2013Annual Report.pdf

AsT- C
Questar Gas Company
UtahBuslnessEntityNumben 5587294142
. TO THE
PUBLIC SERVICE COMMISSION
OF UTAH
For CalendarYear
2013
Annual Report
(RGS)(Rev. Jani07)
Questar Gas Com CalendarYear 2013
ATTESTATION / CERTIFICATION
OF
RESPONSIBILITY
I certify that I have examined the information contained in this report submitted to the Utah
Division of Public Utilities, and that, to the best of my knowledge, information, and belief, all
statements of fact contained in this report are true and represent an accurate statement of the
affairs of the respondent company as of the date shown below.
Signature:
Print Name:
Title:
Phone Number:
Fax Number:
Mce-President and Controller
1.801\324-2403 Extension:
Emarl:[e-mail]
Pleas send one completed hard copy and email one copy to the following:
Hard copy to:
Utah Division of Public Utilities
Heber Wells Building, 4th Floor
160 East 300 South
Salt Lake City, UT 84111-6751
Email copy to: (using State approved e-filing protocol.)
dennismiller@utah. gov
Annual Report
(RGS)(Rev. Jan/07)
General Company & Contact Information
Company Name: Questar Gas ComPanY
DBA Name (if different):
FKA Name (if different):
Address: 333 South State
City: Salt Lake City State: UT Zip: 84145
Phone Number: [phone] Fax Number:
(800) Number:
P'rinciple Business Address: 333 South State
City: Salt Lake City State: UT Zip:. 84145
Corporate Book Address: 333 South State
City: Salt Lake City State: UT Zip: 00008-4145
Report Contact Person
Name: Connie Marshall Title: Director - Accountinq
Phone Number: [phone] Extension:
Fax Number:Email: connie.marshal!@questar.com
Gorporate Book Custodian
Name: Thomas C. Jepperson Title: GeneralCounsel & EVP
Phone Number: [phone] Extension:
Email: [e-mail] Number:
-1-
Gt,'. -
-"${,r -
Contact !nformation
Attorney:
Name:
Firm Name:
Address:
City:
PhoneNumber:
(800) Number:
Colleen Bell Title: VP & Assistant General Counsel
Questar Corporation
333 South State
Salt Lake Citv State: UT Zip:84145
[phone] Extension:
Fax Number:
Accountant:
Name:
Firm Name:
Address:
City:
Phone Number:
(800) Number:
Title:
zip:
Extension:
Fax Number:
Other Contacts:
Name:
Phone Number:
Fax Number:
Extension:
E-mail:
Name:
Phone Number:
Fax Number:
Title:
Extension:
E-mail:
Name:
Phone Number:
Fax Number:
Extension:
E-mail:
-2-
1.
IMPORTANT CHANGES DURING THE YEAR
Give particulars conceming the following matters. Make the statements explicit and precise.
Each inquiry must be answered. Only use "none" or "not applicable" if it conectly states the fact.
lmportant additions or changes in franchise rights, including the actual consideration, if any,
2. lmportant additions or extensions of the utility system such as new structures, exchanges,
toll facilities. etc.
NA
COMPARATIVE BALANCE SH EETS
(Utah Operations Financial Statement in Accordance with GAAP)
Certificated entitv onlv. Do not consolidate with other affiliated entities.
Account
Balance at
beginning
of vear
Balance at
end of
vear
1 Cash and cash equivalents
2 Federal income taxes receivable
3 Accounts and notes receivable
4 Unbilled gas accounts receivable
5 Deferred income taxes - current
6 Gas stored underground
7 Materials and supplies
8 Current regulatory assets
9 Prepaid expenses and other
10 Purchased gas adjustment
11 Total current assets
12 Construction Work in Progress
13 Property, plant and equipment
14 Less allowances for depreciation
15 Net property, plant and equipment
16 Other long-term assets
17 Goodwill
18 Regulatory assets
19 Other long-term assets
20 TotalAssets
21 Notes payable to affiliates
22 Notes pay - Current Port LT Debt
23 Accounts payable and accrued expenses
24 Customer credit balance
25 Current regulatory liabilities
26 lnterest payable
27 Other taxes payable -
28 Purchased gas adjustment
29 Total current liabilities
30 Long{erm debt, less current portion
3't Other liabilities
32 Asset retirement obligation
33 Deferred investment tax credits
34 Deferred income taxes
35 Customer contributions-in-aid-of-construction
36 Regulatory and other noncurrent liabilities
37 Total Liabilities
38 Common stock
39 Additional paid-in capital
40 Retained earnings
41 Total shareholder's equity
42 Total liabilities and equity
1,437,066
79,762,743
78,229,873
1,542,347
38.347.749
13,460,632
25,839,092
3,060,571
15.221.740
8,776,026
2,767,089
86,434,805
93,390,066
2,906,377
39,172,683
12,080,748
30,231,563
3,035,038
256,901,813
68,754,447
1,972,067,144
762.767.98',1
278,794,394
73,430,794
2,129,606,690
(.745.278.183\
1,278,053,610
5,652,450
16,337,780
3.165.332
1,457,759,300
5,652,450
16.129.514
3.938.584
1.560_110.985 1.762.274.242
166,100,000
42,000,000
122,978,689
30,222,062
4,278,713
4,526,182
9,605,375
17,700,000
16',1,426,990
19,796,785
3,665,044
5,185,063
10,463,101
7.432.556
379,71',\,O21
384,500,000
408,778
2,877,8s8
301,647,201
22,907,815
496.150
225,669,538
534,500,000
432,524
2,589,294
340,725,134
29,131,278
53.033,058
1,092,548,823
22,974,065
172,503,065
272.O85.O33
1,186,080,826
22,974,065
255,254,975
289.363,035
467.562.163 576,193,416
1 ,560,1 1 0,985 1.762.274,242
-5-
COMPARATIVE STATEMENTS OF INCOME
(Utah Operations FinancialStatement in Accordance with GAAP)
Certificated entitv onlv. Do not consolidate with other affiliated entities.
Account
Amount for
Preceding
Year
Amount for
Current
Year
1 Operating Revenues
2 Utility Operating Expenses:
3 Gas Purchases
4 Operating Expense
5 Maintenance Expense
6 Depreciation and Amortization
7 Taxes Other Than lncome Taxes
8 lncome Taxes
9 lncome Taxes - Deferred
10 Total Utility Operating Expenses
11 Net Operating lncome
12 Other lncome
13 Other lncome Deductions
14 Total Other lncome and Deductions
15 lnterest Charges
16 Net lncome
862,z',t3,958
533,332,123
160,674,756
11,917,551
47,168,966
16,184,150
0
20,898.228
9E5,603,929
650,552,084
154,091,612
11,527,623
49,683,325
18,061,994
2,220,422
28.351.301
790,175,773
72,O38,184
(737,366)
n55.240\
914,488,360
71,315,569
3,940,839
Q27 0991
(8e2,606)
24,061,714
3,713,740
22,251,307
47,083.864 52.778.002
-6-
COMPARATIVE STATEMENTS OF CASH FLOW
(Utah Operations FinancialStatement in Accordance with GAAP)
Certificated entitv only. Do not consolidate with other affiliated entities.
