UNITEDTable STATESof Contents

~~SECURITIES~~UNITED ~~AND~~STATES ~~EXCHANGE COMMISSION~~

~~Washington,~~SECURITIES ~~D.C.~~AND ~~20549~~EXCHANGE COMMISSION

~~FORM~~Washington, ~~10-K~~D.C. 20549

~~ANNUAL~~FORM ~~REPORT~~10-K ~~PURSUANT TO SECTION 13 OR 15(d)~~

OF(Mark ~~THE~~One) ~~SECURITIES EXCHANGE ACT OF 1934~~

~~For~~☒ ~~the~~ANNUAL ~~Fiscal~~REPORT ~~Year~~PURSUANT ~~Ended~~TO ~~December 31,~~SECTION ~~2012~~13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Exact name of registrant as specified in its charter	State or other jurisdiction of incorporation or organization	Commission File Number	(I.R.S. EmployerIdentification No.)
Questar Corporation	Utah	001-08796	87-0407509
Questar Gas Company	Utah	333-69210	87-0155877
Questar Pipeline Company	Utah	000-14147	87-0307414

For the fiscal year ended December 31, 2016

~~333~~OR ~~South State Street, P.O. Box 45433, Salt Lake City, Utah 84145-0433~~

~~(Address~~☐ ofTRANSITION ~~principal~~REPORT ~~executive~~PURSUANT ~~offices~~TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

~~Registrants'~~For ~~telephone~~the ~~number,~~transition ~~including area code (801) 324-5900~~period from to

Web site http://www.questar.com


Commission File Number	Exact name of registrants as specified in their charters	I.R.S. Employer Identification Number

333-69210	QUESTAR GAS COMPANY	87-0155877

	UTAH (State or other jurisdiction of incorporation or organization)

	333 SOUTH STATE STREET SALT LAKE CITY, UTAH (Address of principal executive offices)	84145 (Zip Code)

	(801) 324-5000 (Registrants’ telephone number)
Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: None

~~Securities~~Indicate ~~registered~~by ~~pursuant~~check tomark ~~Section~~whether ~~12(b)~~the registrant is a well-known seasoned issuer as defined in Rule 405 of the Securities Act:.

~~Questar~~Yes ☐ No ☒ ~~Corporation Common stock without par value, listed on the New York Stock Exchange Questar Gas Company None Questar Pipeline Company None~~

~~Securities~~Indicate ~~registered~~by check mark if the registrant is not required to file reports pursuant to Section 13 12or Section 15(gd) of the Act:.

~~Questar~~Yes ☒ No ☐ ~~Corporation None Questar Gas Company None Questar Pipeline Company None~~

Indicate by check mark ifwhether the registrant is(1) has afiled ~~well-known~~all ~~seasoned~~reports ~~issuer,~~required asto ~~defined~~be infiled ~~Rule~~by ~~405~~Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

~~Questar Corporation~~ Yes ~~[X]~~ ☐ No ☒ ~~[ ] Questar Gas Company Yes [ ] No [X] Questar Pipeline Company Yes [ ] No [X]~~

Indicate by check mark whether the registrant ~~(1)~~ has ~~filed~~submitted ~~all~~electronically ~~reports~~and posted on its corporate Web site, if any, every Interactive Data File required byto ~~Section~~be 13submitted orand ~~15(d)~~posted ofpursuant ~~the~~to ~~Securities~~Rule ~~Exchange~~405 ~~Act~~of Regulation S-T (§232.405 of ~~1934~~this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to ~~file~~submit ~~such reports),~~ and ~~(2)~~post ~~has been subject to~~ such ~~filing requirements for the past 90 days~~files).

~~Questar Corporation~~ Yes ~~[X]~~ ☒ No ☐ ~~[ ] Questar Gas Company Yes [X] No [ ] Questar Pipeline Company Yes [X] No [ ]~~

Indicate by check mark ~~whether~~if ~~the~~disclosure ~~registrant~~of ~~has~~delinquent ~~submitted~~filers ~~electronically~~pursuant ~~and~~to ~~posted~~Item on405 ~~its~~of ~~corporate~~Regulation ~~Web~~S-K (§229.405 ~~site,~~of ifthis ~~any,~~chapter) ~~every~~is ~~Interactive~~not ~~Data~~contained ~~File~~herein, ~~required~~and towill not be ~~submitted~~contained, ~~and posted pursuant~~ to ~~Rule~~the ~~405~~best of ~~Regulation~~registrant’s ~~S-T~~knowledge, ~~(Section~~in ~~232.405~~definitive ofproxy ~~this~~or ~~chapter)~~information ~~during~~statements ~~the~~incorporated ~~preceding~~by 12reference ~~months~~in ~~(or~~Part ~~for~~III ~~such~~of ~~shorter~~this ~~period~~Form ~~that~~10-K ~~the~~or ~~registrant~~any ~~was~~amendment ~~required~~ to ~~submit~~this ~~and~~Form ~~post~~10-K. ~~such~~☒ ~~files).~~

~~Questar~~Indicate ~~Corporation~~by check ~~Yes~~mark ~~[X]~~whether Nothe [registrant ]is ~~Questar~~a ~~Gas~~large ~~Company~~accelerated ~~Yes~~filer, ~~[X]~~an Noaccelerated [filer, ]a ~~Questar~~non-accelerated ~~Pipeline~~filer ~~Company~~or ~~Yes~~a ~~[X]~~smaller Noreporting [company. ]See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

~~Indicate~~Large byaccelerated ~~check~~filer ~~mark~~☐ ifAccelerated ~~disclosure~~filer of☐ ~~delinquent~~Non-accelerated ~~filers~~filer ~~pursuant~~☒ toSmaller ~~Item~~reporting ~~405~~company of☐ ~~Regulation S-K~~ (~~Section~~Do ~~229.405 of this chapter) is~~ not ~~contained~~check ~~herein,~~if ~~and~~a ~~will~~smaller ~~not~~reporting ~~be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.~~company)

~~Questar~~Indicate ~~Corporation~~by [check ]mark ~~Questar~~whether ~~Gas~~the ~~Company~~registrant [is ]a ~~Questar~~shell ~~Pipeline~~company ~~Company~~(as [defined ]by Rule 12b-2 of the Act).

~~Indicate~~Yes ☐ No ☒ by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act. Do not check non-accelerated filer if a smaller reporting company (Check one).

Questar ~~Corporation~~Gas ~~Large~~does ~~accelerated~~not ~~filer[X]~~have ~~Accelerated~~any ~~filer[~~voting ]or ~~Non~~non-~~accelerated~~voting ~~filer[~~common ]equity ~~Smaller~~held ~~reporting~~by ~~company [ ] Questar Gas Company Large accelerated filer[ ] Accelerated filer[ ] Non~~non-~~accelerated~~affiliates. ~~filer[X]~~As ~~Smaller~~of ~~reporting~~February ~~company~~28, [2017, ] Questar ~~Pipeline~~Gas ~~Company~~had ~~Large~~9,189,626 ~~accelerated~~shares ~~filer[~~of ]common ~~Accelerated~~stock ~~filer[~~outstanding. ~~] Non-accelerated filer[X] Smaller reporting company [ ]~~

~~Indicate~~QUESTAR byGAS ~~check~~COMPANY ~~mark~~MEETS ~~whether~~THE ~~the~~CONDITIONS ~~registrant~~SET isFORTH aIN ~~shell~~GENERAL ~~company~~INSTRUCTION I(as1)(a) ~~defined~~AND in(b) OF ~~Rule~~FORM 10-K ~~12b~~AND IS FILING THIS FORM 10-2K ofUNDER ~~the~~THE ~~Exchange~~REDUCED ~~Act)~~DISCLOSURE FORMAT.

QuestarTable Corporationof Yes [ ] No [X] Questar Gas Company Yes [ ] No [X] Questar Pipeline Company Yes [ ] No [X]Contents

~~State~~Questar ~~the~~Gas ~~aggregate~~Company market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of the last business day of the registrant's most recently completed second fiscal quarter (June 30, 2012). The aggregate market value was calculated by excluding all shares held by directors and executive officers of the registrant and three nonprofit foundations established by the registrant without conceding that all such persons are affiliates for purposes of federal securities laws.

Questar Corporation	$3.7 billion
Item Number			Page Number
Questar Gas Company	None
		Glossary of Terms	3
Questar Pipeline Company	None
Part I
1.		Business	4
1A.		Risk Factors	5
1B.		Unresolved Staff Comments	7
2.		Properties	7
3.		Legal Proceedings	7
4.		Mine Safety Disclosures	7
Part II
5.		Market for the Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	8
6.		Selected Financial Data	8
7.		Management’s Discussion and Analysis of Financial Condition and Results of Operations	9
7A.		Quantitative and Qualitative Disclosures About Market Risk	10
8.		Financial Statements and Supplementary Data	11
9.		Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	31
9A.		Controls and Procedures	31
9B.		Other Information	31
Part III
10.		Directors, Executive Officers and Corporate Governance	32
11.		Executive Compensation	32
12.		Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	32
13.		Certain Relationships and Related Transactions, and Director Independence	32
14.		Principal Accountant Fees and Services	32
Part IV
15.		Exhibits and Financial Statement Schedules	33
16.		Form 10-K Summary	34


2

IndicateTable the number of shares outstanding of each of the issuers' classes of common stock, as of January 31, 2013.Contents

Questar Corporation	without par value	175,097,361
Questar Gas Company	$2.50 per share par value	9,189,626
Questar Pipeline Company	$1.00 per share par value	6,550,843

Glossary of Terms

~~Documents~~The ~~Incorporated~~following byabbreviations ~~Reference~~or acronyms used in this Form 10-K are defined below:

Portions of Questar Corporation's definitive Proxy Statement (the "Proxy Statement"), to be filed in connection with its May 10, 2013, Annual Meeting of Shareholders, are incorporated by reference into Part III of this Annual Report.


Abbreviation or Acronym		Definition
AFUDC		Allowance for funds used during construction
ARO		Asset retirement obligation
bcf		Billion cubic feet
CEO		Chief Executive Officer
CERCLA		Comprehensive Environmental Response, Compensation and Liability Act of 1980
CET		Conservation enabling tariff
CFO		Chief Financial Officer
Dominion		The legal entity, Dominion Resources, Inc., one or more of its consolidated subsidiaries (other than Dominion Questar) or operating segments, or the entirety of Dominion Resources, Inc. and its consolidated subsidiaries
Dominion Gas		The legal entity, Dominion Gas Holdings, LLC, one or more of its consolidated subsidiaries or operating segment, or the entirety of Dominion Gas Holdings, LLC and its consolidated subsidiaries
Dominion Questar		The legal entity, Dominion Questar Corporation (formerly known as Questar Corporation), one or more of its consolidated subsidiaries or operating segment, or the entirety of Dominion Questar Corporation and its consolidated subsidiaries
Dominion Questar Combination		Dominion’s acquisition of Dominion Questar completed on September 16, 2016 pursuant to the terms of the agreement and plan of merger entered on January 31, 2016
dth		Dekatherm
EEP		Energy-efficiency program
EPA		Environmental Protection Agency
ERISA		The Employee Retirement Income Security Act of 1974
FASB		Financial Accounting Standards Board
GAAP		U.S. generally accepted accounting principles
GHG		Greenhouse gas
Heating degree days		Units measuring the extent to which the average daily temperature is less than 65 degrees Fahrenheit, calculated as the difference between 65 degrees and the average temperature for that day
Idaho Commission		Idaho Public Utilities Commission
IRCA		Intercompany revolving credit agreement
MD&A		Management’s Discussion and Analysis of Financial Condition and Results of Operations
Mdth		One thousand dekatherms
PHMSA		Pipeline and Hazardous Materials Safety Administration
PSIA		Pipeline Safety Improvement Act of 2002
PSRCJCA		Pipeline Safety, Regulatory Certainty and Jobs Creation Act of 2011
Questar Gas		The legal entity Questar Gas Company
Questar Pipeline		Questar Pipeline, LLC (successor by statutory conversion to and formerly known as Questar Pipeline Company), one or more of its consolidated subsidiaries, or the entirety of Questar Pipeline, LLC and its consolidated subsidiaries
SEC		Securities and Exchange Commission
Utah Commission		Public Service Commission of Utah
Virginia Power		The legal entity, Virginia Electric and Power Company, one or more of its consolidated subsidiaries or operating segments, the entirety of Virginia Electric and Power Company and its consolidated subsidiaries
Wexpro		The legal entity, Wexpro Company, one or more of its consolidated subsidiaries, or the entirety of Wexpro Company and its consolidated subsidiaries
Wexpro Agreement		An agreement effective August 1981, which sets forth the rights of Questar Gas to receive certain benefits from Wexpro’s operations, including cost-of-service gas
Wexpro II Agreement		An agreement with the states of Utah and Wyoming modeled after the Wexpro Agreement that allows for the addition of properties under the cost-of-service methodology for the benefit of Questar Gas customers
Wyoming Commission		Wyoming Public Service Commission

Questar Gas Company and Questar Pipeline Company, as wholly-owned subsidiaries of a reporting company, meet the conditions set forth in General Instruction I(1)(a) and (b) of Form 10-K and are therefore filing this form with the reduced disclosure format.3

3Table of Contents

TABLE OF CONTENTS
		Page
Where You Can Find More Information		5
Forward-Looking Statements		5
Glossary of Commonly Used Terms		6
PART I
Item 1.	BUSINESS	8
	Nature of Business	8
	Retail Gas Distribution – Questar Gas	8
	Gas and Oil Development and Production – Wexpro	10
	Interstate Gas Transportation – Questar Pipeline	11
	Corporate and Other	12
	Employees	12
	Executive Officers	13
Item 1A.	RISK FACTORS	13
Item 1B.	UNRESOLVED STAFF COMMENTS	19
Item 2.	PROPERTIES	19
	Retail Gas Distribution – Questar Gas	19
	Gas and Oil Development and Production – Wexpro	19
	Interstate Gas Transportation – Questar Pipeline	21
Item 3.	LEGAL PROCEEDINGS	21
Item 4.	MINE SAFETY DISCLOSURES	21
PART II
Item 5.	MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES	22
Item 6.	SELECTED FINANCIAL DATA	24
Item 7.	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	25
Item 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	37
Item 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA	39
Item 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE	98
Item 9A.	CONTROLS AND PROCEDURES	98
Item 9B.	OTHER INFORMATION	100
PART III
Item 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE	100
Item 11.	EXECUTIVE COMPENSATION	100
Item 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS	100
Item 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE	100
Item 14.	PRINCIPAL ACCOUNTING FEES AND SERVICES	100
PART IV
Item 15.	EXHIBITS, FINANCIAL STATEMENT SCHEDULES	101
	SIGNATURES	106

Part I

~~FILING~~Item 1. ~~FORMAT~~Business

~~This~~GENERAL Annual Report on Form 10-K is a combined report being filed by three separate registrants: Questar Corporation, Questar Gas Company and Questar Pipeline Company. Questar Gas Company and Questar Pipeline Company are wholly-owned subsidiaries of Questar Corporation. Separate financial statements for Wexpro Company have not been included since Wexpro is not a registrant. See Note 13 to the accompanying financial statements for a summary of operations by line of business. Information contained herein related to any individual registrant is filed by such registrant solely on its own behalf. Each registrant makes no representation as to information relating exclusively to the other registrants.

~~Item~~Questar 8Gas ofis ~~Part~~a ~~II of this Annual Report on Form 10~~wholly-Kowned subsidiary ~~includes separate financial statements (i.e. statements~~ of ~~income,~~Dominion ~~statements~~Questar ~~of comprehensive income~~which, ~~balance~~effective ~~sheets,~~September ~~statements of equity and statements of cash flows) for Questar Corporation~~2016, ~~Questar~~is ~~Gas Company and Questar Pipeline Company. The notes accompanying the financial statements are presented on~~ a ~~combined~~wholly-owned ~~basis~~subsidiary ~~for all three registrants. Management's Discussion and Analysis~~ of ~~Financial Condition and Results of Operations included under Item 7 of Part II is presented by line of business~~Dominion.

4Questar Gas distributes natural gas as a public utility in Utah, southwestern Wyoming and a small portion of southeastern Idaho. As of December 31, 2016, Questar Gas was serving approximately 1.0 million sales and transportation customers. Questar Gas is the only non-municipal gas-distribution utility in Utah, where over 97% of its customers are located. The Utah, Wyoming and Idaho Commissions have granted Questar Gas the necessary regulatory approvals to serve these areas. Questar Gas also has long-term franchises granted by communities and counties within its service area. In order to service these areas, Questar Gas owns and operates distribution systems and has approximately 29,200 miles of street mains, service lines and interconnecting pipelines. It has a major operations center in Salt Lake City, and has operations centers, field offices and service-center facilities in other parts of its service area.

~~Where~~Questar ~~You~~Gas’ ~~Can~~growth ~~Find~~is ~~More~~tied ~~Information~~to the economic growth of Utah and southwestern Wyoming. It has a market share of over 90% of residential space and water heating in its service area. During 2016, Questar Gas added nearly 17,300 customers, a 1.7% increase over the prior year.

Questar ~~Corporation (Questar or the Company) and two of its subsidiaries, Questar~~ Gas ~~Company~~faces ~~(Questar~~similar ~~Gas)~~risks ~~and~~as ~~Questar Pipeline Company (Questar Pipeline), each file annual, quarterly, and current reports with the Securities and Exchange Commission (SEC). Questar also regularly files proxy statements and~~ other ~~documents~~local ~~with~~distribution ~~the SEC~~companies. These ~~reports~~risks ~~and~~include ~~other~~revenue ~~information~~variations ~~can~~based beon ~~read~~changes ~~and~~in ~~copied~~demand, changes atin ~~the~~natural ~~SEC's~~gas ~~Public Reference Room at 100 F Street~~prices, ~~N.E.,~~availability ~~Washington, D.C., 20549-0213. Please call the SEC at 1-800-SEC-0330 for further information on the operation~~ of ~~the~~natural ~~Public~~gas ~~Reference Room. The SEC also maintains an internet site at http://www.sec.gov that contains reports~~supplies, ~~proxy~~declining ~~and~~residential ~~information~~usage ~~statements~~per ~~and other information regarding issuers that file electronically with the SEC~~customer, ~~including~~aging ~~Questar,~~of ~~Questar~~distribution ~~Gas~~facilities and ~~Questar~~adverse ~~Pipeline~~regulatory decisions.

