Questar Corp. has received approval from Utah and Wyoming regulators to include additional natural gas properties under a long-standing agreement that enables it to produce gas at cost-of-service for its utility customers in both states.
Questar, which produces, distributes and transports gas through its subsidiaries, paid $52.7 million last year to acquire the remaining working interest in operated wells of its exploration unit, Wexpro Co., which are in the Canyon Creek unit of Wyoming's Vermillion Basin (see Daily GPI, July 30, 2013). This year, Questar petitioned state regulators to include that 100% interest as a cost-of-service property under the Wexpro II agreement ( see Daily GPI, May 5).
"Adding the Canyon Creek acquisition to Wexpro II increases our low-cost portfolio of Vermillion Basin assets, our most economical cost-of-service area," said Questar CEO Ron Jibson.
In connection with this year's request, the company also proposed changes to its cost-of-service program to allow its future gas production under the agreement to be more competitive with current market prices. Regulators approved those changes, including a stipulation that post-2015 dry-hole and non-commercial wells costs be shared equally between utility customers and Wexpro.
Also under the changes, when the annual average price of cost-of-service gas from all Wexpro properties is less than the actual average market price, annual savings on post-2015 development would be shared equally between utility customers and Wexpro. Among other things, approving the changes allows Wexpro to reduce the maximum combined production from its properties from 65% to 55% of utility, Questar Gas's annual forecasted demand by 2020. The changes are also likely to help Wexpro resume its gas development drilling program in the current low gas environment, Jibson said.