Account
Amount for
Preceding
Year
Amount for
Current
Year
Operating Activities
Net lncome
Adjustments to reconcile net income to net cash provided
from operating activities:
Depreciation, depletion and amortization
Defened income taxes
Shared-based compensation
Changes in operating assets and liabilities
Accounts receivable
lnventories
Prepaid expenses and other
Accounts payable and accrued expenses
Federal income taxes
Other taxes
Purchased gas adjustments
Other assets
Regulatory assets(current)
Regulatory liabilities(current)
Other liabilities
NET CASH (USED lN) PROVTDED FROM OPERATTNG
lnvesting Activities
Capital expenditures
Property, plant and equipment
Proceeds from disposition of assets
NETCASH (USED rN) PROVTDED FROM TNVESTTNG
Financing Activities
Common stock issued
Long-term debt issued, net of issue costs
Long-term debt repaid
Change in short{erm debt
Dividends paid
Excess tax benefits from share-based compensation
NET CASH(USED tN) PROVIDED FROM FINANCING
Change in cash and cash equivalents
Beginning cash and cash equivalents
Ending cash and cash equivalents
47,083,864
52,204,732
45,832,057
1,195,509
(25,130,948)
695,073
23,468
11,266,735
1,528,456
(3,444,874)
(26,056,364)
(2,O79,314)
681,730
918,245
8.144.277\
52.778,002
54,755,164
37,713,903
672,O25
(21,836,318)
554,949
25,533
17,520,639
(2,767,089)
857,726
22,654,296
(640,163)
(4,392,471)
(613,669)
6.147.886
101,574,092
(162,060,541)
9.223.817
163,430,414
(166,184,585)
(3.630.413)
(152,836,724)
0
148,790,491
(e1,500,000)
23,425,000
(33,000,000)
0
(169,814,998)
90,681,227
148,942,318
(42,000,000)
(148,400,000)
(35,500,000)
0
47,715,491
(3,547,142)
49R42rl7
13,723,54s
7,338,960
1,437,066
1.437.066 8.776.026
-7-
NOTES TO FINANCIAL STATEMENTS
(Utah Operations Financial Statement in Accordance with GAAP)
Provide the notes to the financial statements and sign the certification below.
See Attached
QUESTARGAS COMPANY
The following are exh?cts ofthe notes to Questar's 2013 furancial statements which are relevant to Questar Gas Cornpany:
Note I - Summary of Significant Accounting Policies
Nature of Business
Questar Gas Company (Questar Gas) provides retail natural gas distribution in Utah, Wyorning and Idaho.
Questar is headquaftered in Salt Lake City, Utah. Shares of Questar common stock trade on the New York Stock Exchange
(NYSE:STR).
Revenue Recognition
Questar Gas records revenues in the period that gas is delivered, including gas delivered to residential and commercial
customers but not billed as of the end of the accounting period. Unbilled gas deliveries are estimated for the period fi'om the
date meters are read to the end of the month. Approximately one-half month of revenue is estimated in any period. Gas costs
and other variable costs are recorded on the same basis to ensure proper matching of revenues and expenses. Questar Gas's
tariffallows for rnonthly adjustrnents to customer bills to approximate the effect of abnormal rveather on non-gas revenues. The
weatlrer-nonnalization adjustment significantly reduces the irnpact of rveather on gas-distribution eamings. The PSCU and
PSCW approved a CET to promote energy conservation. Under the CEI Questar Gas non-gas revenues are decoupled from the
volume of gas used by customers. The tariffspecifies an allowed revenue per customer for each month with differences to be
deferred and recovered frorn customers or refunded to customers through periodic rate adjustments. Rate adjustments occur
every six months under the CET. The adjustments amortize deferred CET amounts over a l2-month period. These adjushnents
are limited to 50% of non-gas revenues.
Questar Gas allows customers the option of paying an estimated fxed monthly bill throughout the year on a budget-billing
program. The estirnated payments are adjusted to actual usage annually. Arnounts collected from customers under this program
in excess of gas deliveries are recorded on the Consolidated Balance Sheets as customer advances. The budget-billing option
does not impact revenue recognition. Questar Gas may collect revenues subject to possible refunds and establish reserves
pending final orders from regulatory agencies.
Cost of Sales
Questar Gas obtains the majority of its gas supply from Wexpro's cost-of-service production and pays Wexpro an operator
service fee based on the terms ofthe Wexpro Agreement. Questar Gas also obtains transportation and storage services fiom
Questar Pipeline. These intercompany revenues and expenses are eliminated in the Questar Consolidated Statements of Income
by reducing revenues and cost of sales. The underlying costs of Wexpro's production and Questar Pipeline's transportation and
storage services are disclosed in other categories in the Consolidated Statements of Income, including operating and
maintenance expense and depreciation, depletion and amortization expense. During the second and third quarters of the year, a
significant portion of the natural gas from Wexpro production is injected into underground storage. This gas is withdrawn from
storage as needed during the heating season in the first and fourth quarters. The cost ofnatural gas sold is credited with the
value of natural gas as it is injected into storage and debited as it is with&awn from storage. The reported balance in
consolidated cost ofsales may be a negative amount during the second and third quarters because ofthe entries to record
injection of gas into storage and the elimination of intercompany fiansactions.
The details of Questar's consolidated cost of sales are as follows:
Year Ended December 31,
2013 2012 20tt
Queslor Gos
Gas purchases
Operator service fee
Transportation and storage
Gathering
Royalties
Storage (injection) withdrawal, net
Purchased-gas account adjustment
Other
(in millions)
186.6 $ 104.2
294.6 274.0
80.1 79.6
18.8 20.5
44.3 32.0
(0.8 ) t.e
22.0 16.1
5.0 5.0
221.2
253.4
78.4
25.0
38.9
3.0
20.6
5.2
Total Questar Gas cost of natural gas sold
Elimination of Questar Gas cost of natural gas sold - affiliated parties
6s0.6
(s70.e )
533.3
(347.7 )
645.7
(327.3 )
Total Questar Gas cost of natural gas sold - unaffiliated parties 279.7 18s.6 318.4
Regulation
The Company applies the regulatory accounting principles to the rate-regulated businesses. Under these principles, the
Cornpany records regulatory assets and liabilities that rvould not be otherwise recorded under GAAP for non-rate-regulated
entities. Regulatory assets and liabilities record probable future revenues or expenses associated with cetain charges or credits
that will be recovered from or refunded to customers ttu'ough the rate-makiug process.
Questar Gas accounts for purchased-gas costs in accordance with procedures authorized by the PSCU and the PSCW.
Purchased-gas costs that are different from those provided for in present rates are accumulated and recovered or credited
through future rate changes. Questar Gas may hedge a portion of its natural gas supply to mitigate price fluctuations for gas-
distribution customers. The regulatory conunissions allow Questar Gas to record periodic mark-to-market adjustments for
comrnodity-price derivatives in the purchased-gas adjustment account. Questar did not have any comrnodity-price derivatives
at December 31,2013 or2012. See Note 11 for a description and comparison of regulatory assets and liabilities as of
Decenrber 3 1, 2013 and 20 12.
Cash and Cash Equivalents
Cash equivalents consist principally of repurchase agreements with rnaturities of three months or less. In ahnost all cases, the
repurchase agreements are highly liquid investments in ovemight securities made tluough comrnercial bank accounts that result
in available funds the next business day.
Property Plant and Equipment
Properly, plaut and equipurent balances are stated at historical cost. Maintenance and repair costs are expensed as incuued.
Corttributions in oid of constructiort
Customer conh'ibutions in aid of construction reduce plant unless the arnounts are refundable to custorners. Contributions for
rnain-line extensions may be refundable to customers if additional custonlers connect to the rnain-line segment rvithin five
years. Refundable conh'ibutions are recorded as liabilities untiI refunded or the five-year period expires rvithout additional
custortler connections. Amounts not refunded reduce plant. Capital expenditures in the Consolidated Statements of Cash Florvs
are repofted net of non-refundable contributions.