~~Investors~~Questar ~~can~~Gas’ ~~also~~sales ~~access~~to ~~financial~~residential and ~~other~~commercial ~~information~~customers ~~via~~are ~~Questar's~~seasonal, ~~internet~~with ~~site~~a atsubstantial ~~www.questar.com.~~portion ~~Questar and each~~ of ~~its~~such ~~reporting~~sales ~~subsidiaries~~made ~~make~~during ~~available, free of charge through~~ the ~~internet~~heating season. ~~site,~~The ~~copies~~typical ofresidential ~~Annual~~customer ~~Reports~~in onUtah ~~Form~~(considered ~~10-K,~~to ~~Quarterly~~be ~~Reports~~a oncustomer ~~Form~~using ~~10-Q,~~80 ~~Current~~dth ~~Reports~~per onyear) ~~Form~~consumes ~~8-K,~~more ~~and~~than ~~any~~70% ~~amendments~~of totheir ~~such~~annual ~~reports~~gas ~~and~~usage ~~all~~during ~~reports~~the ~~filed~~coldest bysix ~~executive~~months ~~officers and directors under Section 16~~ of the ~~Securities~~year. ~~Exchange~~Questar ~~Act~~Gas, ~~of 1934~~however, ashas ~~amended~~a ~~(the~~weather-normalization mechanism ~~Exchange~~for ~~Act),~~its ~~reporting~~general-service ~~transactions in Questar securities~~customers. ~~Access~~This tobilling ~~these~~mechanism ~~reports~~adjusts isthe ~~provided~~non-gas asportion ~~soon~~of asa ~~reasonably~~customer’s ~~practical~~monthly ~~after~~bill ~~such~~as ~~reports~~the ~~are~~actual ~~electronically~~Heating ~~filed~~degree ~~with~~days in the ~~SEC.~~billing ~~Information~~cycle ~~contained~~are onwarmer or ~~connected~~colder than tonormal. ~~Questar's~~This ~~internet~~mechanism ~~site~~reduces ~~that~~volatility isin ~~not~~any ~~directly~~given ~~incorporated by reference into the Company'~~customer’s ~~Annual~~monthly ~~Report~~bill onfrom ~~Form~~year ~~10-K~~to ~~should~~year ~~not~~and bereduces ~~considered~~volatility ~~part~~in ofQuestar ~~this~~Gas’ ~~report or any other filing made with the SEC~~earnings.

Questar's ~~internet~~Gas’ ~~site~~gas-supply ~~also~~risk ~~contains~~is ~~copies~~partly ofmitigated ~~Statements~~by cost-of-service ~~Responsibility~~gas ~~for~~supplied ~~various~~by ~~board~~an ~~committees~~affiliate, ~~including~~Wexpro. During 2016, Questar Gas satisfied the ~~Finance~~majority ~~and~~of ~~Audit~~its ~~Committee~~supply requirements with cost-of-service gas volumes. Wexpro designs its development program to meet 65% of Questar Gas’ weather-normalized gas-supply requirements. Wexpro produces gas, ~~Corporate~~which ~~Governance~~is ~~Guidelines~~then gathered by Wexpro or third parties, transported by another affiliate, Questar Pipeline, and delivered at cost of service to Questar's ~~Business~~Gas. ~~Ethics~~Questar Gas also has a balanced and ~~Compliance~~diversified ~~Policy~~portfolio of third-party gas-supply contracts for volumes produced in Wyoming, Colorado, and Utah. In addition, Questar Gas has regulatory approval to pass through in its balancing account the economic results associated with commodity-price hedging activities if it were to utilize such hedges.

~~Finally,~~Questar ~~you~~Gas ~~may~~has ~~request~~designed aits ~~copy~~distribution ofsystem ~~filings~~and ~~other~~annual gas-supply ~~than~~plan anto ~~exhibit~~handle topeak adesign-day ~~filing~~demand, ~~unless~~which ~~that~~is ~~exhibit~~defined isas ~~specifically~~the ~~incorporated~~estimated byvolume ~~reference~~of ~~into~~gas that ~~filing,~~firm atcustomers nocould ~~cost~~use bywhen ~~writing~~the orweather ~~calling~~is ~~Questar,~~extremely ~~333~~cold. ~~South~~For the ~~State~~2016-2017 ~~Street~~heating season, ~~P.O.~~Questar ~~Box~~Gas ~~45433,~~had ~~Salt~~an ~~Lake~~estimated ~~City,~~peak ~~UT,~~sales ~~84145-0433~~and ~~(telephone~~firm ~~number~~transportation ~~801~~design-~~324-5900)~~day demand of 1,740 Mdth.

~~Forward~~Questar Gas has long-~~Looking~~term ~~Statements~~contracts with Questar Pipeline for transportation and storage services. The storage contracts reserve capacity at Questar Pipeline’s Clay Basin storage facility and three peak-day storage aquifers. Questar Gas also has transportation contracts to take deliveries at several locations from Kern River Pipeline.

~~This~~COMPETITION Annual Report on Form 10-K may contain or incorporate by reference information that includes or is based upon "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended (the Securities Act), and Section 21E of the Exchange Act. Forward-looking statements give expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. They use words such as "anticipate," "estimate," "expect," "project," "intend," "plan," "believe," and other words and terms of similar meaning in connection with a discussion of future operating or financial performance. In particular, these include statements relating to future actions, prospective services or products, future performance or results of current and anticipated services or products, development efforts, expenses, the outcome of contingencies such as legal proceedings, trends in operations and financial results.

~~Any~~Questar orGas ~~all~~currently ~~forward-looking~~does not ~~statements~~face ~~may~~direct ~~turn~~competition ~~out~~from toother bedistributors ~~wrong.~~of ~~They~~natural ~~can~~gas befor ~~affected~~residential ~~by inaccurate assumptions or by known or unknown risks~~ and ~~uncertainties.~~commercial ~~Many~~customers ~~such factors will be important~~ in ~~determining~~its ~~actual~~service ~~future results~~territory. ~~These~~Questar ~~statements~~Gas ~~are~~provides ~~based~~transportation onservice ~~current~~to ~~expectations~~large commercial and ~~the~~industrial ~~current~~customers ~~economic~~who ~~environment.~~buy ~~They~~gas ~~involve~~directly afrom other ~~number of risks and uncertainties that are difficult to predict~~suppliers. ~~These~~Questar ~~statements~~Gas ~~are~~faces ~~not~~the ~~guarantees~~risk ofthat ~~future~~it ~~performance. Actual results~~ could ~~differ~~lose ~~materially~~transportation ~~from~~customers ~~those~~to ~~expressed~~competitors orwho ~~implied~~may inbe ~~the~~able ~~forward-looking~~to ~~statements.~~connect ~~Factors~~and ~~that~~transport ~~could~~natural ~~cause~~gas ~~actual results~~ to ~~differ~~large ~~materially~~industrial ~~include,~~customers. ~~but are not limited to the following:~~

•REGULATION ~~the risk factors discussed in Part I, Item 1A of this Annual Report on Form 10-K;~~

•As ~~general~~a ~~economic~~public ~~conditions~~utility, ~~including~~Questar Gas is subject to the ~~performance~~jurisdiction of ~~financial~~the ~~markets~~Utah, Wyoming and ~~interest~~Idaho Commissions. The Idaho Commission has contracted with the Utah Commission for rate oversight of Questar Gas operations in a small area of southeastern Idaho. Natural gas sales and transportation services are provided under rate schedules approved by the Utah and Wyoming Commissions. Both the Utah and Wyoming Commissions permit Questar Gas to recover gas costs through a balancing-account mechanism and to reflect natural gas price changes on a periodic basis, typically twice a year in the spring and the fall. Questar Gas recovers bad debt costs related to the gas-cost portion of rates; in its Utah operations through a purchased-gas adjustment to rates.

•Questar ~~changes~~Gas is subject to the requirements of the PSIA and PSRCJCA. The PSIA is designed to examine and improve the state of pipeline safety regulations, gives enhanced safety authority to the PHMSA and is intended to improve pipeline transportation by strengthening enforcement capabilities. The PSRCJCA and the rules issued by the U.S. Department of Transportation require interstate pipelines and local distribution companies to implement a 10-year program of risk analysis, pipeline assessment and remedial repair for transportation pipelines located in ~~energy~~high-consequence ~~commodity~~areas ~~prices;~~such as densely populated locations. The Utah Commission has allowed Questar Gas to recover $7.0 million per year for the operating costs of complying with these regulations. Costs incurred in excess of these amounts will be recovered through future rate changes.

~~• changes in industry trends;~~4

•Table changesof in laws or regulations; andContents

•Questar ~~other~~Gas ~~factors~~has an infrastructure cost-tracking mechanism that allows it to place into rate base, ~~most~~and earn a return on, capital expenditures associated with a multi-year natural gas infrastructure-replacement program upon the completion of ~~which~~each ~~are~~project. ~~beyond~~A 2014 Utah general rate case reset the ~~Company's~~recovery ~~control~~of costs under the infrastructure-replacement program into general rates until Questar Gas invested $84 million in new pipelines. This dollar threshold was met in November 2014, and thereafter Questar Gas has been able to recover program capital expenditures through the infrastructure-replacement mechanism.

Questar ~~undertakes~~Gas nohas ~~obligation~~a revenue decoupling mechanism called the CET, which allows it to collect ~~publicly~~its ~~correct~~allowed orrevenue ~~update~~per ~~the~~customer ~~forward-looking~~and ~~statements~~promote inenergy ~~this~~conservation. ~~Annual~~Under ~~Report~~the CET, inQuestar ~~other~~Gas ~~documents,~~non-gas orrevenues onare decoupled from the ~~internet~~temperature-adjusted ~~site~~usage per customer. The tariff specifies an allowed monthly revenue per customer, with differences to ~~reflect~~be ~~future~~deferred ~~events~~and recovered from or ~~circumstances.~~refunded ~~All~~to ~~such~~customers ~~statements~~through periodic rate adjustments. These adjustments are ~~expressly~~limited ~~qualified~~to by5% ~~this~~of ~~cautionary~~Utah’s ~~statement~~distribution non-gas revenues.

5Under the EEP, Questar Gas encourages the conservation of natural gas through advertising, rebates for efficient homes and appliances, and home energy plans. The costs related to the EEP are deferred and recovered from customers through periodic rate adjustments.

~~Glossary~~See ofNote ~~Commonly~~10 ~~Used~~to ~~Terms~~the Financial Statements for additional information.

B		Billion.
Barrel (bbl)		Equal to 42 U.S. gallons and is a common measure of volume of crude oil and other liquid hydrocarbons.
British Thermal Unit (Btu)		A measure of the amount of energy required to raise the temperature of a one-pound mass of water one degree Fahrenheit at sea level.
Conservation Enabling Tariff (CET)		A rate mechanism in Utah and Wyoming that decouples customer usage of natural gas from the non-gas revenues received by Questar Gas by specifying a margin for each customer per month. Differences between the CET margin and actual usage are deferred and recovered from or refunded to customers through future rate changes.
Cubic Foot (cf)		One standard cubic foot equals the volume of gas in one cubic foot measured at standard conditions - a temperature of 60 degrees Fahrenheit and a pressure of 30 inches of mercury (approximately 14.7 pounds per square inch).
Cubic Foot Equivalents (cfe)		Cubic foot of natural gas equivalents.
Decatherm (dth)		Ten therms. One dth equals one million Btu or approximately one Mcf.
Demand-Side Management (DSM)		Costs incurred by Questar Gas to promote energy conservation in the form of rebates and promotions. These DSM costs are recovered from customers through periodic rate adjustments.
Developed Reserves		Reserves of any category that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well. See 17 C.F.R. § 210.4-10(a)(6).
Development Well		A well drilled into a known producing formation in a previously discovered field.
Dry Hole		A well drilled and found to be incapable of producing hydrocarbons in sufficient quantities such that proceeds from the sale of production exceed expenses and taxes.
Exploratory Well		A well drilled into a previously untested geologic prospect to determine the presence of natural gas or oil.
FERC		Federal Energy Regulatory Commission.
Gallon (gal)		U.S. measure of a liquid volume equal to 4 quarts or 231 cubic inches.
Gas		All references to gas in this report refer to natural gas.
Gross		Gross natural gas and oil wells or gross acres are the total number of wells or acres in which the Company has a working interest.
Heating Degree Days		A measure of the number of degrees the average daily outside temperature is below 65 degrees Fahrenheit.
M		Thousand.
MM		Million.
Natural Gas Equivalents		Oil and NGL volumes are converted to natural gas equivalents using the ratio of one barrel of crude oil, condensate or NGL to 6,000 cubic feet of natural gas.
Natural Gas Liquids (NGL)		Liquid hydrocarbons that are extracted and separated from the natural gas stream. NGL products include ethane, propane, butane, natural gasoline and heavier hydrocarbons.

EMPLOYEES

6At December 31, 2016, Questar Gas had approximately 900 employees.

Net		Net gas and oil wells or net acres are determined by the sum of the fractional ownership working interest the Company has in those gross wells or acres.
Proved Reserves		Those quantities of natural gas, oil, condensate and NGL which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from known reservoirs under existing economic conditions, operating methods and government regulations. See 17 C.F.R. § 210.4-10(a)(22).
PSCU		Public Service Commission of Utah.
PSCW		Wyoming Public Service Commission.
Reserves		Estimated remaining quantities of natural gas, oil and related substances anticipated to be economically producible by application of development projects to known accumulations. In addition, there must exist, or there must be a reasonable expectation that there will exist, the legal right to produce. See 17 C.F.R. § 210.4-10(a)(26).
Reservoir		A porous and permeable underground formation containing a natural accumulation of producible natural gas and/or oil that is confined by impermeable rock or water barriers and is individual and separate from other reservoirs.
Royalty		An economic interest in a gas and oil lease that gives the owner the right to receive a portion of the production from the leased acreage or of the proceeds of the sale thereof, but generally does not require the owner to pay any portion of the costs of drilling or operating the wells on the leased acreage. Royalties may be either landowner's royalties, which are reserved by the owner of the leased acreage at the time the lease is granted, or overriding royalties, which are usually reserved by an owner of the leasehold in connection with a transfer to a subsequent owner.
SEC		U.S. Securities and Exchange Commission.
Undeveloped Reserves		Reserves of any category that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. See 17 C.F.R. § 210.4-10(a)(31).
Wexpro Agreement		A long-standing comprehensive agreement with the states of Utah and Wyoming. The agreement was effective August 1, 1981, and sets forth the rights of Questar Gas to receive certain benefits from Wexpro's operations. The agreement was approved by the PSCU and PSCW in 1981 and affirmed by the Supreme Court of Utah in 1983.
Wexpro II Agreement		A proposed agreement with the states of Utah and Wyoming modeled after the Wexpro Agreement that would allow for the expansion of properties under the cost-of-service methodology for the benefit of Questar Gas customers.
Working Interest		An economic interest in a gas and oil lease that gives the owner the right to drill, produce and conduct operating activities on the leased acreage and receive a share of any production.
Workover		Operations on a producing well to restore or increase production.

WHERE YOU CAN FIND MORE INFORMATION

7The SEC maintains a website that contains annual, quarterly and current reports and other information that issuers and voluntary reporting companies, like Questar Gas, file electronically with the SEC. The SEC’s website is http://www.sec.gov. You may also read and copy any document it files at the SEC’s public reference room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the public reference room.

~~FORM~~Questar Gas makes its SEC filings available, free of charge, including the annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports, through Dominion’s internet website, http://www.dom.com, as soon as reasonably practicable after filing or furnishing the material to the SEC. Information contained on Dominion’s website is not incorporated by reference in this report.

~~ANNUAL~~Item 1A. ~~REPORT,~~Risk ~~2012~~Factors.

~~PART~~Questar IGas’ business is influenced by many factors that are difficult to predict, involve uncertainties that may materially affect actual results and are often beyond its control. A number of these factors have been identified below. For other factors that may cause actual results to differ materially from those indicated in any forward-looking statement or projection contained in this report, see Forward-Looking Statements in Item 7. MD&A.

~~ITEM~~Questar 1Gas’ investment in infrastructure replacement may increase customer rates, which could cause customers to explore alternatives to natural gas. ~~BUSINESS~~ Questar Gas is investing significant capital to replace aging pipeline infrastructure. This significant investment is expected to continue over a number of years. Replacement of aging pipeline infrastructure will increase customer safety. However, Questar Gas’ return on this investment and depreciation costs may result in increased customer rates. Over time, this may impact customer decisions on the use of natural gas versus other energy sources, which could adversely affect Questar Gas’ results of operations, cash flows and financial condition.

~~Nature~~Questar Gas’ operations are subject to operational hazards, equipment failures, supply chain disruptions and personnel issues, which could negatively affect Questar Gas. Operation of ~~Business~~Questar Gas’ facilities involves risk, including the risk of potential breakdown or failure of equipment or processes due to aging infrastructure, fuel supply, pipeline integrity or transportation disruptions, accidents, acts of terrorism or sabotage, construction delays or cost overruns, shortages of, or delays in, obtaining equipment, material and labor, operational restrictions resulting from environmental limitations and governmental interventions, and performance below expected levels. Questar Gas’ business is dependent upon sophisticated information technology systems and network infrastructure, the failure of which could prevent it from accomplishing critical business functions. Because Questar Gas’ pipelines and other facilities are interconnected with those of third parties, the operation of these facilities and pipelines could be adversely affected by unexpected or uncontrollable events occurring on the systems of such third parties.

In addition, there are many risks associated with Questar isGas’ aoperations ~~Rockies-based~~and ~~integrated~~the transportation, storage and processing of natural gas, ~~holding~~including ~~company~~fires, explosions, uncontrolled release of natural gas and other environmental hazards, the collision of third party equipment with ~~three~~pipelines ~~principal~~and ~~complementary~~wildlife ~~lines~~impacts. Such incidents could result in loss of human life or injuries among employees, customers or the public in general, environmental pollution, damage or destruction of facilities or business ~~operated~~interruptions ~~through~~and ~~wholly-owned~~associated ~~subsidiaries:~~public or employee safety impacts, loss of revenues, increased liabilities, heightened regulatory scrutiny and reputational risk. Further, the location of pipelines and other facilities near populated areas, including residential areas, commercial business centers and industrial sites, could increase the level of damages resulting from these risks.

~~• Questar Gas provides retail natural gas distribution in Utah, Wyoming and Idaho.~~5

•Table Wexpro Company (Wexpro) develops and produces natural gas from cost-of-service reserves for Questar Gas customers.Contents

•Questar Gas is dependent on bank credit arrangements to successfully execute its operating strategies. Questar ~~Pipeline~~Gas ~~operates~~relies ~~interstate~~on ~~natural~~credit ~~gas~~facilities ~~pipelines~~with ~~and~~banks ~~storage~~to meet short-term funding needs. In November 2016, Questar Gas was added as a co-borrower to two joint revolving credit facilities with Dominion, Virginia Power and Dominion Gas. Banks may be unable or unwilling to extend credit in the ~~western~~future. ~~United~~Questar ~~States~~Gas’ revolving credit facilities are subject to variable interest rates. From time to time, Questar Gas may use interest-rate derivatives to fix the rate on a portion of its variable-rate debt. A downgrade of credit ratings could increase the interest cost of debt and ~~provides~~decrease future availability of capital from banks and other ~~energy~~sources. ~~services~~While management believes it is important to maintain investment-grade credit ratings to conduct Questar Gas’ businesses, Questar Gas may not be able to keep investment-grade ratings.

