<PAGE>
                                  UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D. C. 20549

                                    FORM 10-K

                [X] Annual Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934
                   For the fiscal year ended December 31, 2001
                                       or
              [ ] Transition Report Pursuant to Section 13 or 15(d)
                     of the Securities Exchange Act of 1934

            For the Transition Period from            to
                                           ----------    ----------

                          Commission File Number 1-7414

                         NORTHWEST PIPELINE CORPORATION
             (Exact name of registrant as specified in its charter)


          DELAWARE                                              87-0269236
(State or other jurisdiction of                              (I.R.S. Employer
incorporation or organization)                              Identification No.)

295 Chipeta Way, Salt Lake City, Utah                             84108
Address of principal executive offices)                         (Zip Code)

                                 (801) 583-8800
              (Registrant's telephone number, including area code)

           Securities Registered Pursuant to Section 12(b) of the Act:

<Table>
<Caption>
                                                        Name of Each Exchange
    Title of Each Class                                  On Which Registered
----------------------------                           -----------------------
<S>                                                    <C>
6.625% Debentures due 2007                             New York Stock Exchange
9% Debentures due 2022                                 New York Stock Exchange
7.125% Debentures due 2025                             New York Stock Exchange
</Table>

           Securities Registered Pursuant to Section 12(g) of the Act:

                                      None
                                      ----

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 [X] No[ ]

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]

State the aggregate market value of the voting stock held by non-affiliates of
the registrant.

            No voting stock of registrant is held by non-affiliates.

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.

<Table>
<Caption>
        Class                                       Outstanding at March 8, 2002
--------------------------                          ----------------------------
<S>                                                 <C>
Common stock, $1 par value                                          1,000 shares
</Table>


                      Documents Incorporated by Reference:
                                      None

The registrant meets the conditions set forth in General Instruction (I)(1)(a)
and (b) of Form 10-K and is therefore filing this Form 10-K with the reduced
disclosure format.


<PAGE>

                                TABLE OF CONTENTS

                                     PART I

<Table>
<Caption>
HEADING                                                                        PAGE
<S>                                                                            <C>
Items 1.
 and  2.  BUSINESS AND PROPERTIES ...........................................     1

Item  3.  LEGAL PROCEEDINGS .................................................     5

Item  4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (Omitted) .....     5


                                     PART II

Item  5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCK-
           HOLDER MATTERS ...................................................     6

Item  6.  SELECTED FINANCIAL DATA (Omitted)..................................     6

Item  7.  MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS ......     6

Item  8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA .......................     9

Item  9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
           AND FINANCIAL DISCLOSURE .........................................    28

                                    PART III

Item 10.  DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT (Omitted).......    29

Item 11.  EXECUTIVE COMPENSATION (Omitted)...................................    29

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
           MANAGEMENT (Omitted)..............................................    29

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS (Omitted)...........    29

                                     PART IV

Item 14.  EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
           FORM 8-K..........................................................    29
</Table>


<PAGE>


                         NORTHWEST PIPELINE CORPORATION

                                    FORM 10-K

                                     PART I

ITEMS 1 AND 2. BUSINESS AND PROPERTIES

BUSINESS ENVIRONMENT

         Northwest Pipeline Corporation ("Pipeline") is a wholly-owned
subsidiary of Williams Gas Pipeline Company LLC ("WGP"). WGP is a wholly-owned
subsidiary of The Williams Companies, Inc. ("Williams").

         Pipeline owns and operates an interstate natural gas pipeline system,
including facilities for mainline transmission and gas storage. Pipeline's
transmission and storage activities are subject to regulation by the Federal
Energy Regulatory Commission ("FERC") under the Natural Gas Act of 1938
("Natural Gas Act") and under the Natural Gas Policy Act of 1978 ("NGPA"), and,
as such, its rates and charges for the transportation of natural gas in
interstate commerce, the extension, enlargement or abandonment of its
jurisdictional facilities, and its accounting, among other things, are subject
to regulation.

         Pipeline has significant future opportunities to provide service to
meet the demands of growing gas markets. Pipeline's geographical position allows
access to the incremental sources of supply required by these markets.

TRANSMISSION

         Pipeline owns and operates a pipeline system for the mainline
transmission of natural gas. This system extends from the San Juan Basin in
northwestern New Mexico and southwestern Colorado through Colorado, Utah,
Wyoming, Idaho, Oregon and Washington to a point on the Canadian border near
Sumas, Washington. At December 31, 2001, Pipeline's system, having an aggregate
mainline deliverability of approximately 2.9 Bcf* of gas per day, was composed
of approximately 4,100 miles of mainline and branch transmission pipelines, and
43 mainline compressor stations with a combined capacity of approximately
343,000 horsepower.

         Pipeline operates under an open-access transportation certificate
wherein gas is transported for third party shippers. In 2001, Pipeline
transported natural gas for a total of 148 customers. Pipeline provides services
for markets in California, New Mexico, Colorado, Utah, Nevada, Wyoming, Idaho,
Oregon and Washington. Transportation customers include distribution companies,
municipalities, interstate and intrastate pipelines, gas marketers and direct
industrial users. The two largest transportation customers of Pipeline in 2001
accounted for approximately 15.4 percent and 13.7 percent, respectively, of
total operating revenues. No other customer accounted for more than 10 percent
of total operating revenues in 2001. Pipeline's firm transportation agreements
are generally long-term agreements with various expiration dates and account for
the major portion of Pipeline's business. Additionally, Pipeline offers
interruptible and short-term firm transportation services.



*        The term "Mcf" means thousand cubic feet, "MMcf" means million cubic
feet and "Bcf" means billion cubic feet. All volumes of natural gas are stated
at a pressure base of 14.73 pounds per square inch absolute at 60 degrees
Fahrenheit. The term "MMBtu" means one million British Thermal Units and "TBtu"
means one trillion British Thermal Units.


<PAGE>


         No other interstate natural gas pipeline company presently provides
significant service to Pipeline's primary gas consumer market area. However,
competition with other interstate carriers exists for expansion markets.
Competition also exists with alternate fuels. Electricity and distillate fuel
oil are the primary alternate energy sources in the residential and commercial
markets. In the industrial markets, high sulfur residual fuel oil is the main
alternate fuel source.

         Pipeline believes that strong economies in the Pacific Northwest and
the growing preference for natural gas in response to environmental concerns
support future expansions of its mainline capacity.

GAS STORAGE

         Underground gas storage facilities enable Pipeline to balance daily
receipts and deliveries and provide storage services to certain major customers.

         Pipeline has a contract with a third party, under which gas storage
services are provided to Pipeline in an underground storage reservoir in the
Clay Basin Field located in Daggett County, Utah. Pipeline is authorized to
utilize the Clay Basin Field at a seasonal storage level of 3.04 Bcf of working
gas, with a firm delivery capability of 25.3 MMcf of gas per day.

         Pipeline owns a one-third interest in the Jackson Prairie underground
storage facility located near Chehalis, Washington, with the remaining interests
owned by two of Pipeline's distribution customers. The authorized seasonal
storage capacity of the facility is 18.3 Bcf of working gas. The facility
provides peak day deliveries to Pipeline of up to 850 MMcf per day on a firm
basis and up to an additional 150 MMcf per day on a best-efforts basis.

         Pipeline also owns and operates a liquefied natural gas ("LNG") storage
facility located near Plymouth, Washington, which provides standby service for
Pipeline's customers during extreme peaks in demand. The facility has a total
LNG storage capacity equivalent to 2.285 Bcf of working gas, liquefaction
capability of 12 MMcf per day and regasification capability of 300 MMcf per day.
Certain of Pipeline's major customers own the working gas stored at the LNG
plant.

EXPANSION PROJECTS

         On August 29, 2001, Pipeline filed an application with the FERC to
construct and operate an expansion of its pipeline system that will provide an
additional 175,000 dekatherms per day of capacity to its transmission system in
Wyoming and Idaho in order to reduce reliance on displacement capacity. The
Rockies Expansion Project will include installing 91 miles of pipeline loop and
upgrades or modifications to five compressor stations for a total increase of
24,924 horsepower. Pipeline reached a settlement agreement with the majority of
its firm shippers to support roll-in of the expansion costs into its existing
rates. Pipeline expects the FERC to issue a certificate by September 2002.
Pipeline plans to start construction by April 2003. The estimated cost of the
expansion project is approximately $154 million and the targeted completion date
is October 31, 2003.

         On October 3, 2001, Pipeline filed an application with the FERC to
construct and operate an expansion of its pipeline system that will provide 276
MMcf per day of firm transportation capacity to serve new power generation
demand in western Washington. The Evergreen Expansion Project will include
installing 28 miles of pipeline loop, upgrading, replacing or modifying five
compressor stations and adding a net total of 67,000 horsepower of compression.
Pipeline expects the FERC to issue a certificate by July 2002 and plans to start
construction by August 2002. The estimated cost of the expansion project is
approximately $197 million with a targeted in-service date of June 2003. The
customers have agreed to pay for the cost of service of this expansion on an
incremental basis.

         On October 3, 2001, Pipeline filed an application with the FERC to
construct and operate an expansion of its pipeline system that will provide an
additional 57,000 dekatherms per day of capacity to its transmission system from
Stanfield, Oregon to Washougal, Washington. The Columbia Gorge Project will
include upgrading, replacing or modifying five existing compressor stations,
adding a net total of 24,430 horsepower of compression. The Columbia Gorge
Project was filed as part of the Evergreen Expansion Project to reduce reliance
on displacement capacity. Pipeline reached a settlement with the majority of its
firm shippers to support roll-in of 88 percent of the expansion costs with the
remainder to be allocated to the Evergreen Project. Pipeline expects the FERC to
issue a certificate by July 2002 and


                                      -2-
<PAGE>


plans to start construction by April 2003. The estimated cost of the expansion
project is approximately $43 million with a targeted in-service date of October
31, 2003.

         On May 11, 2001, Pipeline filed an application with the FERC to
construct and operate a lateral pipeline that will provide 161,500 dekatherms
per day of firm transportation capacity to serve a new power generation plant.
The Grays Harbor Lateral project will include installing 49 miles of 20-inch
pipeline, adding 4,700 horsepower at an existing compressor station, and adding
a new meter station. Pipeline expects the FERC to issue a certificate by April
15, 2002 and plans to start construction by June 2002. The estimated cost of the
lateral project is approximately $75 million with a targeted in-service date of
November 2002. The customer has agreed to pay for the cost of service of the
lateral on an incremental rate basis.