Depreciotiort, depletiort urtd onnrtizatiott
Major categories offired assets in gas distributiou, trausportation and storage operatious are grouped together and depreciated
using a straight-line nrethod. Gai-ns and losses on asset disposals are recorded as adjushnents iu accumulated depreciation. The
Company has not capitalized future abandonment costs on a rnajority of its long-lived gas dish'ibution and transportation assets
due to a lack ofa legal obligation to restore the area surounding abandoned assets. In these cases, the regulatory agencies have
opted to leave retired facilities in the ground undisturbed rather than excavate and dispose ofthe assets. Depreciation rates for
Questar Gas and Questar Pipeline are established through rate proceedings.
The following represent average depreciation, depletion and anortization rates of the Cornpany's capitalized costs:
Year Ended December 31,
2013 2012 2011
Questar Gas distribution plant 2.7 0l 2.9 ot.2.8 ot
Questar Gas's depreciation rates include a component for the cost of plant removal. Accordingly, Questar Gas recognizes cost
of plant removal as depreciation expense. The related cost of removal accrual is reflected as a regulatory liability on the balance
sheet. At the tirne properfy, plant and equipment is retired, removal expenses less salvage, are charged to the regulatory cost of
plant rernoval accrual.
Impairment of Long-Lived Assets
Properties are evaluated on a specific-asset basis or in gtoups of similar assets, as applicable. hnpainnent is indicated when a
triggering event occurs and the sum of the estirnated undiscounted future net cash flows of an evaluated asset is less than the
asset's canying value. If impairment is indicated, fair value is estirnated using a discounted cash flow approach using market
interest rates or', if available, other market data. Cash flow estirnates require forecasts and assumptions for many years into the
future for a variety of factors, including commodity prices, cornrnodity hansportation rates and operating costs. There were llo
impairments in20l2 or 2011.
Goodwill and Other Intangible Assets
Goodrvill represents the excess of the amount paid over the fair value of net assets acquired in a business combination and is
not subject to amortization. Goodwill and indefinite-lived intangible assets are tested for irnpairment at a minirnum of once a
year or when a higgering event occurs. The Company evaluates whether it is more likely than not that the carrying value of a
reporting unit is greater than its fair value using events and circumstances such as econornic conditions, industry changes,
financial performance, etc. Fair value is measured using actively traded market values of other comparable companies in the
same businesses. If the fair value of the reporting unit exceeds its carrying value then goodwill is considered not to be irnpaired.
If the carrying value of the business unit is gteater than the fair value, an irnpainnent of goodwill is recognized equal to the
excess of carrying amount of goodwill over its fail value.
Capitalized Interest and Allowance for Funds Used During Construction
The Company capitalizes interest costs when applicable. The FERC, PSCU and PSCW require the capitalization of an
allowance for funds used during construction (AFUDC) for rate-regulated plant and equipment. The Wexpro Agreement
requires capitalization ofAFUDC on cost-of-service gas and oil development projects. Amounts recorded in the Consolidated
Statements of Income for the capitalization ofAFUDC and interest costs are disclosed in the table belorv:
Year Ended December 31,
2013 2012 20tt
Capitalized interest costs (recorded as a reduction of interest expense)
Questar Gas $ 0.2 S 0.1 $ 0.1
N. Derivative Instruments and Hedging Activities
The Company may elect to designate a derivative inst ument as a hedge of exposure to changes in fair value or cash florvs. A
derivative instrument qualifies as a hedge if all of the follorving tests are nlet:
. The iteur to be hedged exposes the Corttpany to rnatket risk.
. The derivative reduces the risk exposure and is designated as a hedge at tlte inception ofthe hedging relationship.
. At the inception of the hedge and throughout the hedge period, there is a high correlation behveen changes in the fair'
value of the derivative instrument and the fair value of the underlying hedged itern.
If the hedged exposure is a fair value exposure, the gain or loss on the derivative instrument is recognized in earnings in the
period of the change together with the offsetting gain or loss from the change in fair value of the hedged itern. If the hedged
exposure is a cash flow exposure, the effective portion of the gain or loss on the derivative instrument is reported initially as a
component of accumulated other comprehensive income (loss) (AOCI) and subsequently reclassified into earnings rvhen the
forecasted transaction affects eamings. Any amount excluded from the assessment of hedge effectiveness, as well as the
ineffective portion of the gain or loss, is reported currently in earnings. When a derivative insfrument is designated as a cash
flow hedge of a forecasted transaction that becomes probable of not occurring, the gain or loss on the derivative is itunediately
reclassifi ed into earnings from AOCI.
Credit Risk
The Rocky Mountain region is the Cornpany's primary market area. Exposure to credit risk may be affected by the
concenhation of customers in this region due to changes in economic or other conditions. Custorners include individuals and
nulnerous corunercial and industrial enterprises that may react differently to changing conditions. Management believes that its
credit-review procedures, loss reseres, customer deposits and collection procedures have adequately provided for usual and
customary credit-related losses. Loss reserves are periodically reviewed for adequacy and may be established on a specific-case
basis.
Bad debt expense associated with accounts receivable amountedto $0.2 million in20l3, $1.2 million h2012 and9'2.4 rnillion
in 2011. The allowance for bad debts was $ 1.7 rnillion at December 31,2013 and $3.1 million at December 31,2012. Questar
Gas's retail gas operations account for a rnajority of the bad debt expense. Questar Gas estimates bad debt expense as a
percentage of general-service revenues with periodic adjustments. Uncollected accounts are generally written offsix months
after gas is delivered and interest is no longer accrued. Questar Gas recovers bad debt costs related to the gas-cost portion of
rates in its Utah operations through a purchased-gas adjushnent to rates.
Asset Retirement Obligations
Questar records an asset retirement obligation (ARO) when there is a legal obligation associated with the retirement of a
tangible long-lived asset. Questar's AROs apply primarily to abandonment costs associated with gas and oil wells, production
facilities and certain other properties. The Cornpany has not capitalized future abandorunent costs on a majority of its long-
lived transportation and distribution assets because the Company does not have a legal obligation to restore the area
surounding abandoned assets. In these cases, the regulatory ageucies have opted to leave retired facilities in the ground
undisturbed rather than requiring the Company to excavate and dispose of the assets. Cost-of-service gas and oil AROs apply
prirnarily to abandomnent costs associated with gas and oil wells and certain other properties. The fair value of retirement costs
is estimated by Company personnel based on abandonment costs of similar properties available to field operations and
depreciated over the life of the related assets. Revisions to estimates result from material changes in the expected tirning or
amourt of cash flows associated with AROs. Income or expense resulting fi'om the settlement ofARO liabilities is included in
net gain (loss) from asset sales on the Consolidated Statements of Income. The ARO liability is adjusted to present value each
period tlu'ough an accretion calculation using a credit-adjusted risk-free interest rate. See Note 4 for further discussion on
AROs.
fncome Taxes
Questar and its subsidiaries file a consolidated federal incorne tax retum. Questar Gas accounts for income taxes on a separate
return basis and record tax expenses and benefits as they are generated. Deferred income taxes are recorded for the temporaly
differences arising between the book and tax carrying amout'tts of assets and liabilities. These differences create taxable or tax-
deductible amounts for future periods. Questar Gas uses the deferral method to account for investrnent tax credits as required
by regulatory courrnissions. The Cornpany records interest eamed on income tax refunds in interest and other incorne and
records penalties and interest charged on tax deficiencies in interest expellse.