Exposure to counterparty performance may adversely affect Questar Gas’ financial results of operations. Questar Gas is ~~headquartered~~exposed into ~~Salt~~credit ~~Lake~~risks ~~City~~of its counterparties and the risk that one or more counterparties may fail or delay the performance of their contractual obligations, ~~Utah~~including but not limited to payment for services. ~~Shares~~For ofexample, Questar ~~common~~Gas ~~stock~~has ~~trade~~credit onexposure ~~the~~in ~~New~~outstanding ~~York~~accounts ~~Stock~~receivable ~~Exchange~~from ~~(NYSE:STR)~~customers, which could become significant. Defaults or failure to perform by customers, suppliers or other third parties may adversely affect Questar Gas’ financial results, cash flows and liquidity.

~~Questar~~Potential ischanges in aaccounting ~~holding~~practices ~~company,~~may asadversely ~~that~~affect ~~term~~Questar isGas’ ~~defined~~financial inresults. ~~the~~Questar ~~Public~~Gas ~~Utility~~cannot ~~Holding~~predict ~~Company~~the ~~Act~~impact ofthat ~~2005~~future ~~(PUHCA~~changes ~~2005),~~in ~~because~~accounting ~~Questar~~standards ~~Gas,~~or ~~its~~practices ~~subsidiary,~~may ishave aon ~~natural~~public ~~gas~~companies ~~utility~~in ~~company. Questar~~general, ~~however,~~the ~~has~~energy anindustry ~~exemption~~or their ~~and~~operations ~~waiver~~specifically. ~~from~~New ~~provisions~~accounting ofstandards ~~the~~could ~~Act~~be ~~applicable~~issued tothat ~~holding~~could ~~companies.~~change ~~Questar~~the ~~conducts~~way ~~all~~Questar ~~operations~~Gas ~~through~~records ~~subsidiaries.~~revenues, ~~The~~expenses, ~~parent~~assets ~~holding~~and ~~company~~liabilities. ~~performs~~These ~~certain~~changes ~~management,~~in ~~legal,~~accounting ~~financial,~~standards ~~tax,~~could ~~administrative~~adversely ~~and~~affect ~~other~~earnings ~~services~~or ~~for~~could ~~its subsidiaries~~increase liabilities.

~~The~~Questar ~~corporate~~Gas’ ~~organization~~business ~~structure~~and operations depend upon the ability of Wexpro and ~~major~~its ~~subsidiaries~~other suppliers to economically find and develop new resources and produce natural gas to satisfy Questar Gas’ supply requirements. During 2016, Questar Gas satisfied the majority of its supply requirements with cost-of-service gas volumes supplied by Wexpro, which designs its development program to meet 65% of Questar Gas’ weather-normalized gas supply requirements. Questar Gas also maintains a balanced and diversified portfolio of third-party gas-supply contracts. Productive natural gas reservoirs are ~~summarized~~generally characterized ~~below:~~by declining production rates that vary depending on reservoir characteristics. Because of significant production decline rates in several of Questar Gas’ suppliers’ producing areas, Questar Gas’ suppliers may be required to make substantial capital expenditures to develop gas reserves to replace those depleted by production. As a result, the price of gas volumes acquired from third-party producers may increase.

~~Questar~~Similarly, ~~Corporation~~the volume of cost-of-service gas that Wexpro can provide may decline or the growth of Questar Gas’ ~~CompanyRetail~~demand for cost-of-service gas may outpace Wexpro’s production capability. In either case, if Questar Gas’ ~~Distribution~~supply requirements exceed the volume of cost-of-service gas it can acquire from Wexpro, ~~CompanyGas~~Questar ~~and~~Gas ~~Oil~~would ~~Development~~be ~~and~~forced ~~Production~~to seek gas at non-cost-of-service prices from third-party suppliers. Questar ~~Pipeline~~Gas’ ~~CompanyInterstate~~suppliers may not be able to supply volumes of natural gas to Questar Gas ~~Transportation~~sufficient to satisfy Questar Gas’ needs at economically favorable prices or at all, which could negatively affect Questar Gas’ financial condition and ~~Storage~~impair its ability to operate its business.

~~See~~Questar ~~Note~~Gas 13faces to the ~~consolidated~~risk ~~financial~~that ~~statements~~future ~~included~~legislative initiatives in ~~Item~~the 8states ofin ~~Part~~which IIit ofoperates ~~this~~could ~~Annual~~open ~~Report~~its ~~for~~service financial information by line of business including, but not limited to, revenues from unaffiliated customers, operating income and identifiable assets. A discussion of the Company's lines of business follows.territories

~~RETAIL~~ to ~~GAS~~competition ~~DISTRIBUTION~~for retail and commercial natural gas customers and that it could lose transportation customers to competitors, each of which would adversely affect its financial results, cash flows and liquidity. Questar Gas currently does not face direct competition from other distributors of natural gas for residential and commercial customers in its service territory, because state regulations in Utah, Wyoming and Idaho do not allow customers to choose their natural gas provider. Questar Gas is the only non-municipal gas distribution utility in Utah, where over 97% of its customers are located. At this time, Utah, Wyoming and Idaho have not enacted legislation allowing customers to choose natural gas providers in Questar Gas’ service territories. However, if any of the states in which Questar Gas operates were to consider legislation regarding the competitive deregulation of natural gas sales, Questar Gas may be forced to compete for retail and commercial customers with other natural gas distributors.

~~General:~~ Questar Gas currently ~~distributes~~does ~~natural~~not ~~gas~~face assignificant acompetition ~~public~~for ~~utility~~transportation ~~in Utah~~customers. However, ~~southwestern~~the ~~Wyoming~~states ~~and~~in awhich ~~small~~Questar ~~portion~~Gas ofoperates ~~southeastern~~do ~~Idaho.~~not Itlimit ~~generated~~the ~~approximately~~choice ~~25%~~ of ~~the~~provider ~~Company's~~for ~~operating~~transportation ~~income~~customers in ~~2012. Wexpro provides~~ the ~~majority~~same ofway ~~Questar~~they ~~Gas's~~limit ~~gas supply and Questar Pipeline provides~~ the ~~majority~~choice of ~~Questar~~retail ~~Gas's transportation~~ and commercial ~~storage services~~customers. As ofa ~~December 31~~result, ~~2012,~~ Questar Gas ~~was~~faces ~~serving~~the ~~930,760~~risk ~~sales~~that ~~and~~it could lose transportation customers. ~~Questar~~to ~~Gas~~competitors iswho ~~the~~may ~~only~~be ~~non-municipal~~able ~~gas-distribution~~to ~~utility~~connect inand ~~Utah,~~transport ~~where~~natural ~~97%~~gas ofto ~~its~~large ~~customers~~industrial ~~are located~~customers. The ~~Public~~loss ~~Service Commission~~ of ~~Utah,~~transportation ~~the~~or retail ~~Wyoming Public Service Commission~~ and ~~the~~commercial ~~Public~~natural ~~Utility~~gas ~~Commission~~customers ofwould ~~Idaho~~adversely ~~have~~affect ~~granted~~ Questar Gas’ ~~the~~financial ~~necessary~~results, ~~regulatory~~cash ~~approvals~~flows ~~to serve these areas. Questar Gas also has long-term franchises granted by communities~~ and ~~counties within its service area~~liquidity.

8Questar Gas is subject to complex federal, state and local environmental laws and regulations that could adversely affect its cost of doing business. Environmental laws and regulations are complex, change frequently and have become more restrictive over time. Some of the laws with which Questar Gas must comply include the National Environmental Policy Act, the Endangered Species Act, the Clean Air Act, the Clean Water Act, the National Historic Preservation Act, the Toxic Substance Control Act, the Resource Conservation and Recovery Act, the Comprehensive Environmental Response, Compensation and Liability Act, the Emergency Planning and Community Right to Know Act, the Oil Pollution Act as well as similar state and local laws that can be stricter than federal laws.

Federal and state agencies frequently impose conditions on Questar Gas's’ ~~growth~~activities. isThese ~~tied~~restrictions tohave ~~the~~become ~~economic~~more ~~growth~~stringent over time and can limit or prevent the construction of ~~Utah~~new transmission or distribution pipelines and ~~southwestern~~related ~~Wyoming~~facilities. ItFor example, Questar Gas is subject to regulation by the Department of Transportation under PHMSA, which has aestablished requirements ~~market~~relating ~~share~~to the design, installation, testing, construction, operation, replacement and management of ~~over~~pipeline ~~94%~~facilities. The most recent reauthorization of ~~residential~~PHMSA ~~space~~included ~~and~~new ~~water~~provisions ~~heating~~on inhistorical ~~its~~records ~~service~~research, ~~area.~~maximum-allowed operating ~~During~~pressure ~~2012~~validation, ~~Questar~~use ~~Gas~~of ~~added~~automated 11or remote-controlled valves on new or replaced lines,~~524~~ ~~customers~~increased civil penalties, aand 1evaluation of expanding integrity management beyond high-consequence areas.3% ~~increase~~PHMSA has not yet issued new rulemaking on most of these items. We expect that existing environmental laws and regulations may be revised and/or new laws may be adopted or become applicable to Questar Gas.

~~Questar~~Compliance ~~Gas~~costs ~~faces~~cannot ~~the~~be ~~same~~estimated ~~risks~~with ascertainty ~~other~~due ~~local~~to ~~distribution~~the ~~companies.~~inability ~~These~~to ~~risks~~predict ~~include~~the ~~revenue~~requirements ~~variations~~and ~~based~~timing ~~on seasonal changes in demand, changes in natural gas prices, availability~~ of ~~natural~~implementation ~~gas supplies, declining residential usage per customer, adequacy~~ of ~~distribution~~any ~~facilities~~new environmental ~~and~~rules ~~adverse~~or ~~regulatory decisions~~regulations. ~~Questar~~Other ~~Gas's~~factors ~~sales~~which toaffect ~~residential~~the ~~and~~ability ~~commercial~~to ~~customers~~predict ~~are~~future ~~seasonal,~~environmental expenditures with acertainty ~~substantial~~include ~~portion of such sales made during~~ the ~~heating~~difficulty ~~season. The typical residential customer~~ in ~~Utah~~estimating ~~(defined~~clean-up ascosts aand ~~customer~~quantifying ~~using~~liabilities 80under ~~dth~~environmental ~~per~~laws ~~year)~~that impose ~~consumes~~joint ~~more~~and ~~than~~several ~~79%~~liability ofon ~~total~~all ~~gas~~responsible ~~requirements in the coldest six months of the year~~parties. ~~Questar~~Such ~~Gas~~expenditures, ~~however~~if material, ~~has~~could a weather-normalization mechanism for its general-service customers. This billing mechanism adjusts the non-gas portion of a customer's monthly bill as the actual heating-degree days in the billing cycle are warmer or colder than normal. This mechanism reduces volatility in any given customer's monthly bill from year to year and reduces volatility in Questar Gas gross margin.make

Since 2006, Questar Gas has had a conservation enabling tariff (CET) to promote energy conservation. Under the CET, Questar Gas non-gas revenues are decoupled from the temperature-adjusted usage per customer. The tariff specifies a margin per customer for each month with differences to be deferred and recovered from customers or refunded to customers through periodic rate adjustments. These adjustments are limited to 5% of distribution non-gas revenues. Under the CET, Questar Gas recorded a $2.9 million revenue decrease in 2012 compared with a $3.6 ~~million decrease in 2011 and a $2.9 million increase in 2010, which offset changes in customer usage.~~

SinceTable 2007, Questar Gas has had a demand-side management (DSM) program. Under the DSM program, Questar Gas encourages the conservation of natural gas through advertising, rebates for efficient homes and appliances, and home energy audits. The costs related to the DSM program are deferred and recovered from customers through periodic rate adjustments. Questar Gas received revenues for recovery of DSM costs amounting to $36.6 million in 2012, compared to $39.9 million in 2011 and $39.1 million in 2010. As of December 31, 2012, Questar Gas had a regulatory asset of $11.0 million for DSM costs yet to be recovered from customers.Contents

Questar Gas's’ ~~gas-supply~~facilities ~~risk~~uneconomical isto ~~partly~~operate, ~~mitigated~~result byin ~~Wexpro~~the ~~cost-of-service~~impairment ~~gas supply. During 2012 Questar Gas satisfied 68%~~ of ~~its supply requirements with cost-of-service gas volumes. Wexpro produces cost-of-service gas~~assets, ~~which is then gathered by Wexpro~~ or ~~third~~otherwise ~~parties~~adversely ~~and~~affect ~~transported by~~ Questar Pipeline. See Item 2 of Part I and Note 17 to the financial statements included in Item 8 of Part II of this Annual Report for more information on the Company's cost-of-service proved reserves. Questar Gas’ ~~also~~results ~~has a balanced and diversified portfolio~~ of ~~gas-supply contracts for volumes produced in Wyoming~~operations, ~~Colorado,~~financial ~~and~~performance ~~Utah~~or liquidity. ~~In addition, Questar Gas has regulatory approval to pass through in its balancing account the economic results associated with hedging activities.~~

State agencies regulate the distribution of natural gas. Questar Gas’ ~~has~~natural ~~designed~~gas ~~its~~distribution business is regulated by the Utah, Wyoming and Idaho Commissions. These commissions set rates for distribution ~~system~~services and ~~annual~~establish ~~gas-supply~~policies ~~plan~~and toprocedures ~~handle~~for ~~peak~~services, ~~design-day~~accounting, ~~demand~~purchases, ~~which~~sales isand ~~defined~~other asactivities. ~~the~~The ~~estimated~~Utah ~~volume~~and ofWyoming ~~gas~~Commissions’ policies ~~that~~and ~~firm~~decisions ~~customers~~including ~~could~~an ~~use~~authorized ~~when~~return ~~the~~on ~~weather~~equity isand ~~extremely~~disallowed ~~cold~~costs may adversely affect Questar Gas’ profitability. ~~For~~Authorized ~~the~~returns ~~2012-2013~~on ~~heating~~equity ~~season,~~have declined for Questar Gas ~~had~~and anthroughout ~~estimated~~the ~~peak~~U.S. ~~sales~~with the decline in interest rates, and ~~firm-transportation~~may ~~design-day~~decline ~~demand~~further offor ~~1,474~~Questar ~~MMdth~~Gas in future rate cases.

Questar Gas’ ~~has~~business ~~long-term~~operations ~~contracts~~involve ~~with~~risks due to exposure to revenue variations based on seasonal changes in demand. Questar ~~Pipeline~~Gas’ ~~for~~sales ~~transportation~~to residential and ~~storage~~commercial ~~capacity~~customers atare ~~the~~seasonal, ~~Clay~~with ~~Basin~~a ~~storage~~substantial ~~facility~~portion ~~and~~of ~~three~~such ~~peak-day~~sales ~~storage~~made ~~facilities~~during the heating season. The ~~Questar~~typical ~~Gas~~residential ~~has~~customer in Utah (considered to be a ~~long-term~~customer ~~storage~~using ~~contract~~80 ~~with~~dth ~~Ryckman~~per ~~Creek~~day) ~~Resources~~consumes more than 70% of their annual gas usage during the coldest six months of the year. If Questar Gas ~~also~~is ~~has~~unable ~~transportation~~to ~~contracts~~effectively mitigate volatility in revenue due to ~~take~~seasonal ~~deliveries~~changes atin ~~several~~demand ~~locations~~including ~~from~~if ~~Kern~~the ~~River~~Utah ~~Pipeline~~or Wyoming Commissions were to disallow the CET, this volatility could adversely affect Questar Gas’ results of operations, liquidity, cash flows and financial condition.

~~Competition,~~Failure ~~Customers~~to attract and ~~Growth:~~retain ~~Questar~~key ~~Gas~~executive ~~currently~~officers ~~does~~and ~~not~~an ~~face~~appropriately ~~direct~~qualified ~~competition~~workforce ~~from~~could ~~other~~have ~~distributors~~an ofadverse ~~natural~~effect ~~gas~~on ~~for~~Questar Gas’ ~~residential~~operations. ~~and~~Questar ~~commercial~~Gas’ ~~customers~~business instrategy is dependent on its ~~service~~ability ~~territory~~to recruit, retain and motivate employees. ~~Natural~~Questar ~~gas~~Gas’ ~~has~~key ~~historically~~executive ~~enjoyed~~officers aare ~~favorable~~the ~~price~~CEO, ~~comparison~~CFO ~~with~~and ~~other~~those ~~energy~~responsible ~~sources~~for ~~used~~financial, byoperational, ~~residential~~legal, regulatory and ~~commercial~~accounting ~~customers~~functions. ~~with~~Competition ~~the~~for ~~occasional~~skilled ~~exception~~management employees in these areas of ~~electricity~~Questar ~~from~~Gas’ ~~coal-fired~~business ~~power~~operation ~~plants~~is high. With respect to Questar Gas’ ~~provides~~technical ~~transportation~~employees, ~~service~~certain events, such as an aging workforce, mismatch of skill set or complement to ~~large~~future ~~commercial~~needs, ~~and~~or ~~industrial~~unavailability ~~customers~~of ~~who~~contract ~~buy~~resources ~~gas~~may ~~directly~~lead ~~from~~to ~~other~~operating ~~suppliers~~challenges and increased costs. ~~Questar~~The ~~Gas~~challenges ~~faces~~include lack of resources, loss of knowledge base and the ~~risk~~length ~~that~~of ittime ~~could~~required ~~lose~~for skill ~~transportation~~development. ~~customers~~In this case, costs, including costs for contractors to ~~competitors~~replace ~~who~~employees, productivity costs and safety costs, may berise. ~~able~~Failure to ~~connect~~hire and ~~transport~~adequately ~~natural~~train ~~gas~~replacement toemployees, ~~large~~including ~~industrial~~the ~~customers.~~transfer ~~Certain~~of ~~large~~significant ~~commercial~~internal historical knowledge and ~~industrial~~expertise ~~customers~~to new employees, or future availability and cost of contract labor may adversely affect the ability to manage and operate Questar Gas’ ~~have~~business. ~~elected~~If Questar Gas is unable to ~~switch~~successfully ~~from~~attract ~~sales~~and ~~service~~retain toan appropriately ~~transportation~~qualified ~~service~~workforce, its financial position or results of operations could be negatively affected.

