“Unprecedented demand” for gas pushed Questar’s storage,transportation and distribution system to the limit in November,the company said last week. The Salt Lake City-based LDC was forcedto curtail service to some industrial customers during the month tomaintain deliveries to residential customers.

November was the coldest on record in Questar’s Utah servicearea. Questar’s interstate pipeline system had no excesstransportation capacity.

“As one of the nation’s most diversified natural gas companies,we are experiencing firsthand the unprecedented demand for gas fromour wells, for capacity in our storage and transportation systems,and for supplies to serve a growing number of residential,commercial and industrial customers,” said Questar CEO R.D. Cash.

With the significantly higher wellhead prices, Cash said Questarwould meet or exceed the First Call earnings estimate of $1.67 pershare for 2000.

Cash outlined an aggressive capital spending plan for 2001 tomeet “the unprecedented demand we are seeing for natural gassupplies, transportation and retail-distribution services.” Capitalspending is expected to range between $368 million and $563million, a potential record for the diversified natural gascompany. The higher spending, Cash said, will occur if constructionbegins as scheduled on two major pipeline projects.

Regulated Services expenditures could exceed $235 million in2001 if the 75-mile Main Line 104 in central Utah is built. FERCapproved the project last week. The 24-inch-diameter line couldcarry a minimum of 272,000 Dth/d to Utah’s main population centersand to pipelines serving other markets. The pipeline could becompleted by late fall of 2001 if environmental impact statementsare completed. Projected cost of the line is $80 million ($74million to be spent in 2001). Construction work on a second majorpipeline project — the Southern Trails Pipeline — also isscheduled to begin in 2001. Questar plans to convert an existing700-mile, 16-inch-diameter pipeline to transport 120,000-130,000Dth/d of gas to Southern California markets. The California StateLands Commission in November certified the environmental impactreport for the pipeline, and the company is working on finalright-of-way agreements.

Nick Rose, CEO of the Regulated Services area, said the twopipeline projects “are critically important to expanding the gassupply for Utah and other western markets. Main Line 104 andSouthern Trails will provide new sources of gas to meet theregion’s growing demand.”

Cash said the largest share of the projected 2001 base budget of$368 million would be designated for the company’s Market Resourcesarea, which conducts oil and gas exploration and production, gasgathering and processing, and energy trading. Market Resourcesplans expenditures of $194 million, including $76 million fordevelopment drilling, $32 million for reserve acquisitions, $28million for gathering and processing, and $19 million forexploration drilling and related activities.

The base $368 million budget anticipates $117 million in capitalexpenditures by Regulated Services, which includes interstatetransmission and storage and retail gas distribution. Questar Gas,the distribution affiliate, is expected to add 20-22,000 customersin 2001, continuing a decade-long pattern of growing at about twicethe industry average.

Cash said Questar’s 2001 capital budget will be funded primarilyfrom growing internal cash flows and short-term debt. He expectedthe company to maintain a conservative balance sheet, withlong-term debt representing about 45% of total capitalization.

Rocco Canonica

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