Accounting standards for income taxes specifo the accounting for unceftainty in income taxes by prescribing a ntiuimum
recognition threshold for a tax position to be reflected in the financial statements. Ifrecognized, the tax benefit is ureasured as
the largest arnount of tax benefit that is more-likely-than-not to be realized upon ultimate settlement. Management has
considered the amounts and the probabilities of the outcomes that could be realized upon ultimate settlement and believes flrat
it is rnore-likely-than-not that the Cornpany's recorded income tax benefits will be fully realized. There were no unrecognized
tax benefits at the beginning or at the end of the years ended December 31,2013,2012 or2DlL The federal incorne tax r€tum
for 2012 is under exarnination by the Intemal Revenue Service (IRS). The 20 13 federal income tax return has not been filed.
For the 20 13 and 2Ol4 tax years, Questar was accepted into the CAP Maintenance program. The CAP employs real-time
resolution to improve federal tax cornpliance by resolving all or most tax positions prior to filing the related tax rctum.
Successfi.rl conclusion of the CAP allows the IRS to achieve an acceptable level of assurance regarding the accuracy of the
taxpayer's filed tax return and to eliminate or substantially reduce the need for a traditional examination.
Current federal tax statutes allow taxpayers a deduction ofbonus depreciation related to capital expenditures of 100% in 201 1
and 50o/o in}OlZ and2Ol3. The effects of bonus depreciation and other significant book/tax timing differences resulted ilr a net
operating loss (NOL) canyforward for federal incotne tax purposes :in2012 of $30.0 million. Questar's estirnated taxable
income for 2013 is $153.8 million. The NOL carryforward from 2012 of $30.0 million is expected to be utilized on the 2013
federal income tax return.
Share-Based Compensation
Questar may issue stock options, resfricted shares, RSUs and performance shares to certain officers, employees and non-
employee directors under its LTSIP. The Company uses the Black-Scholes-Merton mathematical rnodel fur estimating the fair
value of stock options and the Monte Carlo sirnulation method in estimating the fair value of perfoflnance shares for accounting
purposes. The granting of restricted shares and RSUs results in recognition of compensation cost measured at the grant-date
market price. Questar uses an accelerated method in recognizing share-based compensation costs with graded vesting periods.
Reclassifications
Certain reclassifications were made to prior year financial statements and notes to conform to the 2013 presentation. Questar
Gas reclassified amounts received from customers for the cost of plant removal fi'om accumulated depreciation to a regulatory
liability for prior years. This reclassification did not impact net income or cash flows. The Company does not believe this
change is rnaterial to prior year financial statements.
All dollar amounts in this Annual Report on Form l0-K are in millions, except per-share information and where otherwise
noted-
Note 2 - Earnings Per Share
Long-Term Stock fncentive Plan
Questar may issue stock options, restricted shares and RSUs to certain officers, directors and employees under its RSIP. Stock
options for participants have tenns ranging from five to ten yeals with a rnajority issued with a seven- to ten-year term. Options
generally vest in three or four equal, annual installments. Restricted shares and RSUs vest in equal instalhnents over a specified
number of years after the grant date with the majority vesting in thlee years. Unvested restricted shares have voting and
dividend rights; however, sale or transfer is restricted. RSUs do not have voting rights until shares are distributed, but they do
have dividend equivalent rights. Most RSU dividend equivalents are paid in cash quarterly and vest irnmediately. Dividend
equivalents on certain RSUs rvith deferred share distributions accrue quarterly and are subject to the same vesting, distribution
and voting conditions of the underlying award.
Note 3 - Asset Retirement Obligations
Questar's consolidated AROs by line of business are sumlnarized in fte table below:
December 31,
2013 2012
Questar Gas
(in rnillions)
$ 0.6 $ 0.s
W'expro collects from Questar Gas and deposits in trust certain funds related to estimated ARO costs. The funds are recorded as
other noncunent assets on the Consolidated Balance Sheets and are used to satisfy retirement obligations as the propefiies are
abandoned. The accounting treatment of reclamation activities associated with AROs for properlies administered under the
Wexpro Agreement is defined in a guideline letter between Wexpro and the Utah Division of Public Utilities and the staff of the
PSCW.
Note 4 - Fair Value Measurements
Questar complies with the accounting standards for fair value measurements and disclosures. These standards define fail value
in applying GAAP, establish a fratnework for measuring fair value and expand disclosures about fair value measurements. The
standards establish a fair value hierarchy. Level I inputs are unadjusted quoted prices for identical assets or liabilities in active
markets that the Company has the ability to access at the tneasurement date. LevelZ inputs are inputs other than quoted prices
included within Level I that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are
unobservable inputs for the asset or liability. The Company had no assets or liabilities measured using Level 3 inputs at
December 31,2013 or 2012. Fail value accounting standards also apply to certain nonfinancial assets and liabilities that are
measured at fair value on a noffecurring basis.
Beginning in20l2, Questar adopted fair value accounting guidance issued in May 2011. The guidance did not result in any
changes to the reported amounts ofassets or liabilities, but did result in disclosure ofthe fair value hierarchy levels associated
with fair value estirnates for financial assets and liabilities not carried at fair value.
Questar priurarily applies the market approach for recuning fair value measurements and rnaximizes its use of observable
inputs and minimizes its use of unobservable inputs. Questar considers bid and ask prices for valuing the majority of its assets
and liabilities measured and repofied at fair value. In addition to using market data, Questar makes assurnptions in valuing its
assets and liabilities, including assunrptions about risk and the risks inherent in the inputs to the valuation technique.
Questar Gas
The following table discloses the carrying amount, estirnated fair value and level within the fair value hierarchy of certain
financial instruments not disclosed in other notes to Questar Gas's furancial statements in this Annual Report on Form l0-K:
Hierarchy
Level of Fair Carrying Estimated Carrying
Value Amount FairValue Amount
December 31,2013
Estimated
Fair Value
December 31,2012
Finunciol assets
Cash and cash equivalents
Financiil liabilities
Notes payable to Questar
Long-tenn debt, including cun'ent
l 17.7
2 534.5
8.8 $
(in millions)
8.8 $
17.7
568.0
r.4 $
166.1
426.s
1.4
166.1
503.7
The carrying amounts of cash and cash equivalents and notes payable to Questar approximate fair value. The fair value of
fixed-rate long-term debt is based on the discounted present value of cash flows using Questar Gas's current credit risk-adjusted
borrowing rates.
Note 5 - Deht
The Company has a revolving credit facility with various banks to provide back-up credit liquidity support for its commercial
paper program. Credit commitments under this revolving credit facility totaled $750.0 million at December 3l,2Ol3,with no
amounts borrowed. This revolving credit facility has interest-rate options generally below the prime interest rate and carries
commitment fees on the unused balance. h April 2013, Questar amended and restated its revolving credit facility to increase its
size from S500.0 million to $750.0 mitlion and extend its maturity fiourAugust 3l,2016 toApril 19, 2018. On October 29,
20l2,the Company amended its revolving credit facility to enable Questar Gas to issue $150.0 million in the private placement
market in December 2012.Under both amendments, consolidated funded debt cannot exceed 70olo of consolidated
capitalization. The Company was in compliance with this covenant at December 31,2013.
Questar centrally manages cash. Questar makes loans to Questar Gas and under a short-tenn borrowing anangement. Amounts
Ioaned earn an interest rate that is identical to the interest rate paid on amounts borrowed. The rate is adjusted monthly based on
prevailing short-term market interest rates.
The following table details the notes payable to Questar from Questar Gas and the associated interest rates.