~~Regulation:~~Hostile Ascyber intrusions acould ~~public~~severely ~~utility~~impair Questar Gas’ isoperations, ~~subject~~lead to the ~~jurisdiction~~disclosure of confidential information, damage the ~~PSCU~~reputation of Questar Gas and ~~PSCW.~~otherwise ~~Natural~~have ~~gas~~an ~~sales~~adverse ~~and~~effect ~~transportation~~on ~~services~~Questar ~~are~~Gas’ ~~provided~~business. ~~under~~Questar ~~rate~~Gas ~~schedules~~owns ~~approved~~assets deemed byas critical infrastructure, the ~~two~~operation ~~regulatory~~of ~~commissions~~which is dependent on information technology systems. Further, the computer systems that run Questar Gas’ isfacilities ~~authorized~~are tonot ~~earn~~completely aisolated ~~return~~from onexternal ~~equity~~networks. ofThere ~~10.35%~~appears into ~~Utah~~be an increasing level of activity, sophistication and ~~9.16%~~maturity of threat actors, in ~~Wyoming.~~particular ~~Questar~~nation ~~Gas~~state isactors, ~~required~~that wish to ~~file~~disrupt athe ~~general~~U.S. ~~rate~~bulk ~~case~~power insystem ~~Utah~~and bythe ~~mid-2013~~U.S. ~~Questar~~gas ~~Gas~~transmission ~~filed~~or adistribution ~~general~~system. ~~rate~~Such ~~case~~parties incould ~~Wyoming~~view inQuestar Gas’ ~~December~~computer ~~2011~~systems, ~~and~~software ~~received~~or annetworks ~~order~~as inattractive ~~2012~~targets for cyber attack. For example, ~~which~~malware ~~increased~~has ~~rates~~been bydesigned ~~$0.6~~to ~~million~~target ~~per~~software ~~year.~~that ~~Both~~runs the ~~PSCU~~nation’s critical infrastructure such as power transmission grids and ~~PSCW~~gas pipelines. ~~permit~~In addition, Questar Gas’ tobusiness ~~recover~~requires ~~gas~~that ~~costs~~it ~~through~~and aits ~~balancing-account~~vendors ~~procedure~~collect and tomaintain ~~reflect~~sensitive ~~natural~~customer ~~gas-price~~data, ~~changes~~as onwell aas ~~periodic~~confidential ~~basis~~employee and shareholder information, ~~typically~~which ~~twice~~is asubject ~~year~~to inelectronic ~~the~~theft ~~spring~~or loss.

9A successful cyber attack on the systems that control Questar Gas’ gas transmission or distribution assets could severely disrupt business operations, preventing Questar Gas from serving customers or collecting revenues. The breach of certain business systems could affect Questar Gas’ ability to correctly record, process and report financial information. A major cyber incident could result in significant expenses to investigate and repair security breaches or system damage and could lead to litigation, fines, other remedial action, heightened regulatory scrutiny and damage to Questar Gas’ reputation. In addition, the misappropriation, corruption or loss of personally identifiable information and other confidential data could lead to significant breach notification expenses and mitigation expenses such as credit monitoring. For these reasons, a significant cyber incident could materially and adversely affect Questar Gas’ business, financial condition and results of operations.

War, acts and threats of terrorism, intentional acts and other significant events could adversely affect the ~~fall~~Questar Gas’ operations. Questar Gas ~~has~~cannot ~~also~~predict ~~received~~the ~~permission~~impact ~~from~~that any future terrorist attacks may have on the ~~PSCU~~energy industry in general, or on Questar Gas’ business in particular. Any retaliatory military strikes or sustained military campaign may affect Questar Gas’ operations in unpredictable ways, such as changes in insurance markets and ~~PCSW~~disruptions of fuel supplies and markets. In addition, Questar Gas’ infrastructure facilities could be direct targets of, or indirect casualties of, an act of terror. For example, a physical attack on a critical substation in California resulted in serious impacts to ~~recover~~the power grid. Furthermore, the physical compromise of Questar Gas’ facilities could adversely affect Questar Gas’ ability to manage these facilities effectively. Instability in financial markets as ~~part~~a result of ~~its~~terrorism, ~~gas~~war, ~~costs~~intentional acts, pandemic, credit crises, recession or other factors could result in a significant decline in the ~~specific~~U.S. ~~costs~~economy ~~associated~~and increase ~~with~~the ~~hedging~~cost ~~activities~~of insurance coverage. This could negatively impact Questar Gas’ results of operations and financial condition.

~~Questar Gas's significant relationships with affiliates have allowed it to lower its costs and improve efficiency~~Item 1B. ~~These~~Unresolved Staff ~~relationships~~Comments ~~are subject to scrutiny by regulators.~~

~~Questar Gas is subject to the requirements of the Pipeline Safety, Regulatory Certainty and Jobs Creation Act of 2011 and the Pipeline Safety Improvement Act of 2002~~None. ~~The PSCU has allowed Questar Gas to recover the costs of complying with these Acts.~~

~~GAS~~Item 2. ~~AND OIL DEVELOPMENT AND PRODUCTION - Wexpro~~Properties

~~General:~~At ~~Wexpro~~December ~~develops~~31, ~~produces and delivers cost-of-service reserves for gas utility affiliate Questar Gas under the terms of the Wexpro Agreement~~2016, ~~a long-standing comprehensive agreement with the states of Utah and Wyoming. In 2012, 88% of Wexpro's revenues were from its affiliate,~~ Questar Gas.’ ~~Wexpro~~properties ~~generated~~consisted ~~42%~~ of ~~the~~operations ~~Company's operating income during the year ended December 31~~centers, ~~2012.~~field ~~Pursuant~~offices ~~to the Wexpro Agreement, Wexpro recovers its costs~~ and ~~receives an unlevered, after~~service-~~tax~~center ~~return of approximately 20% on its investment base. Wexpro's investment base is its investment in commercial wells and related~~ facilities ~~adjusted~~as ~~for~~well ~~working~~as ~~capital~~gas distribution ~~and~~systems ~~reduced~~throughout ~~for~~Utah, ~~deferred~~southwestern ~~income~~Wyoming ~~taxes~~ and ~~accumulated~~southeastern ~~depreciation, depletion and amortization~~Idaho. ~~The~~These ~~term~~physical ~~of the Wexpro Agreement coincides with the productive life of the gas and oil~~ properties ~~covered~~are ~~therein.~~described ~~Wexpro's~~in ~~investment~~Item ~~base totaled $531.~~1. ~~million at December 31~~Business, ~~2012.~~which ~~See~~description ~~Note~~is 9incorporated toherein ~~the~~by ~~financial statements included in Item 8 of Part II of this Annual Report for more information on the Wexpro Agreement~~reference.

~~Wexpro delivers natural gas production to Questar Gas at cost-of-service~~Item 3. ~~Cost-of-service~~Legal ~~gas~~Proceedings satisfied approximately 68% of Questar Gas supply requirements during 2012. This percentage was higher in 2012 than previous years due to increased production and lower Questar Gas sales volumes driven by significantly warmer than normal weather. Wexpro sells crude oil production from certain oil-producing properties at market prices with the revenues used to recover operating expenses and to provide Wexpro a return on its investment. Any operating income remaining after recovery of expenses and Wexpro's return on investment is divided between Wexpro and Questar Gas customers, with Wexpro retaining 46%.

~~Wexpro's~~From time ~~properties~~to ~~are~~time, ~~located~~Questar inGas ~~the~~is ~~Rocky~~alleged ~~Mountain~~to ~~region,~~be ~~primarily~~ in ~~the~~violation ~~Vermillion,~~or ~~Pinedale,~~in ~~Moxa~~default ~~Arch~~under orders, ~~and Uinta producing fields. In 2012~~statutes, ~~the~~rules ~~Company~~or ~~drilled~~regulations 45relating ~~wells~~to in the ~~Vermillion~~environment, ~~Basin~~compliance ~~and~~plans ~~will~~imposed ~~suspend~~upon ~~its~~or ~~Vermillion~~agreed ~~drilling~~to ~~program~~by inQuestar ~~the~~Gas, ~~first~~or ~~quarter~~permits ofissued ~~2013.~~by ~~The~~various ~~Company~~local, ~~also~~state and/or ~~participated~~federal inagencies 19for ~~non-operated~~the ~~wells~~construction ~~drilled~~or inoperation ~~Pinedale~~of ~~during~~facilities. ~~2012~~Administrative ~~and~~proceedings ~~will~~may ~~continue~~also tobe ~~participate~~pending inon ~~wells~~these ~~drilled in the area during 2013~~matters. ~~Advances~~In ~~in technology~~addition, ~~including~~in ~~increased~~the ~~density~~ordinary ~~drilling~~course ~~and~~of ~~multi-stage hydraulic fracture stimulation~~business, ~~have~~Questar ~~identified~~Gas ~~additional~~is ~~unexploited~~involved ~~development~~in ~~potential~~various onlegal ~~many properties~~proceedings.

~~Competition~~See ~~and~~Notes ~~Customers:~~10 ~~Wexpro~~and ~~faces~~16 ~~competition~~to inthe ~~its~~Financial ~~business~~Statements, ~~including~~which ~~the~~information ~~marketing~~is ofincorporated ~~oil~~herein ~~and~~by ~~NGL~~reference, ~~and~~for ~~obtaining~~discussion ~~goods,~~of ~~services~~various environmental and ~~labor.~~other ~~Its~~regulatory ~~growth~~proceedings ~~strategy depends, in part, on its ability~~ to ~~develop~~which ~~reserves~~Questar inGas is a ~~low-cost and efficient manner~~party.

~~Regulation: Wexpro operations are subject to various government controls and regulation at the federal, state and local levels~~Item 4. ~~Wexpro~~Mine ~~must~~Safety Disclosures obtain permits to drill and produce; maintain bonding requirements to drill and operate wells; submit and implement spill-prevention plans; and file notices relating to the presence, use, and release of specified contaminants incidental to gas and oil production. Wexpro is also subject to various conservation matters, including the regulation of the size of drilling and spacing units, the number of wells that may be drilled in a unit and the unitization or pooling of gas and oil properties. In addition, the Utah Division of Public Utilities and the staff of the PSCW are entitled to monitor the performance of the Company and Wexpro under the Wexpro Agreement and have retained two monitors, an independent certified public accountant and an independent petroleum engineer, to review the performance of the agreement.

~~Most~~Not ~~Wexpro leasehold acreage in the Rocky Mountain area is held under leases granted by the federal government and administered by federal agencies, principally the Bureau of Land Management (BLM)~~applicable. Current federal regulations restrict activities during certain times of the year on portions of Wexpro leaseholds due to wildlife activity and/or habitat. Wexpro, as the operator in the Vermillion area, and its third-party operator for the Pinedale area have worked with federal and state officials to obtain authorization for winter-drilling activities and have developed measures, such as drilling multiple wells from a single pad location, to minimize the impact of its activities on wildlife and wildlife habitat. Various wildlife species inhabit Wexpro leaseholds. The presence of wildlife, including species that are protected under the federal Endangered Species Act, could limit access to leases held by Wexpro on public lands.

107

InTable September 2008, the BLM issued a Record of Decision (ROD) on the Final Supplemental Environmental Impact Statement (FSEIS) for long-term development of natural gas resources in the Pinedale Anticline Project Area (PAPA). Under the ROD, Wexpro, through its third-party operator, is allowed to drill and complete wells year-round in one of five concentrated development areas defined in the PAPA. The ROD contains additional requirements and restrictions on development in the PAPA.Contents

~~Wexpro~~Part II~~: In~~ September 2012, Questar Gas filed for Commission approval in Utah and Wyoming of an agreement to potentially expand the properties under the cost-of-service pricing methodology for the benefit of Questar Gas customers. This agreement, referred to as Wexpro II, is modeled after the terms of the original Wexpro Agreement. If Wexpro II is approved by the PSCU and the PSCW (the Commissions), Wexpro may acquire gas development properties and Questar Gas may submit an application to the Commissions to treat these properties similar to the original Wexpro properties. If the Commissions approve the applications, the gas will be developed for the benefit of Questar Gas customers. Wexpro will be entitled to a return on the acquisition costs based on Questar Gas's approved cost of capital. Future development costs will earn returns consistent with the original Wexpro Agreement. Decisions from the Commissions are expected in the first half of 2013.

~~Wexpro~~Item 5. ~~may~~Market ~~acquire gas development properties that are in locations separate from its current operations or are not approved by the Commissions~~ for ~~inclusion in~~ the ~~Wexpro~~Registrant’s IICommon ~~arrangement. In these cases~~Equity, ~~Wexpro~~Related ~~will~~Stockholder Matters ~~develop these properties~~ and ~~sell~~Issuer ~~the~~Purchases ~~production~~of inEquity ~~the~~Securities ~~market or through contracts with other customers.~~

~~INTERSTATE~~There ~~GAS~~is ~~TRANSPORTATION~~no -established public trading market for Questar ~~Pipeline~~Gas’ common stock, all of which is owned by Dominion Questar. Questar Gas has had no sale of equity securities in the last three years. Potential restrictions on Questar Gas’ payment of dividends are discussed in Note 14 to the Financial Statements. Questar Gas paid quarterly cash dividends on its common stock as follows:

General: Questar Pipeline provides natural gas-transportation and underground-storage services in Utah, Wyoming and Colorado. Questar Pipeline and subsidiaries generated approximately 33% of the Company's operating income in 2012. As a "natural gas company" under the Natural Gas Act of 1938, Questar Pipeline and certain subsidiary pipeline companies are regulated by the FERC as to rates and charges for storage and transportation of natural gas in interstate commerce, construction of new facilities, extensions or abandonments of service and facilities, and accounting and other activities.


	First Quarter		Second Quarter		Third Quarter		Fourth Quarter		Full Year
(millions)
2016	$	10.0	$	10.0	$	10.0	$	—	$	30.0
2015		9.5		9.5		9.5		9.5		38.0

~~Questar Pipeline and its subsidiaries own 2,638 miles of interstate pipeline with total firm-capacity commitments of 5,039 Mdth per day~~Item 6. ~~Questar~~Selected ~~Pipeline's~~Financial ~~core~~Data transportation system is strategically located near large reserves of natural gas in six major Rocky Mountain producing areas. Questar Pipeline transports natural gas from these producing areas to other major pipeline systems, Questar Gas's distribution system and other utility systems. In addition to this core system, Questar Pipeline, through wholly-owned subsidiaries, owns and operates the Overthrust Pipeline in southwestern Wyoming and the eastern segment of Southern Trails Pipeline, a 487-mile line that extends from the Blanco hub in the San Juan Basin to just inside the California state line near the Arizona border. An additional 96 miles of Southern Trails Pipeline in California is not in service. Questar Pipeline operates and owns 50% of the White River Hub in western Colorado. White River Hub facilities connect with six interstate-pipeline systems and a major processing plant near Meeker, Colorado.

~~Questar~~Omitted ~~Pipeline~~pursuant ~~owns~~to ~~and~~General ~~operates~~Instructions ~~the Clay Basin storage facility, the largest underground-storage reservoir in the Rocky Mountain region~~I. ~~Through~~ (2)(a ~~subsidiary, Questar Pipeline also owns gathering lines and processing facilities near Price, Utah, through which it provides gas-processing services for third parties~~). ~~A Questar Pipeline subsidiary also provides wellhead automation and measurement services for Rockies oil and gas producers.~~

Customers, Growth and Competition: Questar Pipeline's transportation system is nearly fully subscribed. The weighted-average remaining life of Questar Pipeline's firm contracts was 9.6 years as of December 31, 2012. All of Questar Pipeline's storage capacity is fully contracted with a weighted-average remaining life of 5.9 years as of December 31, 2012. Questar Pipeline faces the risk that it may not be able to recontract firm capacity at current terms when contract terms expire.8

QuestarTable Gas, an affiliated company, provides Questar Pipeline's largest share of transportation revenues. During 2012, Questar Pipeline transported 107.2 MMdth for Questar Gas compared to 116.9 MMdth in 2011. Questar Gas has reserved firm-transportation capacity of 916 Mdth per day during the heating season and 841 Mdth per day during off-peak months under long-term contracts. Questar Pipeline's primary transportation agreement with Questar Gas will expire on June 30, 2017. In 2012, 27% of Questar Pipeline's revenues were from its affiliate, Questar Gas.Contents

~~Questar Pipeline also transported 785~~Item 7.4 ~~MMdth~~Management’s ~~during~~Discussion 2012, up 18% over 2011, for unaffiliated customers to pipelines owned by Kern River Pipeline, Northwest Pipeline, Colorado Interstate Gas, TransColorado, Wyoming Interstate Company, Rockies Express Pipeline, Ruby Pipeline and ~~other~~Analysis ~~systems.~~of ~~Rocky~~Financial ~~Mountain~~Condition ~~producers, marketers~~ and Results ~~end-users~~of ~~seek~~Operations ~~capacity on interstate pipelines that move gas to California, the Pacific Northwest or Midwestern markets. Questar Pipeline provides access for many producers to these third-party pipelines.~~

11MD&A discusses Questar Gas’ results of operations and general financial condition. MD&A should be read in conjunction with Item 1. Business and the Financial Statements in Item 8. Financial Statements and Supplementary Data. Questar Gas meets the conditions to file under the reduced disclosure format, and therefore has omitted certain sections of MD&A.

~~Questar~~CONTENTS ~~Pipeline~~OF ~~competes~~MD&A for market growth with other natural gas-transmission companies in the Rocky Mountain region and with other companies providing natural gas-storage services. In addition, Questar Pipeline faces growing competition from third-party gathering companies that build gathering lines to allow producers to make direct connections to competing pipeline systems.

~~Regulation:~~MD&A ~~Questar~~consists ~~Pipeline's natural gas-transportation and storage operations are regulated by the FERC under the Natural Gas Act~~ of ~~1938 and~~ the ~~Natural~~following ~~Gas~~information: Policy Act of 1978, as amended. The FERC has authority to set rates for natural gas transportation, storage and related services; set rules governing business relationships between the pipeline subsidiary and its affiliates; approve new pipeline and storage-facility construction; and establish policies and procedures for accounting, purchase, sale, abandonment and other activities. FERC policies may adversely affect Questar Pipeline profitability. Questar Pipeline maintains a rigorous compliance program to address all areas of FERC compliance including standards of conduct, market manipulation, shipper-must-have-title, bidding, capacity release, reporting, filings, postings and record retention. The Company annually trains Board members, executives, senior management and functional employees on standards-of-conduct rules.