OPERATING STATISTICS

         The following table summarizes volumes and capacity for the periods
indicated:

<Table>
<Caption>
                                                   Year Ended December 31,

                                                   2001     2000     1999
                                                   ----     ----     ----
<S>                                                 <C>      <C>      <C>
Total throughput (TBtu)..........................   734      752      708

Average Daily Transportation Volumes (TBtu)......   2.0      2.1      1.9
Average Daily Firm Reserved Capacity (TBtu)......   2.7      2.7      2.5
</Table>

OTHER REGULATORY MATTERS

         Pipeline's transportation of natural gas in interstate commerce is
subject to regulation by the FERC under the Natural Gas Act and the NGPA.
Pipeline holds certificates of public convenience and necessity issued by the
FERC authorizing it to own and operate all pipelines, facilities and properties
considered jurisdictional for which certificates are required under the Natural
Gas Act.

         Pipeline is subject to the Natural Gas Pipeline Safety Act of 1968, as
amended by Title I of the Pipeline Safety Act of 1979, which regulates safety
requirements in the design, construction, operation and maintenance of
interstate gas transmission facilities.

         On April 1, 1993, Pipeline began collecting new rates, subject to
refund, under its rate case filed October 1, 1992 ("1993 Rate Case"). Pipeline
made refunds to customers in June 1998 totaling $27 million, including interest,
reflecting the FERC's resolution of all disputed matters in this case. Pipeline
and other parties sought judicial review of the FERC's decision concerning rate
of return on equity. One party sought judicial review of the inclusion of unpaid
accruals in rate base. In July 1998, the FERC issued orders concerning its rate
of return on equity policy in rate proceedings of other pipelines adopting a
formula that gives less weight to the long-term growth component. In April 1999,
the Court of Appeals for the D.C. Circuit remanded the 1993 Rate Case to the
FERC for application of its revised rate of return on equity policy. On July 14,
1999, the FERC issued an order requiring Pipeline to: (a) submit a surcharge
plan to the FERC, (b) recalculate rates consistent with the new weighting
formula favoring short term growth, and (c) address in a remand hearing the
appropriate source for Gross Domestic Product ("GDP") growth data. The new
weighting formula generally results in a higher authorized rate of return on
equity. Pipeline and its customers resolved by settlement those issues relating
to long term GDP growth. In February 2000, the FERC approved the long-term
growth settlement and issued an order related to return on equity issues
requiring Pipeline to incorporate the effects of the settlement and to calculate
its allowed rate of return on equity consistent with the recently announced
policy changes in other proceedings. As a part of this recalculation of allowed
return on equity, the FERC provided that Pipeline must use the median instead of
the midpoint of the various results of Discounted Cash Flow ("DCF") analysis for
a proxy group. This resulted in a 13.67 percent return on equity for Pipeline.
On April 3, 2000, Pipeline made the necessary compliance filings to implement
the FERC's decision including the establishment of surcharges in order to
recollect moneys that shippers owe Pipeline for these corrective actions. During
the first quarter of 2000, Pipeline recorded surcharges of $11.4 million, of


                                      -3-
<PAGE>


which $7 million increased revenues and $4.4 million, representing interest,
increased other income. On July 14, 2000, the FERC issued an order denying
customer rehearing requests and approving Pipeline's compliance filing. The
order reaffirmed Pipeline's right to use the median result from the DCF proxy
group analysis. The FERC's action resulted in Pipeline's recognizing $3.2
million of additional revenues and $2.6 million of interest income in July 2000.
Some of Pipeline's customers sought judicial review concerning the FERC's orders
with respect to return on equity issues. On July 13, 2001, the D.C. Circuit
issued its decision affirming the FERC's earlier rulings on various rate base,
accounting, and risk issues, but remanding the case to the FERC to allow the
FERC to set forth more clearly its rationale for allowing Pipeline to utilize
the median result of the DCF proxy group analysis.

         On February 1, 1996, Pipeline began collecting new rates, subject to
refund, under the provisions of its rate case filed August 1, 1995 ("1995 Rate
Case"). On October 18, 1996, the Commission issued an order approving a
settlement concerning certain liquid revenue credit issues relating to
Pipeline's agreement with an affiliate to have liquid hydrocarbon products
extracted from Pipeline's transportation stream at Ignacio, Colorado. The
litigation of all remaining issues took place in late 1996. Pipeline's rate
application sought a revenue increase for increases in rate base related
primarily to the Northwest Natural and Expansion II facilities placed into
service December 1, 1995 and increased operating costs primarily associated with
an increase in headquarters office rent. During the first quarter of 1998, the
Administrative Law Judge ("ALJ") issued an Initial Decision. The ALJ found that
the facts of this case continue to support Pipeline's capital structure of 55
percent equity and 45 percent debt. The ALJ also determined that Pipeline fits
within the average risk range for determining pipeline return on equity and
allowed a return on equity of 11.2 percent. On June 1, 1999, the FERC issued its
order affirming many aspects of the ALJ's initial decision, but finding that the
return on equity issue should be resolved by using the FERC's new policy
concerning rate of return determinations. This resulted in an allowed return on
equity of 12.22 percent. During the second quarter of 1999, Pipeline reduced its
rate refund liabilities $9.9 million, of which $7.7 million increased revenues
and $2.2 million reduced interest expense, to reflect the FERC's action in this
proceeding. On September 29, 2000, the FERC issued its Order on Rehearing,
which, for the most part, reaffirmed the FERC's earlier June 1, 1999 decision.
Pipeline made a compliance filing on October 16, 2000. On July 11, 2001, the
FERC issued an Order accepting Pipeline's compliance filings, subject to
Pipeline making some minor rate related changes relating to billing determinants
and cost of service recovery for facilities subject to reimbursement agreements.
Some of Pipeline's customers have sought judicial review concerning risk and
return on equity issues. On August 31, 2001, Pipeline made refunds to customers
totaling $43.1 million, including interest.

OWNERSHIP OF PROPERTY

         Pipeline's system is owned in fee. However, a substantial portion of
Pipeline's system is constructed and maintained pursuant to rights-of-way,
easements, permits, licenses or consents on and across properties owned by
others. The compressor stations of Pipeline, with appurtenant facilities, are
located in whole or in part upon lands owned by Pipeline and upon sites held
under leases or permits issued or approved by public authorities. The LNG plant
is located on lands owned in fee by Pipeline. Pipeline's debt indentures
restrict the sale or disposal of a major portion of its pipeline system.

EMPLOYEES

         At December 31, 2001, Pipeline employed 569 persons, none of whom are
represented under collective bargaining agreements. No strike or work stoppage
in any of Pipeline's operations has occurred in the past and relations with
employees are good.

ENVIRONMENTAL MATTERS

         Pipeline is subject to the National Environmental Policy Act and other
federal and state legislation regulating the environmental aspects of its
business. Management believes that Pipeline is in substantial compliance with
existing environmental requirements. Pipeline believes that, with respect to any
capital expenditures required to meet applicable standards and regulations, the
FERC would grant the requisite rate relief so that, for the most part, such
expenditures and a return thereon would be permitted to be recovered. Pipeline
believes that compliance with applicable environmental requirements is not
likely to have a material effect upon Pipeline's earnings or competitive
position.


                                      -4-
<PAGE>


FORWARD-LOOKING INFORMATION

         Certain matters discussed in this report, excluding historical
information, include forward-looking statements - statements that discuss
Pipeline's expected future results based on current and pending business
operations. Pipeline makes these forward-looking statements in reliance on the
safe harbor protections provided under the Private Securities Litigation Reform
Act of 1995.

         Forward-looking statements can be identified by words such as
"anticipates", "believes", "expects", "planned", "scheduled" or similar
expressions. Although Pipeline believes these forward-looking statements are
based on reasonable assumptions, statements made regarding future results are
subject to a number of assumptions, uncertainties and risks that could cause
future results to be materially different from the results stated or implied in
this document.


         The following are important factors that could cause actual results to
differ materially from any results projected, forecasted, estimated or budgeted:
(i) changes in general economic conditions in the United States; (ii) changes in
federal or state laws and regulations to which Pipeline is subject, including
tax, environmental and employment laws and regulations; (iii) the cost and
effects of legal and administrative claims and proceedings against Pipeline or
its subsidiary; (iv) conditions of the capital markets Pipeline utilizes to
access capital to finance operations; (v) the ability to raise capital in a
cost-effective way; (vi) the effect of changes in accounting policies; (vii) the
ability to manage rapid growth; (viii) the ability to control costs; (ix) the
ability to successfully implement key systems, such as service delivery systems;
(x) the impact of future federal and state regulations of business activities,
including allowed rates of return and the resolution of other regulatory matters
discussed herein; (xi) the ability to develop expanded markets as well as the
ability to maintain existing markets; (xii) the ability to obtain governmental
and regulatory approval of various expansion projects; (xiii) future utilization
of pipeline capacity, which can depend on energy prices, competition from other
pipelines and alternative fuels, the general level of natural gas demand,
decisions by customers not to renew expiring natural gas transportation
contracts, and weather conditions; (xiv) the accuracy of estimated hydrocarbon
reserves and seismic data; and (xv) global and domestic economic repercussions
from terrorist activities and the government's response thereto.

ITEM 3.  LEGAL PROCEEDINGS

         Other than as described in Note 9 of Notes to Financial Statements and
above under Items 1 and 2 - Business and Properties, there are no material
pending legal proceedings. Pipeline is subject to ordinary routine litigation
incidental to its business.


ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

         Since Pipeline meets the conditions set forth in General Instruction
(I)(1)(a) and (b) of Form 10-K, this information is omitted.


                                      -5-
<PAGE>


                                     PART II


ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

         Pipeline is wholly-owned by WGP, a wholly-owned subsidiary of Williams.

         In 2001 and 2000, Pipeline paid cash dividends on common stock of $20
million and $80 million, respectively.

ITEM 6.  SELECTED FINANCIAL DATA

         Since Pipeline meets the conditions set forth in General Instruction
(I)(1)(a) and (b) of Form 10-K, this information is omitted.