December 31,
2013 2012
Questar Gas
Notes payable to Questar
Interest rate at end ofyear
(in millions)
$ 17.7 $ 166.1
0.30 ' 0.39 (
All short- and long-temr debt and the revolving credit facility are unsecured obligations and rank equally rvith all other
unsecured liabilities. The tenns of the Questar Corporation, Questar Gas and Questar Pipeline long-ten.n debt obligations do not
have dividend-paynent restrictions.
In December 2013, Questar Gas issued $90.0 rnillion of 30-year Senior Notes at 4.78% and $60.0 rnillion of 35-year Senior
Notes at 4.83% in the private placement market. The proceeds of approxirnately $149.0 million, after deducting estimated
issuance costs, were used to repay existing indebtedness and for general corporate puryoses.
In December 2012, Questar Gas issued $110.0 rnillion of l5-year SeniorNotes at3.28% and $40.0 million of 12-year Senior
Notes at 2.98% in the private placement market. The proceeds of approximately $148.8 million, after deducting estirnated
issuance costs, were used to refurance $91.5 rnillion of long-term debt that matured in2012, $40.0 rnillion that rnatured in
January 2013 and $2.0 million that matured in Septernber 2013, and for general corporate purposes. These maturities had a
weighted-average interest rate of 6.060/o. The details of long-term debt are as follows:
Questor Gas
5.00% and 6.89yo Medium-term Notes due 2013
5.31o/o and,6.85yo Medium-termNotes due 2017 and,20l8
6.30% Notes due 2018
2.98%Notes dae2024
3.28%Notes due2027
7.20% Notes due 2038
4.78oloNotes due2043
4.8302 Notes due 2048
84.s
s0.0
40.0
110.0
100.0
90.0
60.0
42.0
84.5
50.0
40.0
110.0
100.0
Total Questar Gas long-term debt 534.5 426.5
The aggregate maturities of Questar Gas long-term debt for the next five years are as follows:
Questar
Gas
Years Ending December 31,
2017
2018
Note6-fncomeTaxes
(in millions)
14.5
120.0
Questor Gos
Details of Questar Gas's income tax expense and deferred income taxes are provided in the following tables. The components
of income tax expense were as follows:
Year Ended December 31,
2013 2012 20tt
Federal
Cuuent
Deferred
Stote
Current
Deferred
Deferred investment tax credit recognized
6.0 $
23.5
0.6
2.0
(0.2 :
(in millions)
(18.7 : $
45.1
1.2
(0.4 .
26.3
(1.6
)-z
(0.4
Total inconre tax expense 31.9 27.2 27.5
The difference between the statutory federal income tax rate and Questar Gas's effective income tax rate is explained as
follows:
Year Ended December 3 l,
2013 2012 201 1
Federal income taxes statutoly rate
lncrease (decrease) in rate as a result of;
State income taxes, net of federal income tax benefit
Arnortization of investment tax credits related to rate-regulated assets
Other
35.0 o/t 35.0%
1.0
) (0.4 )
1.0
2.1
(0.3
0.9
35.0 Yo
1.4
1.5
Effective income tax rate 37.7 0l 36.6%37.4%
Significant components of Questar Gas's deferred income taxes were as follows:
December 31,
2013 2012
Deferred income taxes - noncurrent
Deferred tax liubilities
Propefi plant and equipment
Ernployee benefits
Other
$
(in millions)
322.6 $
14.0
4.9
293.0
17.2
3.4
Deferred tax liabilities - noncurrent
Deferred tax assels
Deferred compensation
Net operating loss carryforward
341.5 313.6
0.9
I l.l
0.8
Deferred tax assets - noncurrent 0.8 12.0
Net deferred income tax liability - noncurrent 340.7 301.6
Deferred income taxes - current
Deferred tax assets - cuffent
Deferred tax liabilities - current
J.J
0.4
6.1
4.6
Net deferred income tax asset - current
Note 7 - Commitments, Contingencies and Leases
On May l,2Ol2, Questar Gas Company filed a legal action against QEP Field Services Cornpany, a subsidiary of QEP
Resources, Inc. The case, entitled Questar Gas Company v. QEP Field Services Contpanl,, rvas filed in the Third Disfi ict Court
in Salt Lake County, Utah. Questar Gas believes ceftain charges of QEP Field Services Cornpany for gathering services exceed
tlre arrrounts contemplated under a Gas Gatltering Agreemeut, effective September I , 1993, peftaining to cerlain gas produced
by Wexpro Company under the Wexpro Agreemeut. Questar Gas is alleging breach of contract by QEP Field Services
Company and is seeking an accounting, damages and a declaratory judgment relating to the services and charges under the Gas
Gathering Agreement. The charges under the Gas Gathering Agreement are included in Questar Gas's rates as part of its
1.52.9
purchased-gas costs. QEP Field Services Company filed an answer and counterclairn alleging that Questar Gas breached the
Agreement by failing to allow QEP Field Services to gather and process gas fi'om certain wells located in two fields in the state
of Wyoming. While Questar Gas intends to vigorously pursue its legal rights, the claims and counterclairns involve complex
legal issues and uncertainties that rnake it difficult to predict the outcome of the case and therefore rnanagernent cannot
detennine at this time rvhether this litigation may have an adverse material effect on its financial position, results of operations
or cash flows.
Questar Gas is involved in various commercial, environmental, and regulatory claims. Litigation and other legal proceedings
arise in the ordinary course of business. Except as stated above conceming the QEP lawsuit, rnanagement does not believe any
of them individually or in the aggregate rvill have a material adverse effect on Questar Gas's financial position, results of
operations or cash flows.
A liability is recorded for a loss contingency when its occun'ence is probable and its amount can be reasonably estirnated. If
some amount rvithin a range of possible outcomes appears to be a better estimate than any other amount within the range, that
amount is recorded. Otherwise, the minimum amount in the range is recorded. Disclosures are provided for contingencies
reasonably likely to occur, which would have a material adverse effect on Questar Gas's financial position, results of operations
or cash flows. Some of the claims involve highly complex issues relating to liability, damages and other matters subject to
substantial uncertainties and, therefore, the probability of liability or an estimate of loss cannot be reasonably determined.
Commitments
Questar Gos
Currently, more than halfofQuestar Gas's natural gas supply is provided by cost-of-service reserrres developed and produced
by Wexpro. In 2013, Questar Gas purchased the remainder of its gas supply from multiple third parties under index-based or
fixed-price contracts. Questar Gas has commitments to purchase gas for $27.4 million in 2014, $21.0 million in 2015, $21.1
rnillion rr;.2016, $25.3 million h20l7,ard$29.4 million in20l8 basedoncurrentprices. Generally, atthe conclusion ofthe
heating season and after a bid process, new agreements for the next heating season are put in place. Questar Gas bought natural
gas under third-party purchase agreements amounting to $186.5 rnillion in 2013, $104.1 rnillion h2012 and $221.0 million in
2011.
In addition, Questar Gas stores gas during off-peak periods (typically during the summer) and withdraws gas from storage to
meet peak gas demand (typically in the winter). The cornpany has contracted for transportation and underground storage
services with Questar Pipeline. Armual payments for these services amount to$74.4 million in20l4, $73.3 rnillion in 2015 and
2016,$46.6 million in20l7, and $13.4 rnillion in 2018. Questar Gas has third-paffy hansportation and gathering cornmitments
requiring yearly payrnents of $27.2 million in2014 through 2017 and$24.2 rnillion in 2018.