~~Questar~~• Pipeline is required to comply with the Pipeline Safety, Regulatory Certainty and Jobs Creation Act of 2011 and the Pipeline Safety Improvement Act of 2002. The 2011 Act is designed to examine and improve the state of pipeline safety regulations and gives enhanced safety authority to the Pipeline and Hazardous Materials Safety Administration (PHMSA) and will improve pipeline transportation by strengthening enforcement capabilities. The 2002 Act and the rules issued by the U.S. Department of Transportation require interstate pipelines and local distribution companies to implement a 10Forward-~~year~~Looking ~~program of risk analysis, pipeline assessment and remedial repair for transportation pipelines located in high-consequence areas such as densely populated locations.~~ Statements

~~Strategic~~• ~~Evaluation:~~Results ~~In the fourth quarter~~ of 2012, Questar Pipeline initiated a strategic review of Questar Southern Trails Pipeline assets. Southern Trails Pipeline is currently operating in natural gas service at a loss with a reduction in transportation revenues as an expired contract was recontracted at a lower rate in the fourth quarter of 2012. Questar Pipeline and its advisers have distributed a confidential information memorandum to a number of interested parties. This memorandum outlines the possible conversion of the Southern Trails Pipeline to oil service that would move crude oil from the San Juan and Permian basins to refineries in the Los Angeles area. This evaluation of Southern Trails Pipeline is considering development of the project by Questar Pipeline, sale to a third party, joint venture, partnership or other alternatives. Questar Pipeline is evaluating a number of non-binding proposals from third parties, and expects to complete this evaluation by mid-2013.Operations

~~Corporate~~• ~~and~~Analysis ~~Other~~of Operations

~~Corporate~~FORWARD-LOOKING ~~employees~~STATEMENTS ~~provide compliance, legal, finance, tax, treasury, human resources, audit, information technology, purchasing, warehousing, fleet, communication and insurance services for Questar's subsidiaries.~~

~~Corporate~~This ~~and~~report ~~Other~~contains ~~operations~~statements ~~also~~concerning ~~include~~ Questar ~~Fueling~~Gas’ ~~Company~~expectations, ~~(Questar~~plans, ~~Fueling). In 2012~~objectives, ~~Questar~~future ~~formed~~financial ~~Questar~~performance ~~Fueling to develop, own~~ and ~~operate~~other ~~natural~~statements ~~gas~~that ~~fueling~~are ~~facilities,~~not historical ~~primarily for large trucks~~facts. ~~While~~These ~~Questar~~statements ~~Gas~~are ~~has~~“forward-looking ~~owned~~statements” ~~and operated natural gas fueling facilities~~ within ~~its~~the ~~regulated~~meaning ~~service~~of ~~area,~~the ~~Questar~~Private ~~Fueling~~Securities isLitigation ~~pursuing~~Reform ~~opportunities~~Act ~~outside~~ of ~~this area~~1995. ~~Questar~~In ~~Fueling~~most ~~has~~cases, ~~signed~~the ~~one~~reader ~~contract~~can ~~for~~identify athese ~~fueling~~forward-looking ~~facility~~statements inby ~~Texas~~such ~~and~~words isas “anticipate,” ~~pursuing~~“estimate,” ~~additional~~“forecast,” ~~contracts~~“expect,” ~~with~~“believe,” ~~trucking~~“should,” ~~companies.~~“could,” ~~Questar~~“plan,” ~~Fueling~~“may,” ~~will~~“continue,” ~~not~~“target” ~~earn~~or ~~revenues~~other ~~until~~similar ~~fueling facilities are completed and in service~~words.

~~Spinoff~~Questar ofGas ~~QEP~~makes forward-looking statements with full knowledge that risks and uncertainties exist that may cause actual results to differ materially from predicted results. Factors that may cause actual results to differ are often presented with the forward-looking statements themselves. Additionally, other factors may cause actual results to differ materially from those indicated in any forward-looking statement. These factors include but are not limited to:

On• ~~June~~Unusual ~~30,~~weather ~~2010,~~conditions ~~Questar~~and ~~distributed~~their ~~all~~effect of the shares of common stock of QEP (formerly Questar Market Resources) held by Questar to Questar shareholders in a tax-free, pro rata dividend (the Spinoff). Each Questar shareholder received one share of QEP common stock for each share of Questar common stock held (including fractional shares) at the close of business on ~~the~~energy ~~record~~sales ~~date. In connection with the Spinoff, QEP distributed Wexpro, a wholly-owned subsidiary of QEP,~~ to ~~Questar.~~customers Inand ~~addition,~~energy ~~Questar~~commodity ~~contributed $250.0 million of equity to QEP prior to the Spinoff.~~prices;

~~Employees~~• Extreme weather events and other natural disasters, severe storms, earthquakes and flooding that can cause system disruptions and property damage to facilities;

At• ~~December 31~~Federal, ~~2012,~~state ~~the~~and ~~Company~~local ~~had~~legislative ~~1,738~~and ~~employees~~regulatory developments, including ~~888~~changes in ~~Questar~~federal ~~Gas,~~and ~~143~~state intax ~~Wexpro,~~laws ~~340 in Questar Pipeline~~ and ~~367 in Corporate.~~regulations;

12• Changes to federal, state and local environmental laws and regulations, including those related to climate change, the tightening of emission or discharge limits for GHGs and other emissions, more extensive permitting requirements and the regulation of additional substances;

~~Executive~~• ~~Officers~~Cost of ~~the~~environmental ~~Registrant~~compliance, including those costs related to climate change;

Primary Positions Held with the Companyand Affiliates, Other Business Experience
Ronald W. Jibson	59	Chairman, President and Chief Executive Officer, Questar (2012 to present); Chairman, President and Chief Executive Officer, Questar Gas (2010 to present); Chairman, Questar Pipeline and Wexpro (2010 to present). Previous titles with Questar: President and Chief Executive Officer, Questar (2010 to 2012); Senior Vice President, Questar (2008 to 2010); President, Chief Executive Officer and Director, Questar Gas (2008 to 2010); Executive Vice President, Questar Gas (2008 to 2010); Vice President, Operations, Questar Gas (2004 to 2008).
Kevin W. Hadlock	40	Executive Vice President and Chief Financial Officer, Questar (2011 to present); Director, Questar Gas, Wexpro and Questar Pipeline (2011 to present). Prior to joining Questar: Senior Vice President and Chief Financial Officer for Baltimore Gas and Electric Company, a subsidiary of the Constellation Energy Group (2008 to 2010); Vice President of Investor Relations and Financial Planning and Analysis for Constellation Energy Group (2007 to 2008)
Thomas C. Jepperson	58	Executive Vice President, General Counsel and Corporate Secretary, Questar (2010 to present). Previous titles with Questar: Vice President and General Counsel, Questar (2005 to 2010).
R. Allan Bradley	61	Executive Vice President, Questar (2010 to present); President and Chief Executive Officer, Questar Pipeline (2006 to present); President, Chief Operating Officer and Director, Questar Pipeline (2005 to present); Chairman of the White River Hub, LLC Management Committee (2008 to present). Previous titles with Questar: Senior Vice President, Questar (2005 to 2010);
James R. Livsey	59	Executive Vice President and Chief Operating Officer, Wexpro (2012 to present); Executive Vice President, Questar (2010 to present); Director, Wexpro (2010 to present). Previous titles with Questar: Executive Vice President and General Manager, Wexpro (2011 to 2012); Executive Vice President, Questar and General Manager, Wexpro (2010 to 2011); Vice President and General Manager, Wexpro (2003 to 2010).
Craig C. Wagstaff	49	Executive Vice President, Questar (2012 to present); Executive Vice President and Chief Operating Officer, Questar Gas (2012 to present); Director, Questar Gas (2010 to present). Previous titles with Questar: Senior Vice President, Questar (2011 to 2012); Senior Vice President and General Manager, Questar Gas (2011 to 2012); Vice President and General Manager, Questar Gas (2010 to 2011); General Manager, Customer Relations, Questar Gas (2006 to 2010).
David M. Curtis	57	Vice President and Corporate Controller (2011 to present); Vice President and Controller, Wexpro (2010 to present); Vice President and Controller, Questar Pipeline and Questar Gas (2003 to present).
Kimberley Heimsath	57	Vice President, Environmental, Health and Safety (2011 to present). Previous titles with Questar: General Manager Environmental, Health and Safety (2010 to 2011), Manager Environmental and Safety Services (2008 to 2010), Director Environmental and Safety Services (2005 to 2008).

•

Changes in implementation and enforcement practices of regulators relating to environmental standards and litigation exposure for remedial activities;

~~There~~• isDifficulty noin ~~"family~~anticipating ~~relationship"~~mitigation ~~between~~requirements ~~any~~associated ofwith ~~the~~environmental ~~listed officers or between any of them~~ and ~~the~~other ~~Company's~~regulatory ~~directors. The executive officers serve at the pleasure of the Board of Directors. There is no arrangement or understanding under which the officers were selected.~~approvals;

~~ITEM~~• ~~1A.~~Unplanned ~~RISK~~system ~~FACTORS.~~disruptions at Questar Gas facilities;

~~Investors~~• ~~should~~Fluctuations ~~read carefully the following factors as well as the cautionary statements referred to~~ in ~~"Forward~~energy-~~Looking~~related ~~Statements"~~commodity ~~herein.~~prices Ifand ~~any of~~ the ~~risks~~effect ~~and~~these ~~uncertainties~~could ~~described~~have ~~below~~on orQuestar ~~elsewhere~~Gas’ inearnings, ~~this~~liquidity ~~Annual~~position ~~Report~~and ~~actually occur,~~ the ~~Company's~~underlying ~~business,~~value ~~financial condition or results~~ of ~~operations~~its ~~could be materially adversely affected.~~assets;

~~Risks~~• ~~Inherent~~Counterparty incredit ~~the~~and ~~Company's~~performance ~~Business~~risk;

~~Wexpro~~• ~~may~~Global ~~not~~capital bemarket ~~able~~conditions, toincluding ~~economically~~the ~~find~~availability ~~and~~of ~~develop~~credit ~~new~~and ~~reserves.~~the ~~Wexpro's profitability depends on its~~ ability to ~~develop~~obtain ~~gas~~financing ~~reserves~~on ~~that~~reasonable ~~are economically recoverable. Productive natural gas and oil reservoirs are generally characterized by~~ terms;

13• Fluctuations in interest rates;

~~declining~~• ~~production~~Changes ~~rates~~in ~~that~~rating ~~vary~~agency ~~depending~~requirements onor ~~reservoir~~credit ~~characteristics.~~ratings ~~Because~~and oftheir ~~significant~~effect ~~production~~on ~~decline~~availability ~~rates~~and incost ~~several~~ of ~~Wexpro's producing areas, substantial~~ capital ~~expenditures are required to develop gas reserves to replace those depleted by production.~~;

~~Wexpro's~~• ~~rate~~Changes ~~of development of cost-of-service gas may vary depending upon market conditions. Wexpro develops cost-of-service gas and oil~~ in ~~accordance~~financial ~~with~~or ~~accepted~~regulatory ~~standards~~accounting ~~and~~principles ~~prudent~~or ~~field-management~~policies ~~and~~imposed ~~engineering practices. These standards and practices are influenced~~ by ~~gas~~governing and oil commodity prices and other market conditions. Historically, natural gas and oil prices have been volatile and will likely continue to be volatile. The Company cannot predict the future price of natural gas and oil because the factors that drive prices are beyond its control. Natural gas prices have declined significantly in 2011 and 2012. In the short-run, purchased gas may be available for Questar Gas customers at a lower price than cost-of-service gas. While the Company believes it can continue to develop natural gas properties at a competitive long-term cost to the consumer, low natural gas prices may impact the pace of that development. bodies;

~~Wexpro's~~• ~~rate~~Employee ofworkforce development of cost-of-service gas may be limited by growth in Questar Gas's sales volumes. The proportion of Questar Gas's gas supply needs met by Wexpro has increased due to successful development of the Vermillion Basin and continued development of the Pinedale field. Wexpro's 2012 share of the utility's gas supply also increased due to warm weather that significantly reduced overall Questar Gas sales volumes. Wexpro's gas-development program may be limited based on the volumes of cost-of-service gas it can supply to Questar Gas for the summer load and Questar Gas's ability to store gas during the summer for peak supply needs. Wexpro and Questar Gas are pursuing opportunities to use Wexpro cost-of-service gas for Questar Gas's industrial customers, although there is no assurance that this will be successful. Certain large commercial and industrial customers of Questar Gas have elected to switch from sales service to transportation service. This switching may reduce the volumes that Wexpro is able to supply to Questar Gas. factors;

~~Gas~~• ~~and~~Risks oil reserve estimates are imprecise and subject to revision. Wexpro's proved natural gas and oil reserve estimates are prepared annually by its reservoir engineers. Gas and oil reserve estimates are subject to numerous uncertainties inherent in estimating quantities of ~~proved~~operating ~~reserves,~~businesses projecting future rates of production and timing of development expenditures. The accuracy of these estimates depends on the quality of available data and on engineering and geological interpretation and judgment. Reserve estimates are imprecise and will change as additional information becomes available. Ownership interests in ~~properties~~regulated ~~may~~industries change due to claims of ownership rights. Estimates of economically recoverable reserves prepared by different engineers, or by the same engineers at different times may vary significantly. Results of subsequent drilling, testing and production may cause either upward or downward revisions of previous estimates. In addition, the estimation process also involves economic assumptions relating to commodity prices, production costs, severance and other taxes, capital expenditures and remediation costs. Changes in field development plans will impact the reporting of reserves because the Company limits the recording of proved undeveloped reserves to those that are ~~expected~~subject to bechanging ~~developed~~regulatory within the next five years. Actual results most likely will vary from the estimates. Any significant variance from these assumptions could affect the recoverable quantities of reserves attributable to any particular property and the classifications of reserves.structures;

~~Shortages~~• ofPolitical ~~oilfield equipment, services~~ and ~~qualified~~economic ~~personnel could impact results of operations. The demand for qualified and experienced field personnel to drill wells and conduct field operations~~conditions, ~~geologists,~~including ~~geophysicists,~~inflation ~~engineers~~ and other professionals in the oil and gas industry can fluctuate significantly, often in correlation with natural gas and oil prices, causing periodic shortages. There also have been regional shortages of drilling rigs and other equipment, as demand for specialized rigs and equipment has increased along with the number of wells being drilled. These factors also cause increases in costs for equipment, services and personnel. These cost increases could restrict the ability to drill wells and conduct operations, especially during periods of lower natural gas and oil prices. This may also delay the installation of gathering facilities for new production.deflation;

~~Wexpro~~• ~~may~~Domestic ~~acquire~~terrorism ~~properties~~and ~~not~~other ~~subject~~threats to ~~the~~Questar ~~Wexpro~~Gas’ orphysical ~~Wexpro~~and IIintangible agreements. Wexpro may acquire gas development properties that are in locations separate from its current operations or are not approved by the Commissions for inclusion in the Wexpro II arrangement. In these casesassets, ~~Wexpro~~as ~~will~~well ~~develop~~as ~~these~~threats ~~properties and sell the production in the market or through contracts with other customers. Wexpro would be subject~~ to ~~commodity price risk and marketing risks for these properties.~~cybersecurity;

~~Excess~~• ~~pipeline~~Changes ~~capacity~~ in ~~the~~demand ~~Rocky~~for ~~Mountain area impacts~~ Questar ~~Pipeline's~~Gas’ ~~revenues.~~services, Inincluding ~~the~~industrial, ~~last~~commercial ~~few~~and ~~years~~residential ~~development~~growth ofor ~~natural~~decline ~~gas reserves~~ in ~~the~~Questar ~~Rocky~~Gas’ ~~Mountain~~service ~~area~~areas, ~~has~~failure ~~slowed due~~ to ~~low~~maintain ~~natural~~or ~~gas~~replace ~~prices~~customer ~~and~~contracts ~~development~~on offavorable ~~reserves~~terms, changes in ~~areas~~customer ~~closer~~growth toor ~~major~~usage ~~markets. As a result~~patterns, ~~export~~including ~~pipeline capacity exceeds current production levels. This excess capacity may impact Questar Pipeline's ability to renew contracts at current terms~~ as ~~contracts~~a ~~expire.~~result ~~This~~of ~~excess~~energy ~~capacity~~conservation ~~may~~programs ~~also~~and ~~limit~~the ~~growth~~availability ~~opportunities~~of toenergy ~~develop~~efficient ~~new pipelines in the area.~~devices;

~~Questar~~• ~~Pipeline's~~Changes ~~natural gas liquid revenues are expected~~ to ~~decline.~~regulated ~~Questar~~gas ~~Pipeline~~distribution ~~earns NGL revenues from its processing plant~~ and ~~pipeline~~transportation ~~facilities.~~rates ~~These~~collected ~~revenues~~by ~~have~~Questar ~~declined in the last few years due to lower prices and the~~ Gas;

14• Changes in operating, maintenance and construction costs;

~~development~~• ofTiming ~~upstream~~and ~~facilities~~receipt ~~that~~of ~~extract~~regulatory ~~NGL~~approvals ~~before~~necessary ~~the~~for ~~gas~~planned isprojects ~~transported~~and oncompliance ~~Questar~~with ~~Pipeline's~~conditions ~~system.~~associated ~~These~~with ~~revenues~~such ~~are~~regulatory ~~expected to decline further due to shifting of gas contracts that results in the delivery of the gas to upstream facilities.~~approvals;

~~Questar~~• ~~Pipeline's~~The ~~investment~~inability in Questar Southern Trails Pipeline may be impaired if other options are not successful. Questar Southern Trails Pipeline is currently operating in natural gas service at a loss with a reduction in transportation revenues as an expired contract was recontracted at a lower rate in the fourth quarter of 2012. In the fourth quarter of 2012, Questar Pipeline began a strategic evaluation of its Questar Southern Trails Pipeline assets. Questar Pipeline and its advisers have distributed a confidential information memorandum to acomplete ~~number~~planned ofprojects ~~interested~~within ~~parties. This memorandum outlines~~ the ~~possible~~terms ~~conversion of the pipeline to oil service that would move crude oil from the San Juan~~ and ~~Permian~~time ~~basins~~frames toinitially refineries in the Los Angeles area. This evaluation of Southern Trails Pipeline is considering development of the project by Questar Pipeline, sale to a third party, joint venture, partnership, or other alternatives. Questar Pipeline is evaluating a number of non-binding proposals from third parties, and expects to complete this evaluation by mid-2013. Questar Pipeline may need to impair its investment in Southern Trails if the results of this strategic evaluation or other options for the use of Southern Trails are not successful.anticipated;

~~Questar~~• ~~Gas's~~Adverse ~~investment~~outcomes in ~~infrastructure~~litigation ~~replacement~~matters ~~will~~or ~~increase~~regulatory customer rates and could impact its competitive position. Questar Gas is investing significant capital to replace aging pipeline infrastructure. This significant investment is expected to continue over a number of years. Replacement of aging pipeline infrastructure will increase customer safetyproceedings; ~~however, Questar Gas's return on this investment~~ and ~~depreciation costs will continue to increase customer rates. Over time this may impact customer decisions on the use of natural gas versus other energy alternatives.~~

• The ~~legal~~impact ~~dispute~~of ~~over~~operational ~~gathering~~hazards, ~~costs~~including ~~between~~adverse ~~Questar~~developments ~~Gas~~with ~~and~~respect ~~QEP Field Services may result in costs~~ to ~~shareholders.~~pipeline Assafety ~~disclosed~~or inintegrity, ~~Note~~equipment 8loss, tomalfunction ~~the~~or ~~financial~~failure, ~~statements~~operator ~~included in Item 8 of Part II~~error, ~~Questar Gas~~ and ~~QEP~~other ~~Field~~catastrophic ~~Services are involved in a legal dispute over gathering costs~~events. ~~These gathering costs have been included in Questar Gas's rates as purchased gas costs. The outcome of this dispute and its resulting financial impact on Questar Gas are uncertain at this time.~~

~~Questar~~Additionally, ~~Fueling~~other ~~may~~risks bethat ~~unable~~could tocause ~~profitably~~actual ~~compete~~results into ~~the~~differ ~~natural~~from ~~gas~~predicted ~~fueling~~results ~~market.~~are ~~Questar~~set ~~Fueling~~forth ~~was created~~ in ~~2012~~Item ~~to design, build and operate natural gas fueling facilities outside Questar Gas's market~~1A. ~~This~~Risk ~~business is competitive and Questar Fueling's operations may not be profitable until it establishes itself as a credible player in the industry~~Factors.