ITEM 7.  MANAGEMENT'S NARRATIVE ANALYSIS OF THE RESULTS OF OPERATIONS

         This analysis discusses financial results of Pipeline's operations for
the years 1999 through 2001. Variances due to changes in price and volume have
little impact on revenues, because under Pipeline's rate design methodology, the
majority of overall cost of service is recovered through firm capacity
reservation charges in its transportation rates.

RESULTS OF OPERATIONS

Year Ended December 31, 2001 vs. Year Ended December 31, 2000

         Operating revenues decreased $11.2 million, or 4 percent, due primarily
to the recognition in 2000 of a $10.2 million surcharge resulting from a
favorable FERC decision on return on equity related to the 1993 rate case.

         Pipeline's transportation service accounted for 93 percent and 94
percent of operating revenues for the years ended December 31, 2001 and 2000,
respectively. Additionally, 3 percent of operating revenues represented gas
storage service in each of the years ended December 31, 2001 and 2000.

         Operating expenses increased $3.3 million, or 2 percent, due primarily
to higher depreciation in 2001 and the receipt in 2000 of $2.1 million in
environmental liability insurance settlements, partially offset by decreased
rental expense reflected in general and administrative expense.

         Operating income decreased $14.4 million, or 10 percent, due to reasons
identified above.


         Other income decreased $8.4 million primarily resulting from the
recognition in 2000 of $7.0 million of interest on the 1993 rate case surcharge
revenues discussed above in operating revenues and higher donations in 2001.

         Other interest expense decreased $1.0 million due primarily to the
payment of the 1995 rate case refund in August of 2001.


Year Ended December 31, 2000 vs. Year Ended December 31, 1999

         Operating revenues increased $8.6 million, or 3 percent, due primarily
to the recognition of a $10.2 million surcharge resulting from a favorable FERC
decision on return on equity related to the 1993 rate case, a $3.5 million
increase in other revenues associated with full year operation of the Columbia
Gorge project placed into service in November 1999 and higher short-term firm
and interruptible transportation revenues, partially offset by a 1999 reduction
to rate refund liabilities of $8.3 million associated with the 1995 rate case.

         Pipeline's transportation service accounted for 94 percent and 95
percent of operating revenues for the years ended December 31, 2000 and 1999,
respectively. Additionally, 3 percent and 2 percent of operating revenues
represented gas storage service for the years ended December 31, 2000 and 1999,
respectively.


                                      -6-
<PAGE>


         Operating expenses increased $2.1 million, or 1 percent, due primarily
to higher depreciation in 2000 coupled with a 1999 $2.1 million reduction to
depreciation associated with the 1995 rate case and a 1999 $1.4 million
reduction to liability reserves for sales and use tax audits resulting from a
favorable ALJ decision, partially offset by the receipt in 2000 of $2.1 million
in environmental liability insurance settlements, lower 2000 retirement plan
contributions and a 1999 adjustment to expense of $1.2 million for software
reengineering, training and other costs previously capitalized.

         Operating income increased $6.5 million, or 5 percent, due to the
reasons identified above.


         Other income increased $8.0 million primarily resulting from $7.0
million of interest on the 1993 rate case surcharge revenues discussed above in
operating revenues.


         Other interest expense increased $2.1 million due primarily to the 1999
reduction to accrued interest liabilities of $2.2 million associated with the
1995 rate case.

FINANCIAL CONDITION AND LIQUIDITY

Capital Expenditures and Financing


         Pipeline's expenditures for property, plant and equipment additions
were $94.9 million, $47.9 million and $65.6 million for 2001, 2000 and 1999,
respectively. Funds necessary to complete capital projects are expected to come
from several sources, including Pipeline's operations, return of advances to
affiliates and available cash. In addition, Pipeline expects to be able to
obtain financing, when necessary, on reasonable terms. To allow flexibility in
the timing of issuance of long-term securities, financing may be provided on an
interim basis with bank debt and from sources discussed below.

         As a participant in Williams' cash management program, Pipeline has
advances to and from Williams through Pipeline's parent company, WGP. The
advances are represented by demand notes. The interest rate on intercompany
demand notes is the London Interbank Offered Rate ("LIBOR") on the first day of
the month plus an applicable margin based on the current Standard and Poor's
Rating of Pipeline.

         Pipeline has an outstanding registration statement filed with the
Securities and Exchange Commission. At March 1, 2002, approximately $150 million
of shelf availability remains under this outstanding registration statement and
may be used to issue debt securities. Interest rates and market conditions will
affect amounts borrowed, if any, under this arrangement.

         Pipeline is a participant in a $700 million Revolving Credit Facility
with Williams and certain affiliated companies. Pipeline's maximum borrowing
availability, subject to prior borrowing by other affiliated companies, is $400
million, none of which was used by Pipeline at December 31, 2001. Interest rates
vary with current market conditions based on the base rate of Citibank N.A.,
federal funds rate or LIBOR. The Facility contains restrictions, which limit,
under certain circumstances, the issuance of additional debt, the attachment of
liens on any assets and any change of ownership of Pipeline. Any borrowings by
Pipeline under this Facility are not guaranteed by Williams and are based on
Pipeline's financial need and credit worthiness.


         Pipeline, through a wholly-owned bankruptcy remote subsidiary, sells
certain of its accounts receivable to a special-purpose entity ("SPE") in a
securitization structure requiring annual renewal. At December 31, 2001,
Pipeline sold $15.0 million of its accounts receivable in exchange for $15.0
million in cash. For 2001, cash inflows from the SPE were approximately $180
million. The sales of these receivables resulted in a net charge to results of
operations of approximately $.7 million in both 2001 and 2000.


OTHER

         Pipeline believes that strong economies in the Pacific Northwest and
the growing preference for natural gas in response to environmental concerns
support future expansions of its mainline capacity. Refer to Items 1 and 2
Business and Properties for information about planned expansions of Pipeline's
system.


                                      -7-
<PAGE>


         Refer to Items 1 and 2 Business and Properties for information about
regulation of Pipeline's business. See Note 2 of Notes to Financial Statements
for fair value of financial instruments.


Critical Accounting Policies

         Pipeline is regulated by the FERC. The FERC regulatory processes and
procedures govern the tariff rates that Pipeline is permitted to charge to
customers for interstate transportation of natural gas. Accordingly, certain
revenues collected by Pipeline may be subject to possible refunds upon final
orders in pending rate cases with the FERC. Pipeline records estimates of rate
refund liabilities considering Pipeline's and other third-party's regulatory
proceedings, advice of counsel and estimated total exposure, as discounted and
risk weighted, as well as collection and other risks. At December 31, 2001,
Pipeline has no potential rate refunds accrued. Currently, Pipeline is involved
in rate case proceedings (see Note 9 of Notes to Financial Statements for a
summary of pending rate cases before the FERC). Depending on the results of
these proceedings, the actual amounts allowed to be collected from customers
could differ from management's estimate.


Contingencies

         Reference is made to Note 9 of Notes to Financial Statements for
information about regulatory, judicial and business developments which cause
operating and financial uncertainties.

Effect of Inflation


         Pipeline generally has experienced increased costs in recent years due
to the effect of inflation on the cost of labor, materials and supplies, and
property, plant and equipment. A portion of the increased labor and materials
and supplies cost can directly affect income through increased maintenance and
operating costs. The cumulative impact of inflation over a number of years has
resulted in increased costs for current replacement of productive facilities.
The majority of Pipeline's property, plant and equipment and inventory is
subject to rate-making treatment, and under current FERC practices, recovery is
limited to historical costs. While amounts in excess of historical cost are not
recoverable under current FERC practices, Pipeline believes it will be allowed
to recover and earn a return based on the increased actual costs incurred when
existing facilities are replaced. Cost-based regulation along with competition
and other market factors limit Pipeline's ability to price services or products
based upon inflation's effect on costs.


MARKET RISK DISCLOSURES

Interest Rate Risk

         Pipeline's interest rate risk exposure primarily results from its debt
portfolio, which is influenced by short-term rates, primarily LIBOR based
borrowings from commercial banks and long-term U.S. Treasury rates. To mitigate
the impact of fluctuations in interest rates, Pipeline targets to maintain a
significant portion of its debt portfolio in fixed rate debt Pipeline has
traditionally maintained an investment grade credit rating as one aspect of
managing its interest rate risk. In order to fund its 2002 capital expenditure
plan, Pipeline may need to access various sources of liquidity, which may
include traditional borrowing.

         The following table provides information as of December 31, 2001, about
Pipeline's long-term debt that is subject to interest rate risk. The table
presents principal cash flows and weighted average interest rates by expected
maturity dates.

<Table>
<Caption>
                                                         December 31, 2001
                                                       (Millions of Dollars)

                              2002    2003    2004    2005       2006    Thereafter    Total    Fair Value
                              ----    ----    ----    ----      -----    ----------    -----    ----------
<S>                           <C>     <C>     <C>     <C>       <C>      <C>           <C>      <C>
Long-term debt,
including current portion:


     Fixed rate                 --    $7.5    $7.5    $7.5      $7.5       $337.9      $367.9     $368.7
     Interest rate             7.0%    6.9%    6.9%    6.8%      6.8%         7.1%
</Table>


                                      -8-
<PAGE>


ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA


                          INDEX TO FINANCIAL STATEMENTS

<Table>
<Caption>
                                                                               PAGE
                                                                               ----
<S>                                                                            <C>
Report of independent auditors.............................................     10

Covered by report of independent auditors:

     Statement of income for the years ended
           December 31, 2001, 2000 and 1999................................     11

     Balance sheet at December 31, 2001 and 2000...........................     12

     Statement of cash flows for the years ended
           December 31, 2001, 2000 and 1999................................     14

     Statement of capitalization for the years ended
           December 31, 2001, 2000 and 1999................................     15

     Notes to financial statements.........................................     16

Not covered by report of independent auditors:


     Quarterly financial data (unaudited)..................................     28
</Table>


         All schedules have been omitted since the required information is not
present or is not present in amounts sufficient to require submission of the
schedule or because the information required is included in the financial
statements and notes thereto.


                                      -9-
<PAGE>


                         REPORT OF INDEPENDENT AUDITORS



The Board of Directors
Northwest Pipeline Corporation


         We have audited the accompanying balance sheet of Northwest Pipeline
Corporation as of December 31, 2001 and 2000, and the related statements of
income, cash flows, and capitalization for each of the three years in the period
ended December 31, 2001. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.