Note 8 - Wexpro and Wexpro II Agreements
Wexpro's operations are subject to the terms of the W'expro Agreement. The agreement was effective August l, 1981, and sets
forth the rights of Questar Gas to receive certain benefits from Wexpro's operations. The agreement was approved by the PSCU
and PSCW in 1981 and affirmed by the Supreme Court of Utah in 1983. The Utah Division of Public Utilities and the staffof
the PSCW are entitled to review the performance of Questar Gas and Wexpro under the Wexpro Agreernent and have retained
an independent cerlified public accouutant and an independent pefioleum engineer to monitor the perfomrance of the
agreement. Major provisions of the agreernent are as follorvs:
Wexpro couducts gas-development drilling on a finite group of productive gas propefties, as defined in the agreement, and
bears any costs of dry holes. Natural gas produced fi'om successful drilling on these propefties is delivered to Questar Gas.
Wexpro operates cerlaiu natural gas properties for Questar Gas. Wexpro conducts developmental-oil drilling on productive oil
propefties and bears any costs of dry holes. Oil and NGL discovered fi'om these propefiies is sold at rnarket prices rvith the
reveuues used to recovel'operating experlses and to give Wexpro a retur on its investnrent in successful rvells. The after-tax
rate of retum is adjusted annually and is approximately 17.2%. Any opemting income remaining after recovery of expenses and
Wexpro's retum on investment is divided between Wexpro and Questar Gas, with Wexpro retaining 460/o andQuestar Gas
retaining 54%.
Any operating income remaining afterrecovery of expenses and Wexpro's return on investment is divided between Wexpro and
Questar Gas, with Wexpro retaning46Yo.
e. Amounts received by Questar Gas fiorn the sharing of Wexpro's oil and NGL income are used to reduce natural gas costs to
utility customers.
Werpro If Agreement
Wexpro and Questar Gas have received approval of the PSCU and PSCW (the Cormnissions) for a Wexpro II Agreernent to add
propefties under the cost-of-service pricing methodology for the benefit of Questar Gas customers. The agreement is rnodeled
after the terms of the original Wexpro Agreement. Under the Wexpro II Agreement, Wexpro may acquire gas development
properties and Questar Gas may subrnit an application to the Commissions to treat these properties similar to the original
Wexpro properlies. If the Comrnissions approve the applications, the gas will be developed for the benefit of Questar Gas
customers. Wexpro will be entitled to a return on the acquisition costs based on Questar Gas's approved cost of capital. Future
development costs will earn returns consistent with the original Wexpro Agreement.
In September 2013, Wexpro completed a transaction to acquire an additional interest in natural gas-producing properties in the
Trail Unit of southwestern Wyoming's Vennillion Basin for $104.3 million, after post-closing adjustments (Trail acquisition). In
January 2014,the Commissions approved a stipulation for inclusion of these properties in the Wexpro II Agreement. As part of
this stipulation, Wexpro agreed to a provision to manage the combined production frorn the original Wexpro properties and the
Trail acquisitionto 65Yo of Questar Gas's annual forecasted demand. Beginning in June 2015 through May 2016 aud for each
subsequent l2-month period, ifthe combined annual production exceeds 65% ofthe forecasted demand andthe cost-of-service
price is greater than the Questar Gas purchased-gas price, an amount equal to the excess production times the excess price will
be credited back to Questar Gas customers. Wexpro may also sell production to manage the 65Yo level and credit back to
Questar Gas custorners the higher of rnarket price or the cost-of-service price tirnes the sales volumes.
Note9-RateRegulation
The following table details regulatoty assets and liabilities:
Current
December 31,2013 December 31,2012
Noncunent Current Noncurrent
(in millions)
Regulatory assets:
Questar Gas
Purchased-gas adj ustment
DSM
Deferred production taxes
Deferred royalties
Contact withholding
Cost ofreacquired debt
Pipeline integrity costs
ARO cost-of-service gas wells
tt.2
5.7
5.2
8.1
s 15.2
11.0
5.0
6.3
3.5
4.8
9.3
2.0
5.3
8.7
2.4
Total Questar Gas regulatory assets 16.130.2 41.0 16.4
Regulatory liabilities:
Questar Gas
Purchased-gas adjustment
CET
Cost of plant removal
Income taxes refundable to customers
Other
$
4.2
0.1
$7.4$
J.J
0.4
52.7
0.3
46.2
0.5
Total Questar Gas regulatory liabilities 46.7
Questar Gas records regulatory assets and liabilities. They recover the costs ofassets but do not generally receive a return on
these assets.
Following is a description of Questar Gas's regulatory assets and liabilities:
- Purchased-gas costs that are diffbrent from those provided for in present rates are accumulated and recovered or credited
through future rate changes.
- The DSM program asset represents funds expended for promoting the conservation ofnatural gas through advertising,
rebates for effrcient homes and appliances, and home energy audits. These costs are deferred and recovered from
customers through periodic rate adjustments.
- Production taxes and royalties on cost-of-service gas production are recorded when the gas is produced and recovered
from customers when taxes and royalties are paid, generally within 12 rnonths.
- Questar Gas recorded a regulatory asset for a disputed amount rvithheld from a supplier of gathering services. The
amount withheld rvill be recovered from customers if it is detennined that Questar Gas is required to pay the supplier.
- Gains and losses on the reacquisition of debt by rate-regulated companies are defered and amorlized as interest expense
over the rvould-be rernaining life ofthe reacquired debt. The reacquired debt costs had a rveighted-average life of
approximately 9 years as of Deceurber 3 I , 20 I 3.
- The costs of complying rvith pipeline-integrity regulations are recovered in rates subject to a PSCU order. Questar Gas is
allorved to recover $4.4 nrillion per )/ear. Costs incurred in excess of tl'ris amount rvill be recovered in future rate
changes.
4.353.0ll.l
- Aregulatory asset that represents future expenses related to abandonment of Wexpro-operated gas and oil wells. The
regulatory asset will be reduced over an l8-year period following an amoftization schedule that commenced January l,
2003, or as cash is paid to plug and abandon wells.
- The CET liability represents actual revenues received that are in excess ofthe allowed revenues. These amounts are
refunded through periodic rate adjustments.
- Cost of plant removal represents asset retirement costs recovered fl'om custorners for other than Iegal obligations.
- Income taxes refundable to customerc arise frorn adjustrnents to deferred taxes, refunded over the life of the related
propefi plant and equipment.
Rate Changes
Questar Gas has an allowed retum on equity of 10.35% in Utah. Questar Gas filed a general rate case in Utah in July 2013,
requesting a $19 million increase in revenues and a continuation of its 10.35% authorized rrturn on equity. Hearings were held
in January 2014 anda decision in the case was received on February 21,2014, which authorized an allorved return on equity of
g-ls%and an annual increase in revenues of $7.6 million effective March l,2}l4. Questar Gas filed a general rate case in
Wyorning in December 2011 and received an order in 2012, which increased rates by $0.6 rnillion per year and authorized a
return on equity of 9.16%.
Note 10 - Share-Based Compensation
Questar may issue stock options, restricted shares, RSUs and performance shares to certain officers, employees and non-
employee dilectors under its LTSIP. Questar recognizes expense over time as the stock options, restricted shares, RSUs and
performance shares vest.
Reshicted shares are valued at the grant-date rnarket price and amortized to expense over the vesting period. Most restricted
share grants vest in equal installments over a tlree-year period frorn the grant date. The weighted-average remaining vesting
period of unvested restricted shares at December 31, 2013, was 7 months.