~~Operations~~Questar ~~involve~~Gas’ ~~numerous~~forward-looking ~~risks~~statements ~~that~~are ~~might~~based ~~result~~on inbeliefs ~~accidents, environmental harm~~ and ~~other~~assumptions ~~operating~~using ~~risks~~information ~~and~~available ~~costs.~~at ~~Drilling~~the istime athe ~~high-risk~~statements ~~activity~~are made. ~~Operating~~Questar ~~risks~~Gas ~~include:~~cautions ~~fire,~~the ~~explosions~~reader ~~and~~not ~~blow-outs;~~to ~~unexpected~~place ~~drilling~~undue ~~conditions~~reliance ~~such~~on asits ~~abnormally~~forward-looking ~~pressured~~statements ~~formations;~~because ~~abandonment~~the ~~costs;~~assumptions, ~~pipe~~beliefs, ~~cement~~expectations orand ~~casing~~projections ~~failures;~~about ~~environmental~~future ~~accidents~~events ~~such as oil spills~~may, ~~natural~~and ~~gas~~often ~~leaks~~do, ~~ruptures~~differ ormaterially ~~discharges~~from ofactual ~~toxic gases, brine or well fluids (including groundwater contamination)~~results. ~~The~~Questar Gas ~~Company~~undertakes ~~could~~no ~~incur~~obligation ~~substantial~~to ~~losses~~update asany aforward-looking ~~result~~statement ~~of injury or loss of life; pollution or other environmental damage; damage~~ to orreflect ~~destruction~~developments ofoccurring ~~property~~after ~~and equipment; regulatory investigation; fines or curtailment of operations; or legal fees and other expenses incurred in~~ the ~~prosecution~~statement oris ~~defense of litigation~~made. ~~As a working interest owner in wells operated by other companies, the Company may also be exposed to the risks enumerated above that are not within its care, custody or control.~~

There are also inherent operating risks and hazards in the Company's gas and oil production, processing, transportation and distribution operations that could cause substantial financial losses. In addition, these risks could result in loss of human life, significant damage to property, environmental pollution, impairment of operations and substantial losses. Certain Company pipelines have been in service for a number of years. As these pipelines age, the risk may increase of pipeline leakage or failure due to corrosion, fatigue, third-party damage or subsidence due to underground mining. The location of pipelines near populated areas, including residential areas, commercial business centers and industrial sites could increase the damages resulting from these risks. In spite of the Company's precautions, an event could cause considerable harm to people or property, and could have a material adverse effect on the financial position and results of operations, particularly if the event is not fully covered by insurance. Accidents or other operating risks could further result in loss of service available to the Company's customers. Such circumstances could adversely impact the Company's ability to meet contractual obligations and retain customers.9

WhileTable the Company works to mitigate the risk of pipeline failures by assessing and replacing sections of more vulnerable pipelines and by implementing other measures as part of its pipeline integrity program, Questar cannot assure that these measures will be successful in avoiding serious accidents, explosions, injuries or death.Contents

AsRESULTS isOF ~~customary~~OPERATIONS in the natural gas development and production, transportation and distribution industries, the Company maintains insurance against some, but not all, of these potential risks and losses. Questar cannot assure that insurance will be adequate to cover these losses or liabilities. Losses and liabilities arising from uninsured or under-insured events could have a material adverse effect on the Company's financial condition and operations.

15Presented below is a summary of Questar Gas’ results:

Questar is dependent on bank credit arrangements and continued access to capital markets to successfully execute its operating strategies. Questar also relies on access to short-term commercial paper markets. The Company is dependent on these capital sources to provide financing for working capital and certain projects. The availability and cost of these credit sources can vary significantly; and these capital sources may not remain available or the Company may not be able to obtain capital at a reasonable cost in the future. In lieu of commercial paper issuance, the Company at times has utilized credit facilities with banks to meet short-term funding needs. Questar has a $500 million revolving credit arrangement with various banks. However, banks may be unable or unwilling to extend credit in the future. Questar's revolving credit arrangement and commercial-paper program are subject to variable interest rates. From time to time the Company may use interest-rate derivatives to fix the rate on a portion of its variable-rate debt. A downgrade of credit ratings could increase the interest cost of debt and decrease future availability of capital from banks and other sources. While management believes it is important to maintain investment-grade credit ratings to conduct the Company's businesses, the Company may not be able to keep investment-grade ratings.


Year Ended December 31,	2016		$ Change			2015
(millions)
Net Income	$	57.2	$	(7.1	)	$	64.3

~~The~~Overview economic downturn increases credit risk. Questar has credit exposure in outstanding accounts receivable from customers in all segments of its business, which could become significant. Questar has tightened its credit procedures, for example, by requiring deposits or prepayments to help manage this risk. Questar aggressively pursues collection of past-due accounts receivable. Questar has also enhanced its review of customer credit risk.

~~Risks~~2016 ~~Related~~vs. to2015 ~~Regulation~~

~~Questar~~Net isincome ~~subject~~decreased ~~to complex federal~~11%, ~~state~~primarily ~~and~~due ~~local~~to ~~environmental~~merger ~~laws~~ and ~~regulations~~restructuring ~~that~~costs ~~could adversely affect its cost of doing business. Environmental laws~~ and ~~regulations~~higher ~~are complex~~depreciation, ~~change~~partially ~~frequently~~offset ~~and~~by ~~tend~~customer togrowth become more restrictive over time. Some of the regulations with which Questar must comply include the National Environmental Policy Act, the Endangered Species Act, the Clean Air Act, the Clean Water Act, and ~~the~~higher infrastructure-replacement ~~National~~cost ~~Historic Preservation Act, as well as similar state laws~~recovery.

~~Federal~~ANALYSIS ~~and~~OF ~~state~~OPERATIONS agencies frequently impose conditions on the Company's activities. These restrictions have become more stringent over time and can limit or prevent natural gas development and production on Wexpro's leaseholds or construction of new transmission or distribution pipelines and related facilities. For example, the United States Fish and Wildlife Service may designate critical habitat areas for certain listed threatened or endangered species. A critical habitat designation could result in further material restrictions to federal-land use and private-land use and could delay or prohibit land access or development. The listing of certain species, such as the sage grouse, as threatened and endangered, could have a material impact on the Company's operations in areas where such species are found. The Clean Water Act and similar state laws regulate discharges of storm water, wastewater, oil, and other pollutants to surface water bodies, such as lakes, rivers, wetlands, and streams. Failure to obtain permits for such discharges or accidental releases could result in civil and criminal penalties, orders to cease such discharges, corrective actions, and other costs and damages. These laws also require the preparation and implementation of Spill Prevention, Control, and Countermeasure Plans in connection with on-site storage of significant quantities of oil.

~~The~~Presented ~~U.S.~~below ~~Environmental~~are ~~Protection~~selected ~~Agency~~amounts ~~(EPA)~~related ~~has~~to ~~recently enacted air-quality regulations that particularly affect~~ Questar ~~Pipeline~~Gas’ ~~and~~results ~~Wexpro~~of operations.: These regulations will require the installation of additional pollution controls and extensive monitoring and reporting. The impact of these air quality regulations, along with greenhouse gas monitoring and reporting requirements, may result in increased costs for Questar.

In addition, the Company is subject to federal and state hazard communications and community right-to-know statutes and regulations such as the Emergency Planning and Community Right-to-Know Act that require certain record-keeping and reporting of the use and release of hazardous substances.

Year Ended December 31,

2016

$ Change

2015

(millions)

Operating revenue

921.3

3.7

917.6

Cost of sales

542.1

(16.0

)

558.1

Net revenue

379.2

19.7

359.5

Other operations and maintenance

176.6

14.1

162.5

Depreciation and amortization

61.0

5.9

55.1

Other taxes

20.9

1.6

19.3

Other income

3.8

(1.0

)

4.8

Interest expense

30.2

1.9

28.3

Income tax expense

37.1

2.3

34.8

~~Certain~~An ~~environmental~~analysis ~~groups~~of ~~oppose~~Questar ~~drilling~~Gas’ onresults ~~some~~ of ~~Wexpro's~~operations ~~federal~~follows: ~~and state leases. These groups sometimes sue federal and state agencies for alleged procedural violations in an attempt to stop, limit or delay natural gas and oil development on public lands.~~

~~All~~2016 ~~wells drilled in tight-gas-sand and shale reservoirs require hydraulic-fracture stimulation to achieve economic production rates and recoverable reserves~~vs. ~~The~~2015 majority of Wexpro’s current and future production and reserve potential is derived from reservoirs that require hydraulic-fracture stimulation to be commercially viable. Currently, all well-construction activities, including hydraulic-fracture stimulation, are regulated by state agencies that review and approve all aspects of gas- and oil-well design and operation. New environmental initiatives, proposed federal and state legislation, and rule-making pertaining to hydraulic-fracture stimulation could increase Wexpro's costs, restrict its access to natural gas reserves and impose additional permitting and reporting requirements. These potential restrictions on the use of hydraulic-fracture stimulation could materially

16Net revenue increased 5%, primarily reflecting an $8.2 million increase in infrastructure-replacement cost recovery, a $5.7 million increase from customer growth, a $2.4 million increase from transportation revenues, and a $3.2 million increase in revenues from affiliates; partially offset by a $1.5 million decrease in revenues from natural gas vehicle fuel sales.

~~affect~~Other ~~the~~operations ~~Company's ability to develop gas~~ and maintenance ~~oil~~increased ~~reserves.~~9%, ~~The~~primarily ~~Company~~reflecting ~~believes~~a ~~its well design and completion procedures are adequate to protect the environment~~$15.9 million ~~Questar~~increase ~~supports~~from ~~disclosure~~merger ~~of the contents of hydraulic-fracturing fluids~~ and ~~submits~~restructuring ~~information on the chemicals used in hydraulic-fracture stimulation on Company operated wells through the national disclosure registry FracFocus (fracfocus~~costs.~~org).~~

InDepreciation ~~addition~~and amortization toincreased ~~the costs of compliance~~11%, ~~substantial~~primarily ~~costs~~due ~~may be incurred~~ to ~~take~~plant ~~corrective~~additions ~~actions~~driven atby ~~both~~customer ~~owned~~growth and ~~previously~~feeder-~~owned~~line ~~facilities~~replacements. These facilities include a previously-owned chemical business, manufactured gas plant sites, and transmission and production facilities. Accidental spills and leaks requiring cleanup may occur in the ordinary course of business. As standards change, the Company may incur significant costs in cases where past operations followed practices that were considered acceptable at the time but now require remedial work to meet current standards. Failure to comply with these laws and regulations may result in fines, significant costs for remedial activities, or injunctions.

~~Various~~Other ~~federal~~taxes increased ~~agencies within the U.S. Department of the Interior~~8%, ~~particularly~~primarily ~~the~~due ~~Minerals Management Service and the Bureau of Indian Affairs, along with each Native American tribe, promulgate and enforce regulations pertaining~~ to ~~gas~~higher ~~and~~property ~~oil~~taxes ~~operations~~resulting on Native American tribal lands. These regulations address such matters as lease provisions, drilling and production requirements, environmental standards and royalty considerations. In addition, each Native American tribe is a sovereign nation having the right to enforce laws and regulations independent from ~~federal,~~plant ~~state and local statutes and regulations~~additions. These tribal laws and regulations include various taxes, fees, requirements to employ Native American tribal members and other conditions that apply to lessees, operators and contractors conducting operations on Native American tribal lands. Lessees and operators conducting operations on tribal lands are generally subject to the Native American tribal court system. One or more of these factors may increase the Company's costs of doing business on Native American tribal lands and have an impact on the viability of its natural gas development, production, gathering, processing and transportation operations on such lands.

~~Regulatory~~Interest ~~authorities~~expense ~~exercise~~increased ~~considerable~~7%, ~~discretion~~primarily due into ~~the~~higher ~~timing~~debt ~~and~~interest ~~scope~~expense ~~of permit issuance~~($1.0 ~~Requirements~~million) ~~imposed~~resulting byfrom ~~these~~increased ~~authorities~~interest ~~may~~rates beas ~~costly~~well ~~and~~as ~~time~~higher ~~consuming~~interest ~~and~~expense ~~may~~on ~~result in delays in~~ the ~~commencement or continuation of Wexpro's natural~~ gas ~~development~~balancing ~~and~~account ~~production operations and Questar Pipeline's construction projects~~($0.9 ~~Further, the public may comment on and otherwise engage in the permitting process, including court intervention~~million). Accordingly, needed permits may not be issued, or if issued, may not be issued in a timely fashion, or may involve requirements that restrict Questar's ability to conduct its operations or to do so profitably.

~~Questar~~Income ~~may~~tax beexpense ~~exposed~~increased to certain regulatory and financial risks related to climate change. Federal and state courts and administrative agencies are addressing claims and demands related to climate change under various laws pertaining to the environment7%, ~~energy~~primarily ~~use~~reflecting ~~and~~changes development, and greenhouse-gas emissions. The EPA has adopted the Greenhouse Gas Reporting Rule for the measurement and reporting of greenhouse gases emitted from combustion at large facilities (emitting more than 25,000 metric tons/year of carbon dioxide equivalent) beginning in ~~2010.~~effective ~~Questar's~~income ~~first~~tax ~~report was filed with the EPA in September 2011~~rates. Reporting under this regulation was expanded to include measurement and reporting of greenhouse-gas emissions attributed to methane venting and leaking starting in 2011. This regulation requires measurement and monitoring in the natural gas producing basins in which Wexpro operates, as well as in Questar Pipeline's compressor stations, storage fields, and processing facilities. Questar Gas is responsible for reporting combustion emissions for all of its customers, as well as for measurement and monitoring of gate-station methane emissions. This rule has created a greenhouse gas inventory, which could be used for regulatory compliance purposes and to generate emissions fees or other potential charges.

~~EPA’s~~Item 7A. ~~Prevention~~Quantitative ~~of Significant Deterioration~~ and ~~Title~~Qualitative VDisclosures ~~Greenhouse~~About ~~Gas~~Market ~~Tailoring~~Risk Rule, which went into effect January 1, 2011, currently regulates greenhouse gases as a Clean Air Act pollutant at large new sources or at existing sources undergoing major modifications. Analysis of near-term capital projects indicates that these permitting regulations will not inhibit development or expansion of Questar services, unless the EPA reduces thresholds in the future.

~~While~~The ~~future~~primary ~~climate-change~~objective ~~regulation~~of isthe ~~possible,~~following itinformation is ~~too early~~ to ~~predict~~provide ~~how~~information ~~potential~~about ~~regulation will affect~~ Questar's ~~business,~~Gas’ ~~operations,~~potential orexposure ~~financial~~to ~~results~~market risk. IfThe ~~forthcoming~~term ~~regulations~~“market risk” ~~recognize~~refers ~~that use of natural gas in high-efficiency residential, commercial, transportation, industrial, and electricity generation applications is essential~~ to ~~lower~~the ~~U.S.~~risk ~~greenhouse-gas emissions, use~~ of ~~natural~~loss ~~gas~~arising infrom ~~these~~adverse ~~applications~~changes ~~could increase. Similarly, natural gas will be essential~~ in ~~ensuring~~commodity ~~electrical-grid~~prices ~~reliability~~and asinterest ~~reliance on intermittent renewable energy increases in the future~~rates. ~~Use~~The ofreader’s ~~natural~~attention ~~gas~~is asdirected ~~an alternative transportation fuel continues~~ to ~~grow, with Questar actively involved in expanding refueling infrastructure~~Item 1A. OnRisk ~~the~~Factors ~~other~~for ~~hand,~~discussion ~~federal regulation~~ of ~~carbon~~various ~~dioxide~~risks ~~could increase the price of natural gas, restrict access to or the use of natural gas,~~ and~~/or~~ ~~reduce~~uncertainties ~~natural~~that ~~gas demand. Federal, state, and local governments~~ may pass laws mandating the use of alternative-energy sources, such as wind, solar, and geothermal energy. The increased use of alternative energy could reduce the future demand for natural gas. It is uncertain whether impact Questar's ~~operations and properties are exposed to possible physical risks, such as severe weather patterns due to climate change, as a result of man-made greenhouse gases~~Gas.

17Commodity Price Risk

Questar ~~is subject to changing U.S. Department of Transportation Pipeline and Hazardous Materials Safety Administration rules and regulations~~Gas, ~~which~~as ~~may~~a distributor increase costs. The Company is subject to PHMSA non-compliance risk due to significant legislative and regulatory developments in response to several major pipeline accidents in recent years. The reauthorization of ~~the~~natural ~~Pipeline~~gas ~~Safety~~under ~~Act was signed by~~ the ~~President~~framework ~~in January 2012. The new law includes significant new provisions on historical records research and maximum allowed operating pressure validation, use~~ of ~~automated~~the ~~or remote controlled valves on new or replaced lines~~Utah, ~~increased~~Wyoming ~~civil penalties~~ and ~~evaluation~~Idaho ofCommissions, ~~expanding~~is ~~integrity~~able ~~management~~to ~~beyond~~recover ~~high-consequence areas. PHMSA will be phasing in~~ the ~~new~~cost ~~regulations~~of ~~over~~natural ~~the~~gas ~~next~~delivered ~~two~~to ~~years~~customers. ~~PHMSA has already begun implementation of integrated compliance audits~~Accordingly, ~~which would require a focused effort by~~ Questar ~~Pipeline and Questar~~ Gas tobelieves ~~address~~that ~~the~~it ~~audit~~is ~~requests~~not ~~and~~subject ~~potential~~to ~~findings~~any ~~and~~material ~~recommendations.~~impacts ~~Penalties~~of commodity ~~associated~~price ~~with non-compliance could be substantial~~risk.