         We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.

         In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Northwest Pipeline
Corporation at December 31, 2001 and 2000, and the results of its operations and
its cash flows for each of the three years in the period ended December 31,
2001, in conformity with accounting principles generally accepted in the United
States.


                                        /s/ ERNST & YOUNG LLP


Houston, Texas
March 4, 2002


                                      -10-
<PAGE>


                         NORTHWEST PIPELINE CORPORATION

                               STATEMENT OF INCOME

<Table>
<Caption>
                                                     Year Ended December 31,
                                               -------------------------------------
                                                  2001         2000          1999
                                               ---------     ---------     ---------
                                                      (Thousands of Dollars)
<S>                                            <C>           <C>           <C>
OPERATING REVENUES ........................    $ 285,171     $ 296,361     $ 287,793
                                               ---------     ---------     ---------
OPERATING EXPENSES:
   General and administrative .............       40,657        39,912        43,441
   Operation and maintenance ..............       37,000        36,666        37,784
   Depreciation ...........................       58,654        56,558        51,444
   Taxes, other than income taxes .........       13,441        13,363        11,777
                                               ---------     ---------     ---------

                                                 149,752       146,499       144,446
                                               ---------     ---------     ---------

      Operating income ....................      135,419       149,862       143,347
                                               ---------     ---------     ---------

OTHER INCOME - net ........................        2,278        10,656         2,657
                                               ---------     ---------     ---------

INTEREST CHARGES:
   Interest on long-term debt .............       25,670        25,914        26,064
   Other interest .........................        5,302         6,273         4,185
   Allowance for borrowed funds used
      during construction .................         (448)         (273)         (833)
                                               ---------     ---------     ---------

                                                  30,524        31,914        29,416
                                               ---------     ---------     ---------

INCOME  BEFORE INCOME TAXES ...............      107,173       128,604       116,588

PROVISION FOR INCOME TAXES ................       40,132        48,862        43,575
                                               ---------     ---------     ---------

NET INCOME ................................    $  67,041     $  79,742     $  73,013
                                               =========     =========     =========

CASH DIVIDENDS ON COMMON STOCK ............    $  20,000     $  80,000     $  56,000
                                               =========     =========     =========
</Table>

See accompanying notes.


                                      -11-
<PAGE>


                         NORTHWEST PIPELINE CORPORATION

                                  BALANCE SHEET

                                     ASSETS

<Table>
<Caption>
                                                                            December 31,
                                                                     ------------------------
                                                                        2001           2000
                                                                     ----------    ----------
                                                                      (Thousands of Dollars)
<S>                                                                  <C>           <C>
PROPERTY, PLANT AND EQUIPMENT, at cost ..........................    $1,775,222    $1,691,935
    Less - Accumulated depreciation .............................       807,579       758,375
                                                                     ----------    ----------

                                                                        967,643       933,560
                                                                     ----------    ----------

CURRENT ASSETS:
    Cash and cash equivalents ...................................           443         1,890
    Advances to affiliates ......................................        72,073        53,882
    Accounts receivable -
       Trade, less reserves of $138 for 2001 and $0 for 2000 ....        12,497        12,227
       Affiliated companies .....................................         5,407         3,149
    Materials and supplies ......................................        11,009        10,798
    Exchange gas due from others ................................         2,236        28,371
    Deferred income taxes .......................................         3,810         2,244
    Excess system gas ...........................................        13,000         7,103
    Prepayments and other .......................................         1,697         2,135
                                                                     ----------    ----------

                                                                        122,172       121,799
                                                                     ----------    ----------

OTHER ASSETS:
    Deferred charges ............................................        38,227        48,720
                                                                     ----------    ----------

                                                                     $1,128,042    $1,104,079
                                                                     ==========    ==========
</Table>


See accompanying notes.



                                      -12-
<PAGE>
                         NORTHWEST PIPELINE CORPORATION

                                  BALANCE SHEET

                      LIABILITIES AND STOCKHOLDER'S EQUITY

<Table>
<Caption>
                                                                       December 31,
                                                                ------------------------
                                                                   2001           2000
                                                                ----------    ----------
                                                                 (Thousands of Dollars,
                                                                   Except Share Data)
<S>                                                             <C>           <C>
CAPITALIZATION:
    Common stockholder's equity -
       Common stock, par value $1 per share; authorized
          and outstanding, 1,000 shares ....................    $        1    $        1
       Additional paid-in capital ..........................       262,844       262,844
       Retained earnings ...................................       253,577       206,536
                                                                ----------    ----------
                                                                   516,422       469,381

    Long-term debt, less current maturities ................       367,503       369,146
                                                                ----------    ----------

                                                                   883,925       838,527
                                                                ----------    ----------
CURRENT LIABILITIES:
    Current maturities of long-term debt ...................            --         1,667
    Accounts payable -
       Trade ...............................................        15,624        12,729
       Affiliated companies ................................        30,396         6,351
    Accrued liabilities -
       Income taxes due to affiliate .......................         9,094         8,067
       Taxes, other than income taxes ......................         2,509         2,701
       Interest ............................................         3,123        15,310
       Employee costs ......................................         8,549         9,512
       Exchange gas due to others ..........................        15,236        35,475
       Reserves for estimated rate refunds .................            --        16,198
       Other ...............................................           933         2,029
                                                                ----------    ----------

                                                                    85,464       110,039
                                                                ----------    ----------

DEFERRED INCOME TAXES ......................................       153,801       149,072
                                                                ----------    ----------

OTHER DEFERRED CREDITS .....................................         4,852         6,441
                                                                ----------    ----------

CONTINGENT LIABILITIES AND COMMITMENTS .....................
                                                                ----------    ----------

                                                                $1,128,042    $1,104,079
                                                                ==========    ==========
</Table>


See accompanying notes.


                                      -13-
<PAGE>


                         NORTHWEST PIPELINE CORPORATION

                             STATEMENT OF CASH FLOWS

<Table>
<Caption>
                                                                           Year Ended December 31,
                                                                    -------------------------------------
                                                                      2001           2000         1999
                                                                    ---------     ---------     ---------
                                                                            (Thousands of Dollars)
<S>                                                                 <C>           <C>           <C>
OPERATING ACTIVITIES:
   Net Income ..................................................    $  67,041     $  79,742     $  73,013
   Adjustments to reconcile to cash provided by operations -
      Depreciation .............................................       58,654        56,558        51,444
      Provision for deferred income taxes ......................        3,163        23,050         8,119
      Amortization of deferred charges and credits .............        1,871         1,111         2,112
      Sale of receivables ......................................           --         5,000            --
      Allowance for equity funds used during construction ......         (826)         (496)       (1,475)
      Reserve for doubtful accounts ............................          138            --            --
      Changes in:
         Accounts receivable and exchange gas due from
           others ..............................................       23,469       (22,635)       13,098
         Materials and supplies ................................         (211)          (64)         (159)
         Other current assets ..................................       (5,459)       (6,513)         (962)
         Deferred charges ......................................        7,705        (4,124)        2,075
         Accounts payable, income taxes due to
           affiliate and exchange  gas due to others ...........      (19,234)       27,242       (11,584)
         Other accrued liabilities .............................      (29,609)       (3,086)       (8,838)
         Other deferred credits ................................         (653)         (213)         (518)
      Other ....................................................         (143)           --             3
                                                                    ---------     ---------     ---------

   Net cash provided by operating activities ...................      105,906       155,572       126,328
                                                                    ---------     ---------     ---------

INVESTING ACTIVITIES:
   Property, plant and equipment -
      Capital expenditures .....................................      (94,923)      (47,933)      (65,687)
      Proceeds from sales ......................................        3,155           988            --
      Changes in accounts payable ..............................       25,935        (2,372)          312
   Advances to affiliates ......................................      (18,191)      (23,040)       (4,108)
                                                                    ---------     ---------     ---------

   Net cash used by investing activities .......................      (84,024)      (72,357)      (69,483)
                                                                    ---------     ---------     ---------
FINANCING ACTIVITIES:
   Principal payments on long-term debt ........................       (3,329)       (1,667)       (1,667)
   Dividends paid ..............................................      (20,000)      (80,000)      (56,000)
                                                                    ---------     ---------     ---------

   Net cash used by financing activities .......................      (23,329)      (81,667)      (57,667)
                                                                    ---------     ---------     ---------

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ...........       (1,447)        1,548          (822)

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR .................        1,890           342         1,164
                                                                    ---------     ---------     ---------

CASH AND CASH EQUIVALENTS AT END OF YEAR .......................    $     443     $   1,890     $     342
                                                                    =========     =========     =========
</Table>


See accompanying notes.


                                      -14-
<PAGE>


                         NORTHWEST PIPELINE CORPORATION

                           STATEMENT OF CAPITALIZATION

<Table>
<Caption>
                                                                Year Ended December 31,
                                                        -------------------------------------
                                                          2001           2000         1999
                                                        ---------     ---------     ---------
                                                                (Thousands of Dollars)
<S>                                                     <C>           <C>           <C>
COMMON STOCKHOLDER'S EQUITY:
   Common stock, par value $1 per share,
      authorized and outstanding, 1,000 shares .....    $       1     $       1     $       1
                                                        ---------     ---------     ---------

   Additional paid-in capital -
         Balance at beginning and end of period ....      262,844       262,844       262,844
                                                        ---------     ---------     ---------

   Retained earnings -
      Balance at beginning of period ...............      206,536       206,794       190,507
         Net income ................................       67,041        79,742        73,013
         Cash dividends ............................      (20,000)      (80,000)      (56,000)
         Noncash dividend ..........................           --            --          (726)
                                                        ---------     ---------     ---------

      Balance at end of period .....................      253,577       206,536       206,794
                                                        ---------     ---------     ---------

         Total common stockholder's equity .........      516,422       469,381       469,639
                                                        ---------     ---------     ---------


LONG-TERM DEBT:
   Debentures -
      6.625%, payable 2007 .........................      250,000       250,000       250,000
      7.125%, payable 2025 .........................       84,729        84,718        84,706
      9%, payable 2003 through 2007 ................       32,774        32,766        32,758
   Adjustable rate notes, payable through 2002 .....           --         1,662         3,329
                                                        ---------     ---------     ---------

         Total long-term debt ......................      367,503       369,146       370,793
                                                        ---------     ---------     ---------

         Total capitalization ......................    $ 883,925     $ 838,527     $ 840,432
                                                        =========     =========     =========
</Table>


See accompanying notes.


