Questar Corp. reported last week that it has entered into an agreement to sell its interests in the TransColorado Pipeline to Kinder Morgan Inc. (KMI) and affiliates for $105.5 million. The agreement, which was effective Oct. 1, is subject to review under the Hart-Rodino-Scott Antitrust Improvement Act of 1976.

The TransColorado Pipeline, which was completed in 1999, consists of 292 miles of 22-inch and 24-inch natural gas pipe extending from the Piceance Basin near Meeker, CO, to the San Juan Basin near Blanco, NM. Affiliates of Questar and Kinder Morgan were co-owners of the pipeline.

In 2001, Questar exercised a contractual right to put (sell) to a KMI affiliate its 50% ownership interest in the TransColorado project. Following lengthy legal proceedings, a Colorado district court in August ordered a KMI affiliate to pay Questar TransColorado nearly $110 million in damages, after it declared as “valid and enforceable” a 1997 agreement and 1998 letter of understanding that allowed Questar Corp. to sell its 50% stake in the pipeline to KMI’s KN TransColorado (see NGI, Sept. 2).

KMI had filed a lawsuit in June 2000 charging Questar with a breach of its fiduciary duty to the TransColorado pipeline partnership after Questar announced plans to build a competing pipeline that would transport gas from the Uinta Basin to Kern River Gas Transmission. The court ruled that Questar Pipeline Co. had failed to install compression as promised, but dismissed all of KMI’s other claims.

“This is a good outcome for us,” said D.N. Rose, CEO of Questar Pipeline. “It allows us to cover our recorded investment and put the matter behind us without further litigation.”

Questar said proceeds from the sale will be used to retire Questar Pipeline debt. The company added that it expects the actual sale to occur before year-end.

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