~~FERC~~Interest ~~regulates~~Rate ~~the~~Risk transportation and storage of natural gas and natural gas markets. Questar Pipeline's natural gas transportation and storage operations are regulated by the FERC under the Natural Gas Act of 1938 and the Natural Gas Policy Act of 1978. The FERC has authority to: set rates for natural gas transportation, storage and related services; set rules governing business relationships between the pipeline subsidiary and its affiliates; approve new pipeline and storage-facility construction; and establish policies and procedures for accounting, purchase, sale, abandonment and other activities. FERC policies may adversely affect Questar Pipeline profitability. Over the past several years, FERC issued a number of orders related to market transparency that extend FERC oversight to many Questar subsidiaries. Order No. 704 requires all natural gas companies to report gas purchases and sales and their relationship to price reporting indexes. Order No. 712 defines changes in capacity release and asset management. Order No. 717 establishes new Standards of Conduct Rules. In addition to the orders, FERC released a policy statement on compliance in which it states that companies must have a "rigorous" FERC compliance program that extends to all subsidiaries, not just interstate pipelines. Since the enactment of the Energy Policy Act of 2005, granting FERC increased penalty authority for non-compliance, FERC has targeted various issues in the natural gas industry for compliance audits and investigations. In late 2010 FERC issued a revised policy statement on penalty guidelines. These guidelines identify mitigation measures companies can take to minimize or reduce the risk of a significant FERC compliance penalty.

~~State~~As ~~agencies~~part ~~regulate~~of the Dominion ~~distribution~~Questar ofCombination, ~~natural gas.~~ Questar Gas's ~~natural~~settled ~~gas-distribution~~its ~~business~~borrowings isunder ~~regulated~~the byvariable ~~the~~rate ~~PSCU~~IRCA with Dominion Questar and began borrowing under the ~~PSCW.~~variable ~~These~~rate ~~commissions~~IRCA ~~set~~with ~~rates~~Dominion. ~~for~~At ~~distribution~~December ~~services~~31, 2016 and ~~establish~~2015, ~~policies~~Questar ~~and~~Gas ~~procedures~~had ~~for~~$48.0 ~~services,~~million ~~accounting~~and $273.3 million, ~~purchase~~respectively, ~~sale~~of ~~and~~borrowings ~~other~~under ~~activities~~the IRCAs. ~~PSCU~~In ~~and~~December ~~PSCW~~2016, ~~policies~~Questar ~~and~~Gas ~~decisions~~began ~~may~~accessing ~~adversely~~the ~~affect~~commercial paper markets. At December 31, 2016, Questar Gas ~~profitability~~had $200 million of outstanding commercial paper. A hypothetical 10% increase in market interest rates would not have resulted in a material change in earnings at December 31, 2016 or 2015.

Questar is subject to health care reform regulations, which may increase costs. Questar incurs significant costs to provide health care benefits to employees and some retirees. These costs have increased at a rate greater than inflation over a number of years and are expected to continue to increase. The full impact of the Patient Protection and Affordable Care Act of 2010 will not affect the Company until 2014; however, the cost of compliance with the provisions of the Act is difficult to measure at this time.10

OtherTable Risksof Contents

~~Questar depends upon key operational and technical personnel~~Item 8. ~~The~~Financial ~~successful~~Statements ~~implementation of the Company's business strategy depends, in part, on experienced operational~~ and ~~technical~~Supplementary ~~personnel,~~Data including key geologists, engineers and other professionals. Many of these key employees have the opportunity to retire within the next few years. In 2012, Questar offered a retirement incentive for those employees eligible for retirement. About 100 employees accepted this offer and will retire in early 2013. The retirement of these employees accelerates the need for succession planning and knowledge transfer to prepare future management and key employees for critical positions.

General economic and other conditions impact Questar's results. Questar's results may be negatively affected by: changes in global economic conditions; changes in regulation; creditworthiness of counterparties; rate of inflation and interest rates; weather and natural disasters; changes in customers' credit ratings; competition from other forms of energy, other pipelines and storage facilities; ability to renegotiate contracts, which could ultimately result in the impairment of assets; effects of accounting policies issued periodically by accounting standard-setting bodies; terrorist attacks or acts of war; changes in business or financial condition; changes in credit ratings; and availability of financing for Questar. Slower economic growth in markets served by Questar businesses may adversely impact the Company's operating results.


	Page Number
Reports of Independent Registered Public Accounting Firms		13
Statements of Income for the years ended December 31, 2016, 2015 and 2014		15
Balance Sheets at December 31, 2016 and 2015		16
Statements of Common Shareholder’s Equity at December 31, 2016, 2015 and 2014 and for the years then ended		18
Statements of Cash Flows for the years ended December 31, 2016, 2015 and 2014		19

Notes to Financial Statements		20

Questar faces risks of cyber-security attacks and loss of sensitive customer and employee data. Questar's operating and business systems may be vulnerable to an attack by individuals or organizations intending to disrupt business operations or obtain sensitive customer and employee data. In addition, this sensitive data may be disseminated through intentional or unintentional actions by employees, agents or vendors. The Company's operations and its ability to serve customers may be significantly impacted if its operating and business systems were unavailable. The cost to remedy an unintended dissemination 11

18Table of Contents

of[THIS ~~sensitive~~PAGE ~~information~~INTENTIONALLY ~~may~~LEFT beBLANK] significant. Questar mitigates these risks through a defense-in-depth approach that utilizes information technology security measures including system disaster-recovery procedures, intrusion-prevention systems, vulnerability management, network segmentation, internet scanning, anti-virus and malware scanning, system-access procedures and system-change-control procedures.

TheTable underfunded status of the Company's defined benefit pension plans increases pension costs and may require large contributions, which may divert funds from other uses. As of December 31, 2012, the Company's defined benefit pension plans were $249.5 million underfunded. This is due in part to the historically low discount rate used to value plan liabilities. The underfunded status of the pension plans may require large contributions, which may divert funds from other uses by the Company. Over time, periods of declining interest rates and pension asset values may result in further reduction of the funding status of the plans and require additional contributions. Questar cannot predict whether these factors will require the Company to make contributions greater than current expectations.Contents

~~Failure~~REPORT ofOF ~~the~~INDEPENDENT REGISTERED ~~Company's~~PUBLIC ~~controls~~ACCOUNTING ~~and~~FIRM procedures to detect misstatement of financial results or fraud could negatively impact operating results and harm the Company's reputation. Questar's management, including its Chief Executive Officer and Chief Financial Officer, cannot ensure and do not expect that the Company's internal controls over financial reporting, including disclosure controls, will work as intended to prevent all possible errors and fraud. A control system, no matter how well designed and implemented, can provide only reasonable assurance that the purpose and intent of the control system are achieved. The design and application of a control system is based, in part, on judgments about the likelihood of future events. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with Company policies. Because of inherent limitations in a control system, misstatements due to error or fraud may occur without detection.

~~ITEM~~To ~~1B. UNRESOLVED~~the ~~STAFF~~Board ~~COMMENTS.~~of Directors and Shareholder of

~~None.~~Questar Gas Company

~~ITEM~~Salt ~~2. PROPERTIES.~~Lake City, Utah

~~RETAIL~~We ~~GAS~~have ~~DISTRIBUTION~~audited the accompanying balance sheet of Questar Gas Company (an indirect wholly-owned subsidiary of Dominion Resources, Inc.)(“Questar Gas”) as of December 31, 2016, and the related statements of income, common shareholder’s equity, and cash flows for the year ended December 31, 2016. These financial statements are the responsibility of Questar Gas’ management. Our responsibility is to express an opinion on these financial statements based on our audit.

~~Questar~~We ~~Gas~~conducted ~~distributes~~our ~~gas~~audit toin ~~customers~~accordance ~~along~~with the ~~Wasatch~~standards ~~Front,~~of the ~~major~~Public ~~populated~~Company ~~area~~Accounting ofOversight ~~Utah,~~Board ~~the~~(United ~~metropolitan~~States) ~~Salt~~and ~~Lake~~in ~~area,~~accordance with ~~Provo,~~auditing ~~and~~standards ~~Ogden~~generally accepted in the United States of America. ItThose ~~also~~standards ~~serves~~require ~~customers~~that ~~throughout~~we ~~the~~plan ~~state,~~and ~~including~~perform the ~~cities~~audit ofto ~~Price,~~obtain ~~Roosevelt,~~reasonable ~~Park~~assurance ~~City,~~about ~~Logan,~~whether ~~Vernal,~~the ~~Moab,~~financial ~~Monticello,~~statements ~~Fillmore,~~are ~~Cedar~~free ~~City~~of ~~and~~material Stmisstatement. ~~George.~~ Questar Gas ~~supplies~~is ~~natural~~not ~~gas~~required to ~~the~~have, ~~southwestern~~nor ~~Wyoming~~were ~~communities~~we ofengaged ~~Rock~~to ~~Springs~~perform, ~~Green~~an ~~River,~~audit ~~Evanston,~~of ~~Kemmerer~~its ~~and~~internal ~~Diamondville,~~control ~~and~~over ~~the~~financial ~~southeastern~~reporting. ~~Idaho~~Our ~~community~~audit included consideration of ~~Preston.~~internal Tocontrol ~~supply~~over ~~these~~financial ~~communities~~reporting ~~Questar~~as ~~Gas~~a ~~owns~~basis ~~and~~for ~~operates~~designing ~~distribution~~audit ~~systems~~procedures ~~and~~that ~~has~~are appropriate ain ~~total~~the circumstances, but not for the purpose of ~~27,612~~expressing ~~miles~~an opinion on the effectiveness of ~~street~~Questar ~~mains~~Gas’ internal control over financial reporting. Accordingly, ~~service~~we ~~lines~~express ~~and~~no ~~interconnecting~~such ~~pipelines~~opinion. ~~Questar~~An ~~Gas~~audit ~~has~~also includes examining, on a test ~~major~~basis, ~~operations~~evidence ~~center~~supporting the amounts and disclosures in ~~Salt~~the ~~Lake~~financial ~~City~~statements, assessing the accounting principles used and ~~has~~significant ~~operations~~estimates ~~centers~~made by management, ~~field~~as ~~offices~~well ~~and~~as ~~service-center~~evaluating ~~facilities~~the inoverall ~~other~~financial ~~parts~~statement ofpresentation. ~~its~~We believe ~~service~~that ~~area~~our audit provides a reasonable basis for our opinion.

~~GAS~~In ~~AND~~our ~~OIL~~opinion, ~~DEVELOPMENT~~such ~~AND~~financial ~~PRODUCTION~~statements -present ~~Wexpro~~fairly, in all material respects, the financial position of Questar Gas Company as of December 31, 2016, and the results of its operations and its cash flows for the year ended December 31, 2016, in conformity with accounting principles generally accepted in the United States of America.

~~Wexpro develops, produces and delivers cost-of-service natural gas for Questar Gas under the terms of the Wexpro Agreement. The estimates of proved reserves were made by Wexpro'~~/s/ ~~reservoir~~Deloitte ~~engineers~~& asTouche ofLLP December 31, 2012. All reported reserves are located in the United States. Wexpro sells crude oil production from certain oil-producing properties at market prices. Wexpro recovers its cost and return on investment from the proceeds. Any residual operating income after recovery of Wexpro costs and return is shared 54% Questar Gas, 46% Wexpro. The following table sets forth estimated natural gas and oil reserves:

	December 31, 2012
	Natural Gas	Oil and NGL	Natural GasEquivalents
	(Bcf)	(Mbbl)	(Bcfe)
Proved developed reserves	523.9	4,967	553.7
Proved undeveloped reserves	173.3	1,202	180.5
Total proved reserves	697.2	6,169	734.2

Richmond, Virginia

~~Refer~~March 15, to2017 ~~Note 17 of the financial statements included in Item 8 of Part II of this Annual Report for additional information pertaining to the Company's reserves at the end of each of the last three years.~~

In addition to this filing, Wexpro will file reserves estimates as of December 31, 2012, with the Energy Information Administration of the U.S. Department of Energy on Form EIA-23. Although Wexpro uses the same technical and economic 13

19Table of Contents

~~assumptions~~REPORT ~~when~~OF itINDEPENDENT ~~prepares~~REGISTERED PUBLIC ~~the~~ACCOUNTING ~~EIA-23,~~FIRM ~~it is obligated to report reserves for the wells it operates, not for all wells in which it has an interest, and to include the reserves attributable to other owners in such wells.~~

~~Production~~The Board of Directors and Shareholder of

~~The~~Questar ~~following~~Gas ~~table~~Company ~~sets forth the net production volumes and the production costs per Mcfe for the years ended December 31, 2012, 2011 and 2010:~~

	Year Ended December 31,
	2012		2011		2010
Volumes produced
Natural gas (Bcf)	57.5		50.5		50.2
Oil and NGL (Mbbl)	665		467		437
Total production (Bcfe)	61.5		53.3		52.9
Lifting costs (per Mcfe)
Lease operating expense		$0.44		$0.42		$0.38
Production taxes	0.33		0.48		0.51
Total lifting costs		$0.77		$0.90		$0.89

We have audited the accompanying balance sheet of Questar Gas Company as of December 31, 2015, and the related statements of income, common shareholder’s equity and cash flows for each of the two years in the period ended December 31, 2015. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

~~Productive~~We ~~Wells~~conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~The~~In ~~following~~our ~~table~~opinion, ~~summarizes~~ the ~~Company's~~financial ~~productive~~statements ~~wells~~referred asto above present fairly, in all material respects, the financial position of Questar Gas Company at December 31, ~~2012.~~2015, ~~All~~and ~~wells~~the ~~are~~results ~~located~~of its operations and its cash flows for each of the two years in the ~~United~~period ~~States~~ended December 31, 2015, in conformity with U.S. generally accepted accounting principles.

	Gas Wells	Oil Wells	Total
Gross	1,561	120	1,681
Net	679.6	39.2	718.8

/s/ Ernst & Young LLP

~~Although~~Salt ~~many~~Lake ~~wells produce both gas and oil~~City, aUtah well is categorized as either a gas or an oil well based upon the ratio of gas to oil produced. Each gross well completed in more than one producing zone is counted as a single well. At the end of 2012, the Company had 13 gross wells with multiple completions.

~~Leasehold~~February ~~Acres~~18, 2016

The following table summarizes developed and undeveloped leasehold acreage in which the Company owns a working interest as of December 31, 2012. Excluded from the table is acreage in which the Company's interest is limited to royalty, overriding-royalty and other similar interests. All leasehold acres are located in the United States.14

	Developed Acres(1)		Undeveloped Acres(2)		Total Acres
	Gross	Net	Gross	Net	Gross	Net
Wyoming	99,918	84,621	10,824	10,824	110,742	95,445
Colorado	29,734	25,874	—	—	29,734	25,874
Utah	14,013	13,773	—	—	14,013	13,773
Other	759	759	—	—	759	759
Total	144,424	125,027	10,824	10,824	155,248	135,851

~~(1)~~Questar ~~Developed~~Gas ~~acreage~~Company ~~is acreage assigned to productive wells.~~

~~(2)~~Statements ~~Undeveloped acreage is leased acreage on which wells have not been drilled or completed to a point that would permit the production~~ of ~~commercial~~Income ~~quantities of natural gas and oil regardless of whether such acreage contains proved reserves.~~

A portion of the leases summarized in the preceding table will expire at the end of their respective primary terms unless the existing leases are renewed or production has been obtained from the acreage subject to the lease prior to that date. Leases held by production remain in effect until production ceases. Leases on all of the undeveloped acreage in the above table expire in more than five years.


Year Ended December 31,	2016		2015		2014
(millions)

Operating Revenue⁽¹⁾	$	921.3	$	917.6	$	960.9
Operating Expenses
Cost of sales⁽¹⁾		542.1		558.1		604.8
Other operations and maintenance⁽¹⁾		176.6		162.5		175.2
Depreciation and amortization		61.0		55.1		53.6
Other taxes		20.9		19.3		17.8
Total operating expenses		800.6		795.0		851.4
Income from operations		120.7		122.6		109.5
Other income		3.8		4.8		5.9
Interest expense⁽¹⁾		30.2		28.3		28.2
Income from operations before income tax expense		94.3		99.1		87.2
Income tax expense		37.1		34.8		32.0
Net Income	$	57.2	$	64.3	$	55.2

20(1) See Note 18 for amounts attributable to related parties.

~~Drilling~~The ~~Activity~~accompanying notes are an integral part of Questar Gas’ Financial Statements.

~~The following table summarizes the number of development wells drilled by Wexpro during the years indicated. Wexpro did not drill any exploratory wells.~~15

	Productive			Dry
	Year Ended December 31,
	2012	2011	2010	2012	2011	2010
Net Wells Completed
Development	43.5	43.7	28.9	2.7	1.0	1.0
Gross Wells Completed
Development	74	81	44	3	1	1

~~INTERSTATE~~Questar ~~GAS~~Gas ~~TRANSPORTATION~~Company ~~– Questar Pipeline~~

~~Questar~~Balance ~~Pipeline~~Sheets has firm-transportation contracts of 5,039 Mdth per day. These commitments include 1,926 Mdth per day for Questar Pipeline; 2,012 Mdth per day for Overthrust Pipeline; 81 Mdth per day for Southern Trails Pipeline; and 1,020 Mdth per day for Questar Pipeline's 50% ownership of White River Hub. Questar Pipeline's transportation system includes 2,638 miles of natural gas-transportation pipelines that interconnect with other pipelines. Its core system includes two segments, referred to as the northern system and southern system. The northern system extends from northwestern Colorado through southwestern Wyoming into northern Utah, while the southern system extends from western Colorado to Goshen, Utah. Questar Pipeline's natural gas-transportation-pipeline mileage includes: pipelines at storage fields and tap lines used to serve Questar Gas; 261 miles of Overthrust Pipeline, a wholly-owned subsidiary; and 487 miles of the Southern Trails Pipeline, a wholly-owned subsidiary; but does not include 96 miles of Southern Trails Pipeline that is not in service in southern California. Questar Pipeline's system ranges in diameter from lines that are less than four inches to 36-inches. Questar Pipeline also owns large-scale compressor stations, which boost the pressure of natural gas transported on its pipelines for delivery to utility customers and third-party pipelines.

Questar Pipeline also owns the Clay Basin storage facility in northeastern Utah, which has a certificated capacity of 120.2 Bcf, including 54.0 Bcf of working gas. Questar Pipeline also owns three smaller storage aquifers in northeastern Utah and western Wyoming. Through a subsidiary, Questar Pipeline also owns gathering lines and processing facilities near Price, Utah, which provide gas-processing services for third parties.