                                      -15-
<PAGE>


                         NORTHWEST PIPELINE CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


(1)      SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Corporate Structure and Control


         Northwest Pipeline Corporation ("Pipeline") is a wholly-owned
subsidiary of Williams Gas Pipeline Company LLC ("WGP"). WGP is a wholly-owned
subsidiary of The Williams Companies, Inc. ("Williams").

Nature of Operations

         Pipeline owns and operates a pipeline system for the mainline
transmission of natural gas. This system extends from the San Juan Basin in
northwestern New Mexico and southwestern Colorado through Colorado, Utah,
Wyoming, Idaho, Oregon and Washington to a point on the Canadian border near
Sumas, Washington.

Basis of Presentation

         Pipeline's 1983 acquisition by Williams has been accounted for using
the purchase method of accounting. Accordingly, an allocation of the purchase
price was assigned to the assets and liabilities of Pipeline, based on their
estimated fair values at the time of the acquisition. Williams has not pushed
down the purchase price allocation (amounts in excess of original cost) of $93.5
million, as of December 31, 2001, to Pipeline as current Federal Energy
Regulatory Commission ("FERC") policy does not permit Pipeline to recover
through its rates amounts in excess of original cost. The accompanying financial
statements reflect Pipeline's original basis in its assets and liabilities.

Use of Estimates

         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 financial
statements and accompanying notes. Actual results could differ from those
estimates.

Property, Plant and Equipment

         Property, plant and equipment ("plant"), consisting principally of
natural gas transmission facilities, is recorded at original cost. Pipeline
accounts for repair and maintenance costs under the guidance of FERC
regulations. The FERC identifies installation, construction and replacement
costs that are to be capitalized. Routine maintenance, repairs and renewal costs
are charged to income as incurred. Gains or losses from the ordinary sale or
retirement of plant are charged or credited to accumulated depreciation.

         Depreciation is provided by the straight-line method for utility plant.
The annual weighted average composite depreciation rate recorded for
transmission and storage plant was 3.09 percent, 3.16 percent and 2.88 percent
for 2001, 2000 and 1999, respectively, including an allowance for negative
salvage.

Allowance for Borrowed and Equity Funds Used During Construction

         Allowance for funds used during construction ("AFUDC") represents the
estimated cost of borrowed and equity funds applicable to utility plant in
process of construction. Recognition is made of this item as a cost of utility
plant because it constitutes an actual cost of construction under established
regulatory practices. The FERC has prescribed a formula to be used in computing
separate allowances for borrowed and equity AFUDC.

         The composite rate used to capitalize AFUDC was approximately 9.9
percent in each of the years 2001, 2000 and 1999. Equity AFUDC of $.8 million,
$.5 million and $1.5 million for 2001, 2000 and 1999, respectively, is reflected
in other income.


                                      -16-
<PAGE>


                         NORTHWEST PIPELINE CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


Income Taxes

         Pipeline is included in Williams' consolidated federal income tax
return. Pipeline's federal income tax provisions are computed as though separate
tax returns are filed. Deferred income taxes are computed using the liability
method and are provided on all temporary differences between the financial basis
and the tax basis of Pipeline's assets and liabilities.

Deferred Charges

         Pipeline amortizes deferred charges over varying periods consistent
with the FERC approved accounting treatment for such deferred items. Unamortized
debt expense, debt discount and losses on reacquired long-term debt are
amortized by the bonds outstanding method over the related debt repayment
periods.

Cash and Cash Equivalents

         Cash and cash equivalents include demand and time deposits,
certificates of deposit and other marketable securities with a term to maturity
of three months or less when acquired.

Exchange Gas Imbalances

         In the course of providing transportation services to customers,
Pipeline may receive different quantities of gas from shippers than the
quantities delivered on behalf of those shippers. These transactions result in
imbalances, which are typically settled through the receipt or delivery of gas
in the future. Customer imbalances to be repaid or recovered in-kind are
recorded as exchange gas due from others or due to others in the accompanying
balance sheets. These imbalances are valued at the average of the spot market
rates at the Canadian border and the Rocky Mountain market as published in
"Inside FERC's Gas Market Report." Settlement of imbalances requires agreement
between the pipelines and shippers as to allocations of volumes to specific
transportation contracts and timing of delivery of gas based on operational
conditions.

Excess System Gas

         Pipeline's excess system gas is valued at the average of the spot
market rates of the Canadian border and the Rocky Mountain market as published
in "Inside FERC's Gas Market Report".

Revenue Recognition

         Revenues from the transportation of gas are recognized based on
contractual terms and the related transported volumes. Pipeline is subject to
FERC regulations and, accordingly, certain revenues collected may be subject to
possible refunds upon final orders in pending rate cases. Pipeline records rate
refund liabilities considering Pipeline and other third party regulatory
proceedings, advice of counsel and estimated total exposure, as discounted and
risk weighted, as well as collection and other risks.

Allowance for Doubtful Receivables

         Due to its customer base, Pipeline has not historically experienced
recurring credit losses in connection with its receivables. As a result,
receivables determined to be uncollectible are reserved or written off in the
period of such determination.

Environmental Matters

         Pipeline is subject to Federal, state, and local environmental laws and
regulations. Environmental expenditures are expensed or capitalized depending on
their future economic benefit and potential for rate recovery. Pipeline believes
that, with respect to any expenditures required to meet applicable standards and
regulations, the FERC would grant the requisite rate relief so that, for the
most part, such expenditures would be permitted to be recovered. Pipeline
believes that compliance with


                                      -17-
<PAGE>

                         NORTHWEST PIPELINE CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


applicable environmental requirements is not likely to have a material effect
upon Pipeline's financial position.

Cash Flow from Operating Activities

         Pipeline uses the indirect method to report cash flows from operating
activities, which requires adjustments to net income to reconcile to net cash
flows provided by operating activities.

Interest Payments

         Cash payments for interest were $39.9 million, $25.7 million and $25.3
million, net of $.4 million, $.3 million and $.8 million of interest capitalized
in 2001, 2000 and 1999, respectively.

Stock-Based Compensation

         Williams' employee stock-based awards are accounted for under
Accounting Principles Board ("APB") Opinion No. 25, "Accounting for Stock Issued
to Employees" and related interpretations. Williams' fixed plan common stock
options generally do not result in compensation expense, because the exercise
price of the stock options equals the market price of the underlying stock on
the date of grant.

Adoption of Accounting Standards

         The Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No. 140, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities." The Statement
provides guidance for determining whether a transfer of financial assets should
be accounted for as a sale or a secured borrowing, and whether a liability has
been extinguished. The statement is effective for recognition and
reclassification of collateral and for disclosures, which relate to
securitization transactions and collateral for fiscal years ending after
December 15, 2000. The statement became effective for transfers and servicing of
financial assets and extinguishments of liabilities occurring after March 31,
2001. The initial application of SFAS No. 140 did not have a material impact on
Pipeline's results of operations and financial position.

         In June 2001, the FASB issued SFAS No. 141, "Business Combinations" and
SFAS No. 142, "Goodwill and Other Intangible Assets." SFAS No. 141 establishes
accounting and reporting standards for business combinations and requires all
business combinations to be accounted for by the purchase method. The statement
is effective for all business combinations initiated after June 30, 2001, and
any business combinations accounted for using the purchase method for which the
date of acquisition is July 1, 2001, or later. SFAS No. 142 addresses accounting
and reporting standards for goodwill and other intangible assets. Under this
statement, goodwill and intangible assets with indefinite useful lives will no
longer be amortized, but will be tested annually for impairment. The statement
became effective for all fiscal years beginning after December 15, 2001.
Pipeline applied the new rules on accounting for goodwill and other intangible
assets beginning January 1, 2002. The adoption of these standards did not have a
material effect on Pipeline's results of operations and financial position.

         In June 2001, the FASB issued SFAS No. 143, "Accounting for Asset
Retirement Obligations." This statement addresses financial accounting and
reporting for obligations associated with the retirement of tangible long-lived
assets and the associated asset retirement costs and amends SFAS No. 19,
"Financial Accounting and Reporting by Oil and Gas Producing Companies." The
statement requires that the fair value of a liability for an asset retirement
obligation be recognized in the period in which it is incurred if a reasonable
estimate of fair value can be made, and that the associated asset retirement
costs be capitalized as part of the carrying amount of the long-lived asset. The
statement is effective for financial statements issued for fiscal years
beginning after June 15, 2002. The effect of this standard on Pipeline's results
of operations and financial position is being evaluated.

         In August 2001, the FASB issued SFAS No. 144, "Accounting for the
Impairment or Disposal of Long-Lived Assets." This statement supersedes SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of" and amends Accounting Principles Board Opinion No. 30,
"Reporting the Results of Operations - Reporting the Effects of Disposal of a
Segment of


                                      -18-
<PAGE>

                         NORTHWEST PIPELINE CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


a Business and Extraordinary, Unusual and Infrequently Occurring Events and
Transactions." The statement retains the basic framework of SFAS No. 121,
resolves certain implementation issues of SFAS No. 121, extends applicability to
discontinued operations, and broadens the presentation of discontinued
operations to include a component of an entity. The statement is to be applied
prospectively and is effective for financial statements issued for fiscal years
beginning after December 15, 2001. The adoption of this statement had no impact
on Pipeline's results of operations or financial position.

         The FASB issued Interpretation No. 44, "Accounting for Certain
Transactions Involving Stock Compensation." This interpretation modifies the
current practice of accounting for certain stock award agreements and was
generally effective beginning July 1, 2000. The initial impact of this
interpretation on Pipeline's results of operations and financial position was
not material.

Reclassifications

         Certain reclassifications have been made in the 2000 and 1999 financial
statements to conform to the 2001 presentation.

(2)      DISCLOSURES ABOUT THE FAIR VALUE OF FINANCIAL INSTRUMENTS

         The following methods and assumptions were used to estimate the fair
value of each class of financial instruments for which it is practicable to
estimate that value:

Cash, cash equivalents and advances to affiliate - The carrying amounts of these
items are assumed to be indicative of their fair value.