Starting in the first quarler of 2013, Questar granted RSUs to certain officers, employees and non-eurployee directors under its
LTSIP. One share of Questar common stock will be dishibuted for each RSU at the tirne of vesting. RSUs are valued at the
grant-date market price and amortized to expense over the vesting period. RSU grants typically vest in equal instalhnents over
a three-year period from the grant date. Several grants vest in a single instalhnent after a specified period. The weighted-
average remaining vesting period of ulested RSUs at December 31,2013, was 14 months.
Questar grants performance shares to Company officers under the terms of the LTSIP. The awards are designed to motivate and
reward these officers for long-tenn Cornpany perfonnance and provide an incentive for thern to remain with the Cornpany. The
target number of perfonnance shares for each ofEcer is subject to adjustment upward or downward based on the Cornpany's
total shareholder return relative to a specified peer group ofcompanies over a three-year performance period. Each three-year
perfonnance period cofiunences at the beginning ofthe year ofgrant. Distributions ofperfonnance shares, ifany, take place in
the quarter following the conclusion of the perfonnance period so long as such officer was eurployed by the Company or its
affiliates as of the last day ofthe performance period.
The Company uses the Monte Carlo sirnulation method in estimating the fair value of perforulance shares. Fair value estimates
rely upon subjective assumptions used in the mathematical rnodel and may not be representative of future results. The
estimated fail value of perfonlance shares granted and major assumptions used in the sirnulation at the date of grant are listed
belorv:
2013 2012 20lt
Performance Share
Input Variables
Fair value ofperformance shares at grant date
Risk-fiee interest rate
Expected price volatility
Expected dividend yield
Expected Iife in years
Range of
exercise
prices
outstanding at Dec. remaining term in Weighted-average
31,2013 years exercise price
39.62 $
0.40 0l
19.0 0l
2.8801
2.9
25.42 $
0.35 0t
22.00t
335 0t
2.9
18.23
1320t
313 0t
339 ot
2.9
The grant-date fair value of perfonnance slrares is amoftized to expense over the vesting period. Half of any award will be
distributed in shares of Questar common stock and half in cash.
The following table sumrnarizes the stock options held under the LISIP by Questar Gas officers and employees at
December 31,2013
Options Outstanding Options Exercisable
Number Weighted-average
exercisable Weighted-average
exercise priceat Dec. 31,2013
Questar Gos
$ rr.40 -$ 13.10 17,000 2.6 s 12.10 17,000 $ 12.10
The following table summarizes the restricted shares held under the LISIP by Questar Gas officers and employees at
December 31,2013. The weighted-average remaining vesting periods of unvested restricted shares at December 31, 2013, for
Questar Gas were 6 months and 7 rnonths, respectively.
Restricted
Shares
Outstanding Price Range
Weighted-
Average Price
Queslar Gos 58,837 $ 13.10 -$ 19.39 $ 18.60
The following table sumurarizes the RSUs held under the LTSIP by Questar Gas officers and ernployees at December 31,2013.
The weighted-average remaining vesting period of unvested RSUs at December 31,2013, for Questar Gas was 14 months.
RSUs
Outstanding Price Range
Weighted-
Average Price
Questor Gas 55,631 $, 22.17 -s 23.62 $ 23.54
The following table surnmarizes the target number of performance shares held under the LTSIP by Questar Gas officers at
December 31,2013. The weighted-average remaining vesting period of unvested performance shares at December 31, 2013, for
Questar Gas was l8 months.
TargetNumber of Weighted-
Performance Shares Grant-Date Average Grant-Outstanding Fair Value Range Date Fair Value
Queslor Gas
Note ll - Employee Benefits
Defined Benefit Pension Plans and Other Postretirement Benefits
34,326 $ 18.23 -$ 39.62 $27.91
The Cornpany has a nonconh'ibutory defined benefit pension plan covering a majority of its ernployees and postretilement
medical and life insurance plans providing coverage to less than half of its employees. Employees hired or rehired after
June 30, 2010 are not eligible for the nonconh-ibutory defined benefit pension plan and employees hired or rehired after
December 31, 1996, are not eligible for the poshetirement medical plan and are not eligible to receive basic life coverage once
they retire.
Questar Gas participates in Questar's qualified and nonqualified pension plans as well as its postretirement medical and life
plans. Questar Gas's pension plan and postretirement rnedical and life insurance assets and benefit obligations cannot be
separately detemrined because plan assets are not segregated or resh'icted to meet the companies'pension aud postretirement
medical and life obligations. If the cornpanies were to lvithdrarv fi'om the plans, the pension and other postretirement
obligations for Questar Gas ernployees rvould be retained by the Questar plans. Pension and other posh'etirement benefit net
cost and plan contribution infonlation for Questar Gas is shown belorv:
2013
Pension
Year Ended December 31,
2012 20ll 2013
Other Postretirement B enefi ts
Year Ended December 3l,
2012 2011
Questor Gas
Net periodic cost
Share oftotal plan contributions
(in millions)
s 18.1 $ 19.7 $ 13.4 $ 2.4 $ 3.3 $ 2.3
29.6 39.4 27.1 2.0 I.9 2.2
Employee Investment PIan
The Employee Investment Plan (EIP) is a defined contribution pension plan that allows eligible employees to purchase shares
of Questar common stock or other investments tluough payroll deduction at the fair market value on the transaction date. The
Company cunently contributes an overall rnatch of 100% of employees'purchases up to a maxirnurn of 6% of their qualifying
eamings. To satisfy employee purchases of Questar stock, the EIP h'ustee may purchase Questar shares on the open rnar*et with
cash received or Questar may issue new shares.
Questar Gas's EIP expense equaled its matching conhibution of $3.4 rnillion in 2013, $3.6 rnillion :.r:.2012 and $3.4 rnillion in
2011.
Note 12 - Related-Party Transactions
Questor Gas
In 2013 Questar Gas providedtechnical services to affiliates. In2012 and 2011 Questar Gas also provided communication
services to affiliates. Questar Gas provided these services at its cost and charged $6.7 rnillion in 2013, $13.6 million in2}l2
and $ 14.0 rnillion in 201 I . The majority of these costs are allocated. The allocation methods are based on the specific nature of
the charges. Management believes that the allocation rnethods are reasonable-
Questar Gas has reserved transportation capacity on Questar Pipeline's system for 916 Mdth per day during the heating season
aud 841 Mdth per day during off-peak months. Questar Gas periodically releases excess capacity and receives a credit fiom
Questar Pipeline for the released capacity revenues and a pofiion of Questar Pipeline's intenuptible kansportation revenues.
Questar Gas paid for fl-ansportation, storage and processing services provided by Questar Pipeline and a subsidiary amounting
to $73.0 million in 2013, $73.6 million in2012 and $73.7 million in 2011, rvhich included dernand charges. The costs of these
services were included in the cost ofnatural gas sold.
Under the temrs of the Wexpro Agreement, Questar Gas leceives a poftion of Wexpro's income fi'om oil and NGL operations
after recovery of Wexpro's opelating expenses and a returl on investurent. This amount, u,hich is included in revenues and
reduces amounts billect to gas distribution custonters, rvas $0.6 urillion in 2013, $2.5 million in 2012 and $3.3 million in 2011.
The Company has a nonconhibutory defined benefit pension plan covering a majority of its employees and postretfuement
medical and life insurance plans providfurg coverags to less than half of its employees. Ernployees hired or rehired after
June 30, 2010 are not eligible for the nonconf ibutory defined benefit pension plan and employees hired or rehired after
December 31,1996, are not eligible for the postretirement rnedical plan and are not eligible to receive basic life coverage once
they retire.
