Note 2 - Basis of Presentation of Interim Financial Statements

The interim financial statements contain the accounts of Questar and its wholly-owned subsidiaries. The financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP), the instructions for Quarterly Reports on Form 10-Q and SEC Regulations S-X and S-K. All significant intercompany accounts and transactions have been eliminated in consolidation.

The financial statements reflect all normal, recurring adjustments and accruals that are, in the opinion of management, necessary for a fair presentation of financial position and results of operations for the interim periods presented. Interim financial statements do not include all of the information and notes required by GAAP for audited annual financial statements. These financial statements should be read in conjunction with the financial statements and notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014.

The preparation of financial statements and notes in conformity with GAAP requires that management make estimates and assumptions that affect the amounts of revenues, expenses, assets and liabilities, and disclosure of contingent assets and liabilities. Actual results could differ from estimates. The results of operations for the three and 12 months ended March 31, 2015, are not necessarily indicative of the results that may be expected for the year ending December 31, 2015.

Certain reclassifications were made to prior year information to conform to the current year presentation.

Questar and Questar Pipeline use the equity method to account for an investment in an unconsolidated affiliate where they do not have control, but have significant influence. The investment in the unconsolidated affiliate on the Condensed Consolidated Balance Sheets equals Questar Pipeline's proportionate share of equity reported by the unconsolidated affiliate. The investment is assessed for possible impairment when events indicate that the fair value of the investment may be below the Questar Pipeline's carrying value. When such a condition is deemed to be other-than-temporary, the carrying value of the investment is written down to its fair value, and the amount of the write-down is included in the determination of net income. White River Hub, LLC, a limited liability company and FERC-regulated transporter of natural gas, is the sole unconsolidated affiliate. Questar Pipeline owns 50% of White River Hub, LLC, and is the operator.

In March 2015, Questar Gas purchased Eagle Mountain City's municipal natural gas system for $11.4 million. The city has over 6,500 natural gas customers and is one of Utah's fastest-growing areas.

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 of the Wexpro Agreement and the Wexpro II Agreement (Wexpro agreements). Questar Gas also obtains transportation and storage services from 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 of natural gas sold is credited with the value of natural gas as it is injected into storage and debited as it is withdrawn from storage. The reported balance in consolidated cost of sales may be a negative amount during the second and third quarters because of the entries to record injection of gas into storage and the elimination of intercompany transactions. The details of Questar's consolidated cost of sales are as follows:



	3 Months Ended						12 Months Ended
	March 31,						March 31,
	2015			2014			2015			2014
	(in millions)
Questar Gas
Gas purchases	$	41.0		$	92.7		$	84.8		$	176.0
Operator service fee	84.8			89.1			345.4			310.9
Transportation and storage	22.2			22.1			79.7			80.2
Gathering	5.4			4.9			21.5			19.1
Royalties	11.9			17.3			54.7			50.5
Storage (injection) withdrawal, net	30.9			33.0			(3.2		)	3.4
Purchased-gas account adjustment	36.2			(5.6		)	(4.0		)	(30.3		)
Other	1.2			1.1			4.9			4.8
Total Questar Gas cost of natural gas sold	233.6			254.6			583.8			614.6
Elimination of Questar Gas cost of natural gas sold - affiliated companies	(104.0		)	(108.2		)	(419.2		)	(387.0		)
Total Questar Gas cost of natural gas sold - unaffiliated parties	129.6			146.4			164.6			227.6
Questar Pipeline
Total Questar Pipeline cost of sales	1.9			1.7			4.2			6.6
Other cost of sales	0.3			0.1			1.1			0.2
Total cost of sales	$	131.8		$	148.2		$	169.9		$	234.4