Long-term debt - The fair value of Pipeline's publicly traded long-term debt is
valued using year-end traded market prices. Private debt is valued based on the
prices of similar securities with similar terms and credit ratings. Pipeline
used the expertise of an outside investment-banking firm to estimate the fair
value of long-term debt. The carrying amount and estimated fair value of
Pipeline's long term debt, including current maturities, were $368 million and
$369 million, respectively, at December 31, 2001, and $371 million and $369
million, respectively, at December 31, 2000.

(3)      CONCENTRATION OF OFF-BALANCE-SHEET AND OTHER CREDIT RISK

         During the periods presented, more than 10 percent of Pipeline's
operating revenues were generated from each of the following customers.

<Table>
<Caption>
                                 Year Ended December 31,
                              ---------------------------
                               2001      2000      1999
                              -------   -------   -------
                                  (Thousands of Dollars)
<S>                           <C>       <C>       <C>
Puget Sound Energy, Inc.      $43,919   $43,368   $43,762
Northwest Natural Gas Co.      39,203    40,376    39,064
</Table>


         Pipeline's major customers are located in the Pacific Northwest. As a
general policy, collateral is not required for receivables, but customers'
financial condition and credit worthiness are regularly evaluated and historical
losses have been minimal.

         Pipeline, through a wholly-owned bankruptcy remote subsidiary, sells
certain of its accounts receivable to a special-purpose entity ("SPE") in a
securitization structure requiring annual renewal. At December 31, 2001,
Pipeline sold $15.0 million of its accounts receivable in exchange for $15.0
million in cash. For 2001, cash inflows from the SPE were approximately $180
million. The sales of these receivables resulted in a net charge to results of
operations of approximately $.7 million in both 2001 and 2000.


                                      -19-
<PAGE>

                         NORTHWEST PIPELINE CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


(4)      INCOME TAXES

         Significant components of the deferred tax liabilities and assets are
as follows:

<Table>
<Caption>
                                                           December 31,
                                                       ----------------------
                                                       (Thousands of Dollars)

                                                         2001        2000
                                                       --------    --------
<S>                                                    <C>         <C>
Property, plant and equipment                          $141,637    $142,230
                                                       --------    --------
Regulatory assets                                         5,243       5,431
Loss on reacquired debt                                   7,214       8,294
Other - net                                                 648         534
                                                       --------    --------

Deferred tax liabilities                                154,742     156,489
                                                       --------    --------
Regulatory liabilities                                      917       3,305
Accrued liabilities                                       3,834       6,356
                                                       --------    --------

Deferred tax assets                                       4,751       9,661
                                                       --------    --------
Net deferred tax liabilities                           $149,991    $146,828
                                                       ========    ========
Reflected as:
  Deferred income taxes - current asset                $  3,810    $  2,244
  Deferred income taxes - noncurrent liability          153,801     149,072
                                                       --------    --------

                                                       $149,991    $146,828
                                                       ========    ========
</Table>


The provision for income taxes includes:


<Table>
<Caption>
                                  Year Ended December 31,
                               -----------------------------
                                 2001       2000       1999
                               -------    -------    -------
                                   (Thousands of Dollars)
<S>                            <C>        <C>        <C>
Current:
   Federal ................    $33,036    $23,150    $31,804
   State ..................      3,933      2,662      3,652
                               -------    -------    -------
                                36,969     25,812     35,456
                               -------    -------    -------
Deferred:
   Federal ................      2,827     20,598      7,255
   State ..................        336      2,452        864
                               -------    -------    -------
                                 3,163     23,050      8,119
                               -------    -------    -------
Total provision ...........    $40,132    $48,862    $43,575
                               =======    =======    =======
</Table>


                                      -20-
<PAGE>


                         NORTHWEST PIPELINE CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


         A reconciliation of the statutory Federal income tax rate to the
provision for income taxes is as follows:


<Table>
<Caption>
                                                                     Year Ended December 31,
                                                              -----------------------------------
                                                                2001          2000         1999
                                                              --------      --------     --------
                                                                    (Thousands of Dollars)
<S>                                                           <C>           <C>          <C>
Provision at statutory Federal income tax
  Rate of 35 percent .....................................    $ 37,511      $ 45,011     $ 40,806
Increase (decrease) in tax provision resulting from -
   State income taxes net of Federal tax benefit .........       2,775         3,324        2,999
   Other - net ...........................................        (154)          527         (230)
                                                              --------      --------     --------
      Provision for income taxes .........................    $ 40,132      $ 48,862     $ 43,575
                                                              ========      ========     ========

Effective tax rate .......................................       37.45%        37.99%       37.38%
                                                              ========      ========     ========
</Table>

         Net cash payments made to Williams for income taxes were $35.9 million,
$26.3 million and $35.5 million in 2001, 2000 and 1999, respectively.


(5)      LONG-TERM DEBT, LEASES AND BANKING ARRANGEMENTS

Debt Covenants

         The terms of Pipeline's debt indentures preclude the issuance of
mortgage bonds. The indentures contain provisions for the acceleration of
repayment or the reset of interest rates under certain conditions. Pipeline's
debt indentures also contain restrictions which, under certain circumstances,
limit the issuance of additional debt and restrict the disposal of a major
portion of its natural gas pipeline system.

Adjustable Interest Rate Notes

         On May 15, 2001, under the terms of the note agreement, Pipeline
prepaid, without penalty, the outstanding $1.7 million balance of its adjustable
rate notes with accrued interest. Prepayment was made from Pipeline's operations
and available cash.

Sinking Fund Requirements and Maturities

         As of December 31, 2001, cumulative sinking fund requirements and other
maturities of long-term debt for each of the next five years are as follows:


<Table>
<Caption>
                  (Thousands of
                     Dollars)
                  -------------
<S>               <C>
2002...........    $     --
2003...........       7,500
2004...........       7,500
2005...........       7,500
2006...........       7,500
Thereafter.....    $337,867
                   --------
   Total           $367,867
                   ========
</Table>


Line-of-Credit Arrangements

         Pipeline is a participant in a $700 million Revolving Credit Facility
with Williams and certain affiliated companies. Pipeline's maximum borrowing
availability, subject to prior borrowing by other


                                      -21-
<PAGE>

                         NORTHWEST PIPELINE CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


affiliated companies, is $400 million, none of which was used by Pipeline at
December 31, 2001. Interest rates vary with current market conditions based on
the base rate of Citibank N.A., federal funds rate or the London Interbank
Offered Rate ("LIBOR"). This Facility contains restrictions, which limit, under
certain circumstances, the issuance of additional debt, the attachment of liens
on any assets and any change of ownership of Pipeline. Any borrowings by
Pipeline under this Facility are not guaranteed by Williams and are based on
Pipeline's financial need and credit worthiness.

Leases

         Pipeline's leasing arrangements include mostly premise and equipment
leases that are classified as operating leases.

         The major operating lease is a leveraged lease, which became effective
during 1982 for Pipeline's headquarters building. The agreement has an initial
term of approximately 27 years, with options for consecutive renewal terms of
approximately 9 years and 10 years. The major component of the lease payment is
set through the initial and first renewal terms of the lease. Various purchase
options exist under the building lease, including options involving adverse
regulatory developments.

         Pipeline subleases portions of its headquarters building to third
parties under agreements with varying terms. Following are the estimated future
minimum yearly rental payments required under operating leases, which have
initial or remaining noncancelable lease terms in excess of one year:

<Table>
<Caption>
                           (Thousands
                           of Dollars)
                           -----------
<S>                         <C>
2002 ...................    $ 8,806
2003 ...................      8,806
2004 ...................      8,806
2005 ...................      8,807
2006 ...................      6,354
Thereafter .............     52,676
                            -------
                            $94,255
Less: noncancelable
 Subleases .............     11,843
                            -------
     Total .............    $82,412
                            =======
</Table>


         Operating lease rental expense amounted to $6.1 million, $8.8 million
and $8.3 million for 2001, 2000 and 1999, respectively. Capital lease payments
for the periods presented are not significant.

(6)      EMPLOYEE BENEFIT PLANS

         Pipeline's employees are covered by Williams' non-contributory
defined-benefit pension plan and Williams' health care plan that provides
postretirement medical benefits to certain retired employees. Contributions for
pension and postretirement medical benefits related to Pipeline's participation
in these plans were $2.3 million, $2.8 million and $4.9 million in 2001, 2000
and 1999, respectively. These amounts are currently recoverable in Pipeline's
rates.

         Pipeline's employees are also covered by various Williams'
defined-contribution plans. Pipeline's costs related to these plans totaled $1.9
million, $1.8 million and $1.7 million in 2001, 2000 and 1999, respectively.

(7)      STOCK-BASED COMPENSATION

         Williams has several plans providing for common stock-based awards to
its employees and employees of its subsidiaries. The plans permit the granting
of various types of awards including, but not


                                      -22-

<PAGE>

                         NORTHWEST PIPELINE CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


limited to, stock options, stock appreciation rights, restricted stock and
deferred stock. Awards may be granted for no consideration other than prior and
future services or based on certain financial performance targets being
achieved. The purchase price per share for stock options may not be less than
the market price of the underlying stock on the date of grant. Depending on the
terms of the respective plans, stock options generally become exercisable in
one-third increments each year from the anniversary of the grant or after three
and five years, subject to accelerated vesting if certain future stock prices or
if specific financial performance targets are achieved. Stock options expire 10
years after grant.

         FAS No. 123, "Accounting for Stock-Based Compensation," requires that
companies who continue to apply APB Opinion No. 25 disclose pro forma net income
assuming that the fair-value method in SFAS 123 had been applied in measuring
compensation cost. Pro forma net income for Pipeline was $66.6 million, $78.4
million and $71.5 million for 2001, 2000 and 1999, respectively. Reported net
income was $67.0 million, $79.7 million and $73.0 million for 2001, 2000 and
1999, respectively. Pro forma amounts for 2001 include compensation expense for
certain awards made in 1999 and compensation expense from awards made in 2001.
Pro forma amounts for 2000 include compensation expense for certain awards made
in 1999 and the total compensation expense from awards made in 2000, as these
awards fully vested in 2000 as a result of accelerated vesting provisions. Pro
forma amounts for 1999 include the remaining total compensation expense from
awards made in 1998 and the total compensation from certain awards made in 1999,
as these awards fully vested in 1999 as a result of the accelerated vesting
provisions. Since compensation expense from stock options is recognized over the
future years' vesting period for pro forma disclosure purposes, and additional
awards generally are made each year, pro forma amounts may not be representative
of future years' amounts.