Questar Gas participates in Questar's qualified and nonqualified pension plans as well as its posketirernent medical and life
plans. Questar Gas's pension plan and postretirement rnedical and life insurance assets and benefit obligations camot be
separately determined because plan assets are not segregated or resh'icted to meet the companies'pension and postretirement
medical and Iife obligations. If the companies were to withdraw fi'om the plans, the pension and other posh'etirement
obligations for Questar Gas ernployees would be retained by the Questar plans. Pension and other postretirement benefit net
cost and plan conh'ibution infonnation for Questar Gas is shotvn belorv:
2013
Pension
Year Ended December 31,
20t2
Other Postretirernent Benefits
Year Ended December 31,
2013 201220tt 201 I
Questor Gas
Net periodic cost
Share oftotal plan contibutions
(in millions)
s 18.1 $ 19.7 $ 13.4 $ 2.4 S 3.3 S 2.3
29.6 39.4 27.1 2.0 1.9 2.2
Employee Investment PIan
The Employee Investment Plan (EIP) is a defined contribution pension plan that allows eligible employees to purchase shares
of Questar common stock or other investments through payroll deduction at the fair tnarket value on the hansaction date. The
Cornpany currently contributes an overall match of 100% of employees'purchases up to a maximum of 6% of their qualiffing
earnings. To satisff employee purchases of Questar stock, the EIP trustee nay purchase Questal shares on the open rnarket with
cash received or Questar may issue nelv shares.
Questar Gas's EIP expense equaled its matching contribution of $3.4 million in 2013, $3.6 million in2A12 and $3.4 million in
2011. Questar Pipeline's EIP expense equaled its matching contribution of $1.4 rnillion in 2013, 2012 and2Dll.
Note 12 - Related-Party Transactions
Questor Gas
In 2013 Questar Gas provided technical services to affrliates. In20l2 and 20l l Questar Gas also provided communication
services to affiliates. Questar Gas provided these services at its cost and charged $6.7 rnillion in 2013, $13.6 million in20l2
and $14.0 rnillion in 201l. The majority of these costs are allocated. The allocation methods are based on the specific nature of
the charges. Managernent believes that the allocation rnethods are reasonable.
Questar Gas has reserved transportation capacity on Questar Pipeline's system for 916 Mdth per day during the heating season
and 841 Mdth per day during off-peak months. Questar Gas periodically releases excess capacity and receives a credit from
Questar Pipeline for the released capacity revenues and a portion of Questar Pipeline's intenuptible transportation revenues.
Questar Gas paid for transportation, storage and processing services provided by Questar Pipeline and a subsidiary arnounting
to $73.0 rnillion in 2013, $73.6 milliortin20l2 and $73.7 million in 201l, rvhich included denand charges. The costs of these
services rvere iucluded in the cost ofnatural gas sold.
Under the terms of tl're Wexpro Agreement, Questar Gas receives a portion of Wexpro's income fi'om oil and NGL operations
after recovery of Wexpro's operating experlses and a retum on investnrent. This amount, rvhich is included in revenues and
reduces autounts billed to gas distributiorl custon'rers, rvas $0.6 ntillion in 20l i, S2.5 million in2012 and $3.3 million in 2011.
The amounts that Questar Gas paid Wexpro for the operation of cost-of-service gas properties were $294.6 million in 2013,
$274.0 rnillion lra2012 and $253.4 rnillion in 2011. Questar Gas reports these amounts in the cost of natural gas sold.
Questar Gas had a lease with an affiliate for space in an office building located in Salt Lake City, Utah, which expired on
April 30,2012. Rent expense was $0.4 rnillion l.rl.2012 and $1.1 rnillion in 2011.
Questar charged Questar Gas for certain administrative functions amounting to $48.4 million in 2013, $49.3 million in20l2
and $47.4 million in 201l. These costs are included in operating expenses and are generally allocated based on each affiliated
company's proportional share ofrevenues less product costs; properly, plant and equipment; and labor costs. Management
believes that the allocation method is reasonable.
Questar Pipeline charged Questar Gas for communication services amounting to $3.7 million in 2013. These costs are included
in operating expenses and are allocated based on usage.
Questar Gas borrowed cash from Questar and incurred interest expense of $0.5 million tn2}l3,$0.6 million inl}l2and $0.3
million in 2011.
Note 13 - Supplemental Gas and Oil Information (Unaudited)
Cap italized Co sts of Co st-of-9 ervi ce Act iv iti es
Capitalized costs of cost-of-service gas and oil properties net of the related accumulated depreciation, depletion and
amofiization are shown below:
December 31,
2013 2012
Questar Gas
Esthnded Quurttities of Cost-of-Service Proved Gas and Oil Reserves
Estimates of cost-of-service proved gas and oil resewes have been prepared in accordance with professional engineering
standards and the Company's established interral controls. The estimates were prepared by Wexpro's reservoir engineers,
individuals who possess professional qualifications and demonstrated competency in reserves estimation and evaluation.
Because gas reseryes managed, developed and produced by Wexpro are delivered to Questar Gas at cost of seruice, SEC
guidelines with respect to standard economic assumptions are not applicable. The SEC acknowledges this potential
circurnstance and provides that companies may give appropriate recognition to differences arising because of the effect of the
rate-making process. Accordingly, in cases where differences arise because of the effect of the rate-making process, Wexpro
uses a minimum-producing rate or maximum well-life limit to determine the ultimate quantity of reserves attributable to each
well.
The Company annually reviews all proved undeveloped reserves to ensure an appropriate plan for developrnent exists. All
proved undeveloped reserves are converted to prove developed reserves within five years ofthe proved undeveloped reserve
booking. At December, 2013, all of the Cornpany's proved undeveloped reserves were scheduled to be developed within five
years fi'om the date such locations were initially disclosed as proved undeveloped reserves. W'expro converted 42olo of prior
year-end proved undeveloped reserves to developed stahrs in 2013, 15% :rr2012 and l9o/o in2}ll.
Revisions of prior estimates reflect the addition of new proved undeveloped reserves associated with current five-year
developrnent plans, revisions to prior proved undeveloped reserves, revisions to infill drilling development plans, as well as the
transfer ofproved undeveloped reseryes to unproved reserve categories due to changes in development plans. The negative
revisions reflected in the 2013 cost-of-service reserve estimates are due in part to an increase in well spacing in the Pinedale
field based on 2013 drilling results.
In establishing reserves, the SEC allows the use of techniques that have been field tested and demonsh'ated to provide
reasonably certain results with consistency and repeatability in the fonnation being evaluated or in an analogous formation. In
general, the Company uses nuilrerous data elements and analysis techniques in the estimation of proved reserves. These data
elements and techniques include, but are not limited to, production tests, well perfonnance data, decline curve analysis,
wireline logs, core datq pressure transient analysis, seismic data and interpretation, and rnaterial balance calculations. The
Company utilizes these reliable technologies to book proved reserves, however, no reserves were recorded frorn increasing
recovery factor estimates or from extending down-dip reservoir limits associated rvith the use of reliable technology.
Wexpro's estimates of proved reserves were rnade by the Courpany's engineers and are the responsibility of management. The
Company requires that reserve estimates be made by qualified reserves estirnators (QREs), as defined by the Society of
Petroleum Engineers' standards. The QREs interact with engineering, Iand, and geoscience persomel to obtain tlre necessary
data for projecting future productiort, costs, net revenues and ultinrate recoverable reserves. Management approves the QREs'
reserve estimates ar,nually. All QREs receive ongoing education on the fundamentals of SEC reserves reporting tlrough
intemal and external training over the policies for estimating aud recording reserves in conrpliance rvith applicable SEC
definitions and guidance.
7.87.2
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