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Strategic Review of Questar Southern Trails Pipeline and Impairment of Eastern Segment
9 Months Ended
Sep. 30, 2013
Strategic Review of Questar Southern Trails Pipeline and Impairment of Eastern Segment [Abstract]  
Strategic Review of Questar Southern Trails Pipeline and Impairment of Eastern Segment
Note 12 - Strategic Review of Questar Southern Trails Pipeline and Impairment of Eastern Segment

In the fourth quarter of 2012, Questar Pipeline initiated a strategic review of the noncore Questar Southern Trails Pipeline. All strategic options were analyzed, including joint ventures, asset sales or other alternatives. The western segment of Southern Trails Pipeline runs 96 miles from Whitewater to Long Beach, California. This segment has not been placed in service. The eastern segment of Southern Trails Pipeline runs 487 miles from the San Juan Basin in New Mexico to connections with other pipelines in the eastern portion of southern California.

As a result of that review, Questar Pipeline entered into an agreement with another pipeline company to evaluate and potentially recommission the western portion of its Southern Trails Pipeline to its original purpose as a crude oil transport pipeline and to develop a rail terminal to offload crude from railcars and into the pipeline for transportation to refineries in Long Beach, California. Questar Pipeline's net book value of the western segment of Southern Trails Pipeline is approximately $21 million. This project is in the marketing phase and a decision whether or not to proceed with the development is expected in 2014.

Questar has been in discussions with a third party developer to either purchase the eastern segment of Southern Trails Pipeline or enter into a long-term transportation contract for the full capacity of the pipeline. The expected progress with this party to reach a definitive agreement was not achieved during the third quarter of 2013. In addition during the third quarter, Questar updated its five-year forecast for Southern Trails Pipeline, which resulted in revised projections of higher operating expenses including right-of-way and pipeline safety costs. Current and projected market rates for natural gas transportation between the San Juan Basin and California markets do not cover these increasing operating expenses. Due to the developments in the third quarter of 2013, Questar Pipeline recorded a noncash impairment of its entire investment in the eastern segment of Southern Trails Pipeline of $80.6 million, or $52.4 million after income taxes. Questar used a probability-weighted discounted cash flow analysis that included significant inputs including Questar's cost of capital and assumptions regarding future transportation rates and operating costs.