         A summary of stock options granted to employees of Pipeline under the
plans is shown in the following table (options in thousands):

<Table>
<Caption>
                                               2001                  2000                 1999
                                        ------------------    ------------------   ------------------
                                                  Weighted              Weighted             Weighted
                                                   Average              Average              Average
                                                  Exercise              Exercise             Exercise
                                        Options     Price     Options    Price     Options    Price
                                        -------   --------    -------   --------   -------   --------
<S>                                     <C>       <C>         <C>       <C>        <C>       <C>
Outstanding - beginning of year          1,200     $24.02      1,183     $20.64     1,292     $17.74
Granted                                    159     $38.00        136     $46.04       161     $39.70
Exercised                                 (112)    $11.82       (131)    $15.01      (104)    $16.34
Forfeited/expired                          (21)    $32.81         (7)    $38.66        (6)    $26.98
Adjustment for WCG spinoff(1)              111         --         --         --        --         --
Employee transfers, in                      99     $20.50        235     $22.90       160     $19.41
Employee transfers, out                   (145)    $23.32       (216)    $23.06      (320)    $19.20
                                         -----                 ------               -----
Outstanding - end of year                1,291     $24.38      1,200     $24.02     1,183     $20.64
                                         =====                 ======               =====
Exercisable at year end                  1,102     $22.58      1,169     $23.66     1,151     $20.16
                                         =====                 ======               =====
</Table>

         The weighted average grant date fair values of the stock options
granted to employees of Pipeline were $10.93, $15.44 and $11.90 in 2001, 2000
and 1999, respectively.

-----------
(1)  Effective with the spinoff of Williams Communications Group ("WCG") on
     April 23, 2001, by Williams, the number of unexercised Williams stock
     options and the exercise price were adjusted to preserve the intrinsic
     value of the stock options that existed prior to the spinoff.


                                      -23-

<PAGE>


                         NORTHWEST PIPELINE CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


         The following summary provides information about stock options granted
to employees of Pipeline that are outstanding and exercisable at December 31,
2001 (options in thousands):


<Table>
<Caption>
                         Stock Options Outstanding         Stock Options Exercisable
                     ------------------------------------  -------------------------
                                               Weighted
                                               Average
                                 Weighted      Remaining                Weighted
Range of Exercise                Average      Contractual               Average
    Prices           Options  Exercise Price   Life (yrs)   Options  Exercise Price
                     -------  --------------  -----------   -------  --------------
<S>                  <C>      <C>             <C>           <C>      <C>
$4.25 to $25.14       731.6        $15.55          4.4        731.6      $15.55
$26.79 to $42.30      559.4        $35.93          7.9        370.4      $36.47
                     ------                                  ------
                     1291.0        $24.38          5.9       1102.0      $22.58
                     ======                                  ======
</Table>


         The fair value of the stock options was estimated at the date of grant
using a Black-Scholes option pricing model with the following weighted average
assumptions: expected life of the stock options of approximately five years;
volatility of the expected market price of Williams common stock of 35 percent
(31 percent in 2000 and 28 percent in 1999); risk-free interest rate of 4.8
percent (6.5 percent in 2000 and 5.6 percent in 1999); and a dividend yield of
1.9 percent (1.5 percent in both 2000 and 1999).

(8)      RELATED PARTY TRANSACTIONS

         As a subsidiary of Williams, Pipeline engages in transactions with
Williams and other Williams subsidiaries characteristic of group operations. As
a participant in Williams' cash management program, Pipeline has advances to and
from Williams through Pipeline's parent company, WGP. The advances are
represented by demand notes. The interest rate on intercompany demand notes is
LIBOR on the first day of the month plus an applicable margin based on the
current Standard and Poor's Rating of the Pipeline. Pipeline received interest
income from advances to these affiliates of $3.1 million, $3.4 million, and $1.4
million during 2001, 2000 and 1999, respectively.

         Williams' corporate overhead expenses allocated to Pipeline were $6.9
million, $4.5 million and $4.3 million for 2001, 2000 and 1999, respectively.
Such expenses have been allocated to Pipeline by Williams primarily based on the
Modified Massachusetts formula, which is a FERC approved method utilizing a
combination of net revenues, gross payroll and gross plant for the allocation
base. In addition, Williams or an affiliate has provided executive, data
processing, legal, aviation, internal audit and other administrative services to
Pipeline on a direct charge basis, which totaled $5.0 million, $4.8 million and
$3.8 million for 2001, 2000 and 1999, respectively.

         During the periods presented, Pipeline's revenues include
transportation and exchange transactions with subsidiaries of Williams. Combined
revenues for these activities totaled $1.8 million, $1.2 million and $.6 million
for 2001, 2000 and 1999, respectively.

         Pipeline has entered into various other transactions with certain
related parties, the amounts of which were not significant. These transactions
and the above-described transactions are made on the basis of commercial
relationships and prevailing market prices or general industry practices.

(9)      CONTINGENT LIABILITIES AND COMMITMENTS

Pending Rate Cases

         On April 1, 1993, Pipeline began collecting new rates, subject to
refund, under its rate case filed October 1, 1992 ("1993 Rate Case"). Pipeline
made refunds to customers in June 1998 totaling $27 million, including interest,
reflecting the FERC's resolution of all disputed matters in this case. Pipeline
and other parties sought judicial review of the FERC's decision concerning rate
of return on equity. One party sought judicial review of the inclusion of unpaid
accruals in rate base. In July 1998, the FERC


                                      -24-
<PAGE>


                         NORTHWEST PIPELINE CORPORATION

                          NOTES TO FINANCIAL STATEMENTS

issued orders concerning its rate of return on equity policy in rate proceedings
of other pipelines adopting a formula that gives less weight to the long-term
growth component. In April 1999, the Court of Appeals for the D.C. Circuit
remanded the 1993 Rate Case to the FERC for application of its revised rate of
return on equity policy. On July 14, 1999, the FERC issued an order requiring
Pipeline to: (a) submit a surcharge plan to the FERC, (b) recalculate rates
consistent with the new weighting formula favoring short term growth, and (c)
address in a remand hearing the appropriate source for Gross Domestic Product
("GDP") growth data. The new weighting formula generally results in a higher
authorized rate of return on equity. Pipeline and its customers resolved by
settlement those issues relating to long term GDP growth. In February 2000, the
FERC approved the long-term growth settlement and issued an order related to
return on equity issues requiring Pipeline to incorporate the effects of the
settlement and to calculate its allowed rate of return on equity consistent with
the recently announced policy changes in other proceedings. As a part of this
recalculation of allowed return on equity, the FERC provided that Pipeline must
use the median instead of the midpoint of the various results of Discounted Cash
Flow ("DCF") analysis for a proxy group. This resulted in a 13.67 percent return
on equity for Pipeline. On April 3, 2000, Pipeline made the necessary compliance
filings to implement the FERC's decision including the establishment of
surcharges in order to recollect moneys that shippers owe Pipeline for these
corrective actions. During the first quarter of 2000, Pipeline recorded
surcharges of $11.4 million, of which $7.0 million increased revenues and $4.4
million, representing interest, increased other income. On July 14, 2000, the
FERC issued an order denying customer rehearing requests and approving
Pipeline's compliance filing. The order reaffirmed Pipeline's right to use the
median result from the DCF proxy group analysis. The FERC's action resulted in
Pipeline's recognizing $3.2 million of additional revenues and $2.6 million of
interest income in July 2000. Some of Pipeline's customers sought judicial
review concerning the FERC's orders with respect to return on equity issues. On
July 13, 2001, the D.C. Circuit issued its decision affirming the FERC's earlier
rulings on various rate base, accounting, and risk issues, but remanding the
case to the FERC to allow the FERC to set forth more clearly its rationale for
allowing Pipeline to utilize the median result of the DCF proxy group analysis.

         On February 1, 1996, Pipeline began collecting new rates, subject to
refund, under the provisions of its rate case filed August 1, 1995 ("1995 Rate
Case"). On October 18, 1996, the Commission issued an order approving a
settlement concerning certain liquid revenue credit issues relating to
Pipeline's agreement with an affiliate to have liquid hydrocarbon products
extracted from Pipeline's transportation stream at Ignacio, Colorado. The
litigation of all remaining issues took place in late 1996. Pipeline's rate
application sought a revenue increase for increases in rate base related
primarily to the Northwest Natural and Expansion II facilities placed into
service December 1, 1995 and increased operating costs primarily associated with
an increase in headquarters office rent. During the first quarter of 1998, the
Administrative Law Judge ("ALJ") issued an Initial Decision. The ALJ found that
the facts of this case continue to support Pipeline's capital structure of 55
percent equity and 45 percent debt. The ALJ also determined that Pipeline fits
within the average risk range for determining pipeline return on equity and
allowed a return on equity of 11.2 percent. On June 1, 1999, the FERC issued its
order affirming many aspects of the ALJ's initial decision, but finding that the
return on equity issue should be resolved by using the FERC's new policy
concerning rate of return determinations. This resulted in an allowed return on
equity of 12.22 percent. During the second quarter of 1999, Pipeline reduced its
rate refund liabilities $9.9 million, of which $7.7 million increased revenues
and $2.2 million reduced interest expense, to reflect the FERC's action in this
proceeding. On September 29, 2000, the FERC issued its Order on Rehearing,
which, for the most part, reaffirmed the FERC's earlier June 1, 1999 decision.
Pipeline made a compliance filing on October 16, 2000. On July 11, 2001, the
FERC issued an Order accepting Pipeline's compliance filings, subject to
Pipeline making some minor rate related changes relating to billing determinants
and cost of service recovery for facilities subject to reimbursement agreements.
Some of Pipeline's customers have sought judicial review concerning risk and
return on equity issues. On August 31, 2001, Pipeline made refunds to customers
totaling $43.1 million, including interest.

Significant Litigation

         In 1998, the United States Department of Justice informed Williams that
Jack Grynberg, an individual, had filed claims in the United States District
Court for the District of Colorado under the False Claims Act against Williams
and certain of its wholly-owned subsidiaries including Pipeline. Mr. Grynberg
had also filed claims against approximately 300 other energy companies and
alleged that the defendants violated the False Claims Act in connection with the
measurement and purchase of hydrocarbons. The


                                      -25-
<PAGE>

                         NORTHWEST PIPELINE CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


relief sought was an unspecified amount of royalties allegedly not paid to the
federal government, treble damages, a civil penalty, attorneys' fees and costs.
On April 9, 1999, the United States Department of Justice announced that it was
declining to intervene in any of the Grynberg qui tam cases; including the
action filed against the Williams entities in the United States District Court
for the District of Colorado. On October 21, 1999, the Panel on Multi-District
Litigation transferred all of the Grynberg qui tam cases, including those filed
against Williams to the United States District Court for the District of Wyoming
for pre-trial purposes. Motions to dismiss the complaints filed by various
defendants, including Williams, were denied on May 18, 2001.

         On June 8, 2001, fourteen Williams entities, including Pipeline, were
named as defendants in a nationwide class action lawsuit which has been pending
against other defendants, generally pipeline and gathering companies, for more
than one year. The plaintiffs allege that the defendants, including the Williams
defendants, have engaged in mismeasurement techniques that distort the heating
content of natural gas, resulting in an alleged underpayment of royalties to the
class of producer plaintiffs. In September 2001, plaintiffs' counsel voluntarily
dismissed Williams Pipeline Company and Williams Interstate Natural Gas Company.
The Williams defendants, along with the coordinating defendants, filed a motion
to dismiss under Rules 9B and 12B of the Kansas Rules of Civil Procedure. Oral
argument was held in November 2001 and the decision is still pending. Many of
the Williams and coordinating defendants filed a motion to dismiss for lack of
personal jurisdiction. On February 21, 2002, the court granted plaintiffs'
motion for leave to file a third amended complaint.

Other Legal and Regulatory Matters

         On September 27, 2001, the FERC issued a Notice of Proposed Rulemaking
("NOPR") proposing to adopt uniform standards of conduct for transmission
providers. The proposed rules define transmission providers as interstate
natural gas pipelines and public utilities that own, operate or control electric
transmission facilities. Significantly, the proposed standards would regulate
the conduct of transmission providers with their energy affiliates, not just
with their marketing affiliates. The FERC proposes to define energy affiliates
very broadly, so as to include any transmission provider affiliate that engages
in or is involved in transmission (gas or electric) transactions, or manages or
controls transmission capacity, or buys, sells, trades or administers natural
gas or electric energy or engages in financial transactions relating to the sale
or transmissions of natural gas or electric energy. Included in the proposed
definition would be asset managers, producers, gatherers, and local distribution
companies. The NOPR purports to be consistent with the FERC's longstanding goal
of preventing affiliate preference. If adopted, the proposed standards could
require organizational structure changes and the adoption of new compliance
measures. Williams has formed a task force to analyze the potential effects of
the proposed rules and to comment upon them. On December 20, 2001, Williams
filed its comments with the FERC. In its comments, Williams opposed the proposed
rules. Williams also suggested a technical conference to determine if marketing
affiliate issues truly existed and, proposed only then, that the FERC should
examine amending the current existing separate standards of conduct for the gas
and electric industries. The FERC has announced its intention to hold, hopefully
in March 2002, a technical conference to discuss issues raised in the NOPR.

         In addition to the foregoing, various other proceedings are pending
against Pipeline incidental to its operations.

Summary of Contingent Liabilities

         Management believes that the ultimate resolution of the foregoing
matters, based on advise of counsel and after consideration of amounts accrued,
insurance coverage, potential recovery from customers, and other indemnification
arrangements, will not have a materially adverse effect upon Pipeline's future
financial position, results of operations, and cash flow requirements.


                                      -26-
<PAGE>

                         NORTHWEST PIPELINE CORPORATION

                          NOTES TO FINANCIAL STATEMENTS


Other Matters

         Commitments for construction and acquisition of property, plant and
equipment are approximately $78.2 million at December 31, 2001.



                                      -27-
<PAGE>


                         NORTHWEST PIPELINE CORPORATION

QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of quarterly financial data for 2001 and 2000:

<Table>
<Caption>
                                        Quarter of 2001
                           ----------------------------------------
                            First     Second      Third      Fourth
                           -------    -------    -------    -------
                                     (Thousands of Dollars)
<S>                        <C>        <C>        <C>        <C>
Operating revenues ....    $71,198    $71,881    $69,624    $72,468
Operating income ......     34,437     35,532     33,824     31,626
Net income ............     17,532     18,135     15,584     15,790
</Table>


<Table>
<Caption>
                                        Quarter of 2000
                           ----------------------------------------
                            First     Second      Third      Fourth
                           -------    -------    -------    -------
                                     (Thousands of Dollars)
<S>                        <C>        <C>        <C>        <C>
Operating revenues ....    $79,760    $69,114    $73,819    $73,668
Operating income ......     41,402     34,190     39,027     35,243
Net income ............     23,980     17,271     21,291     17,200
</Table>

         Operating results for the first and third quarters of 2000 include the
recognition of surcharges associated with the 1993 rate case. See Note 9 of
Notes to Consolidated Financial Statements.

ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
         FINANCIAL DISCLOSURE

None.


                                      -28-
<PAGE>
                                    PART III


         Since Pipeline meets the conditions set forth in General Instruction
(I)(1)(a) and (b) of Form 10-K, this information is omitted.

                                     PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K


(a)1 AND 2. FINANCIAL STATEMENTS AND SCHEDULES (included in Parts II and IV of
            this report).


         The financial statements are listed in the Index to Financial
Statements on page 9. No schedules are required to be filed.


(a)3. EXHIBITS:


     (2)  Plan of acquisition, reorganization, arrangement, liquidation or
          succession:

          *(a) Merger Agreement, dated as of September 20, 1983, between
               Williams and Northwest Energy Company ("Energy") (Exhibit 18 to
               Energy schedule 14D-9 (Amendment No. 3) dated September 22,
               1983).

          *(b) The Plan of Merger, dated as of November 7, 1983, between Energy
               and a subsidiary of Williams (Exhibit 2(b) to Pipeline report on
               Form 10-K, No. 1-7414, filed March 22, 1984).

     (3)  Articles of incorporation and by-laws:

          *(a) Restated Certificate of Incorporation (Exhibit 3a to Amendment
               No. 1 to Registration Statement on Form S-1, No. 2-55-273, filed
               January 13, 1976).

          *(b) By-laws, as amended (Exhibit 3c to Registration Statement on Form
               S-1, No. 2-55273, filed December 30, 1975).

     (4)  Instruments defining the rights of security holders, including
          indentures:

          *(a) Senior Indenture, dated as of August 1, 1992, between Pipeline
               and Continental Bank, N.A., relating to Pipeline's 9% Debentures,
               due 2022 (Exhibit 4.1 to Registration Statement on Form S-3, No.
               33-49150, filed July 2, 1992).

          *(b) Senior Indenture, dated as of November 30, 1995 between Pipeline
               and Chemical Bank, relating to Pipeline's 7.125% Debentures, due
               2025 (Exhibit 4.1 to Registration Statement on Form S-3, No.
               33-62639, filed September 14, 1995).

          *(c) Senior indenture, dated as of December 8, 1997 between Pipeline
               and The Chase Manhattan Bank, relating to Pipeline's 6.625%
               Debentures, due 2007 (Exhibit 4.1 to Registration Statement on
               Form S-3, No. 333-35101, filed September 8, 1997).

          *(d) Credit Agreement dated July 25, 2000, among Pipeline, Williams
               and certain affiliated companies and the banks named therein and
               Citibank N.A., as agent. (Exhibit 4.1 to Williams Form 10-Q for
               the period ended June 30, 2000, Commission File Number 1-4174).

     (10) Material contracts:

          (c)  *(1) Form of Transfer Agreement, dated July 1, 1991, between
                    Pipeline and Gas Processing (Exhibit 10(c)(8) to Pipeline
                    Report on Form 10-K, No. 1-7414, filed March 26, 1992).

               *(2) Form of Operating Agreement, dated July 1, 1991, between
                    Pipeline and Williams Field Services Company (Exhibit
                    10(c)(9) to Pipeline Report on Form 10-K, No. 1-7414, filed
                    March 26, 1992).


                                      -29-
<PAGE>

     (23) Consent of Independent Auditors

     (24) Power of Attorney with Certified Resolution

(b)  REPORTS ON FORM 8-K:

     No reports on Form 8-K have been filed by Pipeline during the last quarter
of the period covered by this report.





---------

     *Exhibits so marked have heretofore been filed with the Securities and
Exchange Commission as part of the filing indicated and are incorporated herein
by reference.


                                      -30-
<PAGE>


                                   SIGNATURES

         Pursuant to the requirements of Section 13 or 15(d) 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.


                                      NORTHWEST PIPELINE CORPORATION
                                                (Registrant)


                                      By /s/ Jeffrey R. Valentine
                                         -----------------------------
                                             Jeffrey R. Valentine
                                      Controller (Principal Accounting Officer)


Date: March 8, 2002


         Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
registrant in the capacities and on the dates indicated.

<Table>
<Caption>
             Signature                              Title
             ---------                              -----
<S>                                <C>
     /s/ Keith E. Bailey*          Chairman of the Board and Director
------------------------------
         Keith E. Bailey



   /s/ J. Douglas Whisenant*       President, Chief Executive Officer and Director
------------------------------     (Principal Executive Officer)
       J. Douglas Whisenant



    /s/ Robert L. Sluder*          Sr. Vice President, General Manager and Director
------------------------------
        Robert L. Sluder



    /s/ Nick A. Bacile*            Vice President and Chief Financial Officer
------------------------------     (Principal Financial Officer)
        Nick A. Bacile



  /s/ Jeffrey R. Valentine*        Controller (Principal Accounting Officer)
------------------------------
      Jeffrey R. Valentine
</Table>



* By  /s/ Jeffrey R. Valentine
------------------------------
          Jeffrey R. Valentine
          Attorney-in-fact

Date:  March 8, 2002



                                      -31-
<PAGE>


                                  EXHIBIT INDEX


<Table>
<Caption>
EXHIBIT
  NO.               DESCRIPTION
-------             -----------
<S>       <C>
  23      Consent of Independent Auditors

  24      Power of Attorney with Certified Resolution
</Table>