At December 31,	2016			2015
(millions)

ASSETS
Current Assets
Cash and cash equivalents	$	7.6		$	10.5
Customer receivables (less allowance for doubtful accounts of $1.7 at both dates)		163.7			168.8
Receivables from affiliates		0.6			103.4
Inventories at lower of average cost or market:
Gas stored underground		49.3			43.9
Materials and supplies		27.6			17.1
Regulatory assets		9.6			69.8
Prepaid expenses and other		3.7			3.5
Total current assets		262.1			417.0
Property, Plant and Equipment
Property, plant and equipment		2,883.0			2,570.3
Accumulated depreciation and amortization		(737.6	)		(812.2	)
Total property, plant and equipment, net		2,145.4			1,758.1
Deferred Charges and Other Assets
Receivables from affiliates		87.8			—
Goodwill		5.6			5.6
Regulatory assets		5.5			11.9
Other noncurrent assets		0.1			0.1
Total deferred charges and other assets		99.0			17.6
Total assets	$	2,506.5		$	2,192.7

~~ITEM~~The ~~3. LEGAL~~accompanying notes ~~PROCEEDINGS~~are an integral part of Questar Gas’ Financial Statements.

In addition to the items referenced below, the Company is involved in other litigation and regulatory matters arising in the normal course of business. These other matters may include, for example, negligence claims and tax, regulatory or other governmental audits, inspections, investigations or other proceedings. These matters may involve state and federal taxes, safety, compliance with regulations, rate base, cost of service, and purchased-gas cost issues, among other things. While these normal-course matters could have a material effect on earnings and cash flows in the quarterly and annual period in which they are resolved, they are not expected to change materially the Company's present liquidity position, nor are they expected to have a material adverse effect on the financial condition of the Company.16

CommitmentsTable andof ContingenciesContents

See Note 8 to the financial statements included in Item 8 of Part II of this Annual Report for information concerning commitments and contingencies.


At December 31,	2016		2015
(millions)

LIABILITIES AND COMMON SHAREHOLDER’S EQUITY
Current Liabilities
Securities due within one year	$	14.5	$	—
Short-term debt		200.0		—
Affiliated current borrowings		48.0		273.3
Accounts payable and accrued expenses		117.2		122.5
Accounts payable to affiliates		43.5		74.5
Customer advances		27.9		34.3
Other current liabilities		8.2		4.0
Total current liabilities		459.3		508.6
Long-Term Debt		616.3		531.2
Deferred Credits and Other Liabilities
Deferred income taxes		475.8		436.7
Regulatory liabilities		189.1		65.6
Asset retirement obligations		76.2		0.6
Payables to affiliates		13.0		—
Customer contributions in aid of construction		19.0		23.7
Other noncurrent liabilities		0.2		1.6
Total deferred credits and other liabilities		773.3		528.2
Total liabilities		1,848.9		1,568.0
Commitments and Contingencies (see Note 16)
Common Shareholder’s Equity
Common stock—par value $2.50; 50.0 million shares authorized; 9.2 million shares issued and outstanding at December 31, 2016 and December 31, 2015		23.0		23.0
Additional paid-in capital		272.5		266.8
Retained earnings		362.1		334.9
Total common shareholder’s equity		657.6		624.7
Total liabilities and shareholder’s equity	$	2,506.5	$	2,192.7

~~Regulatory~~The ~~Proceedings~~accompanying notes are an integral part of Questar Gas’ Financial Statements.

~~See Note 10 to the financial statements included in Item 8 of Part II of this Annual Report for information concerning various regulatory proceedings.~~17

ITEMTable 4. MINEof SAFETY DISCLOSURESContents

~~Not~~Questar ~~applicable.~~Gas Company

21Statements of Common Shareholder’s Equity

PART II


	Common Stock
	Shares		Amount		Additional Paid-In Capital		Retained Earnings			Total
(millions, except for shares)	(thousands)

Balance at December 31, 2013		9,190	$	23.0	$	263.9	$	289.4		$	576.3
Net income		—		—		—		55.2			55.2
Dividends		—		—		—		(36.0	)		(36.0	)
Share-based compensation		—		—		1.5		—			1.5
Balance at December 31, 2014		9,190		23.0		265.4		308.6			597.0
Net income		—		—		—		64.3			64.3
Dividends		—		—		—		(38.0	)		(38.0	)
Share-based compensation		—		—		1.4		—			1.4
Balance at December 31, 2015		9,190		23.0		266.8		334.9			624.7
Net income		—		—		—		57.2			57.2
Equity contribution from Dominion Questar		—		—		2.7		—			2.7
Dividends		—		—		—		(30.0	)		(30.0	)
Share-based compensation		—		—		3.0		—			3.0
Balance at December 31, 2016		9,190	$	23.0	$	272.5	$	362.1		$	657.6

~~ITEM~~The ~~5. MARKET~~accompanying ~~FOR~~notes ~~REGISTRANT'S~~are ~~COMMON~~an ~~EQUITY,~~integral ~~RELATED~~part ~~STOCKHOLDER~~of ~~MATTERS~~Questar ~~AND~~Gas’ ~~ISSUER~~Financial ~~PURCHASES OF EQUITY SECURITIES~~Statements.

~~Five-Year Cumulative Total Return to Shareholders~~18

TheTable following table and graph compare the cumulative total return of the Company's common stock with the cumulative total returns of a new and old peer group of diversified natural gas companies selected by Questar, and of the S&P 500 stock index:Contents

	2007		2008		2009		2010		2011		2012
Questar	$	100.00	$	61.06	$	78.82	$	97.07	$	114.49	$	117.78
S&P 500	100.00		63.01		79.68		91.68		93.62		108.60
New Peer Group	100.00		78.01		97.41		108.69		126.37		127.38
Old Peer Group	100.00		73.77		97.72		110.12		134.42		136.95

Questar Gas Company

~~The~~Statements ~~chart assumes $100 is invested at the close~~ of ~~trading~~Cash onFlows December 31, 2007, in the Company's common stock, a new and old index of peer companies and the S&P 500 index. It also assumes all dividends are reinvested. The Questar common stock values for periods prior to June 30, 2010, have been recast for the spinoff of QEP Resources. For 2012 the Company had a total return of 2.87% compared to 1.88% for the old peer group, 0.8% for the new peer group and 16.0% for the S&P 500 index. For the five-year period, the Company had a compound annual total return of 3.33% compared to 6.49% for the old peer company, 4.96% for the new peer group and 1.66% for the S&P 500 index. The new peer group is comprised of AGL Resources Inc.; Atmos Energy Corporation; Energen Corporation; EQT Corporation; MDU Resources Group, Inc.; National Fuel Gas Company; New Jersey Resources Corporation; NiSource Inc.; Northwest Natural Gas Company; Piedmont Natural Gas Company, Inc.; South Jersey Industries, Inc.; Southwest Gas Corporation; Vectren Corporation; and WGL Holdings, Inc. ONEOK, Inc. was removed from the peer group in 2012 as it no longer aligned with the Company's revenue generating activities. New Jersey Resources, South Jersey Industries and Vectren Corporation were added to the peer group.


Year Ended December 31,	2016			2015			2014
(millions)

Operating Activities
Net income	$	57.2		$	64.3		$	55.2
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		61.0			60.6			58.8
Deferred income taxes		35.7			52.9			46.0
Other adjustments for non-cash items		3.2			1.4			1.5
Changes in operating assets and liabilities		44.0			(63.1	)		(47.8	)
Net cash provided by operating activities		201.1			116.1			113.7
Investing Activities
Property, plant and equipment purchased		(240.4	)		(217.4	)		(174.7	)
Property, plant and equipment purchased from affiliates		(10.8	)		(0.1	)		—
Acquisition of gas distribution system		—			(11.4	)		—
Cash used in disposition of assets		—			(3.9	)		(3.4	)
Proceeds from disposition of assets		0.5			0.4			0.8
Net cash used in investing activities		(250.7	)		(232.4	)		(177.3	)
Financing Activities
Issuance of short-term debt, net		200.0			—			—
Issuance of long-term debt		100.0			—			—
Issuance (repayment) of affiliated current borrowings, net		(225.3	)		154.0			101.6
Equity contribution from Dominion Questar		2.7			—			—
Dividends paid to Dominion Questar		(30.0	)		(47.0	)		(27.0	)
Other		(0.7	)		—			—
Net cash provided by financing activities		46.7			107.0			74.6
Increase (decrease) in cash and cash equivalents		(2.9	)		(9.3	)		11.0
Cash and cash equivalents at beginning of year		10.5			19.8			8.8
Cash and cash equivalents at end of year	$	7.6		$	10.5		$	19.8
Supplemental Cash Flow Information
Cash paid (received) during the year for:
Interest and related charges, excluding capitalized amounts	$	29.3		$	27.6		$	26.3
Income taxes		(35.0	)		21.1			13.2
Significant noncash investing activities:
Accrued capital expenditures		19.7			22.2			17.2

The ~~foregoing~~accompanying ~~graph~~notes ~~shall~~are ~~not~~an beintegral ~~deemed to be filed as~~ part of ~~this Annual Report and does not constitute soliciting material and should not be deemed filed or incorporated by reference into any other filing of~~ Questar ~~under~~Gas’ ~~the~~Financial ~~Securities Act or the Exchange Act, except to the extent the Company specifically incorporates the graph by reference~~Statements.

Questar's common stock is listed on the New York Stock Exchange (NYSE:STR). As of January 31, 2013, Questar had 7,731 shareholders of record. Following is a summary of Questar's quarterly stock-price and dividend information:19

	High price		Low price		Dividend
	(per share)
2012
First quarter	$	20.18	$	19.07	$	0.1625
Second quarter	21.47		18.86		0.1625
Third quarter	21.31		19.23		0.1700
Fourth quarter	21.04		17.20		0.1700
					$	0.6650
2011
First quarter	$	18.28	$	16.60	$	0.1525
Second quarter	17.96		16.59		0.1525
Third quarter	19.06		16.36		0.1525
Fourth quarter	20.06		16.82		0.1625
					$	0.6200

~~Changes~~Notes into ~~Securities,~~Financial ~~Use~~Statements ~~of Proceeds and Issuer Purchases of Equity Securities~~

~~Questar~~NOTE ~~had no unregistered sales of equity securities during the fourth quarter of 2012~~1. ~~The~~NATURE ~~following~~OF ~~table~~OPERATIONS ~~sets forth the Company's purchases of common stock registered under Section 12 of the Exchange Act that occurred during the quarter ended December 31, 2012:~~

2012	Number of Shares Purchased(1)	Average Price per Share		Total Number of Shares Purchased as Part of Publicly Announced Plan(2)	Approximate Dollar Value of Shares that May Yet be Purchased Under the Plan(2)
Month #1 October 1through October 31	116,189	$	20.42	—	$	28,423,920
Month #2 November 1through November 30	5,423	20.07		—	28,423,920
Month #3 December 1through December 31	605,451	19.61		550,000	—
Total	727,063	$	19.74	550,000

Questar Gas is a wholly-owned subsidiary of Dominion Questar which, effective September 2016, is a wholly-owned subsidiary of Dominion.

~~(1)~~Questar ~~The~~Gas ~~total~~distributes ~~number~~natural ofgas ~~shares~~as ~~purchased~~a ~~includes~~public ~~116,189~~utility in ~~Month #1~~Utah, ~~5,423~~southwestern inWyoming ~~Month #2~~ and ~~55,451~~a ~~shares~~small inportion ~~Month~~of #3southeastern inIdaho. ~~conjunction~~The ~~with~~Utah, Wyoming ~~tax-payment~~and ~~elections~~Idaho ~~under~~Commissions ~~the~~have ~~Company's~~granted ~~Long-term~~Questar ~~Stock~~Gas ~~Incentive~~the ~~Plan~~necessary ~~and~~regulatory ~~rollover~~approvals ~~shares~~to ~~used~~serve inthese ~~exercising~~areas. ~~stock~~Questar ~~options.~~Gas ~~All~~also ~~other~~has ~~shares~~long-term ~~were~~franchises ~~purchased~~granted ~~pursuant~~by tocommunities ~~the~~and ~~publicly~~counties ~~announced~~within ~~program~~its ~~described~~service ~~below~~area.

~~(2)~~Revenue Ongenerated ~~July~~by ~~26, 2011, the~~ Questar ~~Board~~Gas ofis ~~Directors~~based ~~authorized~~primarily aon ~~$100~~rates ~~million~~established ~~share~~by ~~repurchase program. This program expired December 31, 2012. Share repurchases may be made on~~ the ~~open~~Utah ~~market~~and orWyoming ~~through other transactions~~Commissions. ~~Questar's~~The ~~management~~Idaho Commission has contracted ~~sole discretion~~ with ~~respect~~the toUtah ~~determining~~Commission ~~the~~for ~~timing~~rate ~~and~~oversight ~~amount~~ of ~~these~~Questar ~~transactions~~Gas operations.

23Wexpro provides the majority of Questar Gas’ natural gas supply and Questar Pipeline provides the majority of Questar Gas’ transportation and storage services.

~~ITEM~~Questar 6Gas manages its daily operations through one primary operating segment. ~~SELECTED~~ ~~FINANCIAL~~It ~~DATA~~also reports a Corporate and Other segment that primarily includes specific items attributable to its operating segment that are not included in profit measures evaluated by executive management in assessing the segment’s performance or in allocating resources.

~~Selected~~NOTE ~~financial data for the five years ending December 31, 2012, is provided in the table below~~2. SIGNIFICANT ~~Refer~~ACCOUNTING toPOLICIES ~~Item 7 and Item 8 in Part II of this Annual Report for discussion of facts affecting the comparability.~~

	Year Ended December 31,
	2012			2011			2010			2009			2008
	(in millions, except per-share amounts)
Results Of Operations
Revenues	$	1,098.9		$	1,194.4		$	1,123.6		$	1,109.9		$	1,201.9
Operating income	375.7			366.9			343.3			328.2			307.3
Income from continuing operations	212.0			207.9			192.3			180.5			172.2
Discontinued operations, net of income taxes	—			—			146.9			212.8			511.6
Net income attributable to Questar	$	212.0		$	207.9		$	339.2		$	393.3		$	683.8
Earnings per common share attributable to Questar
Basic from continuing operations	$	1.20		$	1.17		$	1.09		$	1.03		$	1.00
Basic from discontinued operations	—			—			0.84			1.23			2.96
Basic total	$	1.20		$	1.17		$	1.93		$	2.26		$	3.96
Diluted from continuing operations	$	1.19		$	1.16		$	1.08		$	1.02		$	0.98
Diluted from discontinued operations	—			—			0.83			1.21			2.90
Diluted total	$	1.19		$	1.16		$	1.91		$	2.23		$	3.88
Weighted-average common shares outstanding
Used in basic calculation	176.5			177.4			175.4			174.1			172.8
Used in diluted calculation	177.5			178.8			178.0			176.3			176.1
Financial Position
Total assets of continuing operations	$	3,757.1		$	3,532.8		$	3,373.6		$	3,189.7		$	3,115.7
Total assets of discontinued operations	—			—			—			5,828.9			5,741.0
Total assets at December 31,	$	3,757.1		$	3,532.8		$	3,373.6		$	9,018.6		$	8,856.7
Total liabilities of continuing operations	$	2,721.5		$	2,499.3		$	2,337.5		$	2,053.1		$	2,123.2
Total liabilities of discontinued operations	—			—			—			3,408.4			3,286.0
Total liabilities at December 31,	$	2,721.5		$	2,499.3		$	2,337.5		$	5,461.5		$	5,409.2
Capitalization and short-term debt of continuing operations at December 31,
Short-term debt	$	263.0		$	219.0		$	242.0		$	221.9		$	271.8
Current portion of long-term debt	42.0			91.5			182.0			—			42.0
Long-term debt, less current portion	1,098.9			993.0			898.5			831.2			829.8
Total equity	$	1,035.6		$	1,033.5		$	1,036.1		$	1,136.6		$	992.5
Book value per common share of continuing operations at December 31,	$	5.91		$	5.81		$	5.87		$	6.51		$	5.72
Cash Flow Of Continuing Operations
Net cash provided by operating activities	$	467.7		$	489.0		$	350.9		$	428.8		$	271.5
Capital expenditures	(370.7		)	(367.7		)	(320.3		)	(299.8		)	(349.0		)
Net cash used in investing activities	(365.3		)	(370.9		)	(525.7		)	(249.8		)	(357.0		)
Net cash provided by (used in) financing activities	(97.2		)	(128.3		)	185.1			(167.5		)	74.0
Dividends per share	$	0.665		$	0.62		$	0.54		$	0.505		$	0.4925

General

24Questar Gas makes certain estimates and assumptions in preparing its Financial Statements in accordance with GAAP. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses and cash flows for the periods presented. Actual results may differ from those estimates.

~~ITEM~~Questar ~~7. MANAGEMENT'S~~Gas ~~DISCUSSION~~reports ~~AND~~certain ~~ANALYSIS~~contracts OFand ~~FINANCIAL~~instruments ~~CONDITION~~at ~~AND~~fair ~~RESULTS~~value. OFSee ~~OPERATIONS~~Note 5 for further information on fair value measurements.

~~RESULTS~~Certain OFamounts ~~OPERATIONS~~in the 2015 and 2014 Financial Statements and footnotes have been reclassified to conform to the 2016 presentation for comparative purposes. The reclassifications did not affect Questar Gas’ net income, total assets, liabilities, equity or cash flows, except for the reclassification of debt issuance costs.

~~Following~~Operating ~~are~~Revenue ~~comparisons of income (loss) from continuing operations by line of business:~~

	Year Ended December 31,									Change
	2012			2011			2010			2012 vs. 2011			2011 vs. 2010
	(in millions, except per-share amounts)
Questar Gas	$	47.1		$	46.1		$	43.9		$	1.0		$	2.2
Wexpro	103.9			95.2			88.1			8.7			7.1
Questar Pipeline	64.7			67.9			67.4			(3.2		)	0.5
Corporate and other	(3.7		)	(1.3		)	(7.1		)	(2.4		)	5.8
Income from continuing operations	$	212.0		$	207.9		$	192.3		$	4.1		$	15.6
Earnings per share - diluted	$	1.19		$	1.16		$	1.08		$	0.03		$	0.08
Average diluted shares	177.5			178.8			178.0			(1.3		)	0.8

Operating revenue is recorded on the basis of services rendered, commodities delivered or contracts settled and includes amounts yet to be billed to customers. Questar Gas collects sales taxes; however, these amounts are excluded from revenue. Questar Gas’ customer receivables at December 31, 2016 and 2015 included $88.6 million and $91.0 million, respectively, of accrued unbilled revenue based on estimated amounts of natural gas delivered but not yet billed to its customers.

25The primary types of sales and service activities reported as operating revenue for Questar Gas are as follows:

~~QUESTAR~~• ~~GAS~~Regulated gas sales consist of delivery of natural gas to residential, commercial and industrial customers;

	Year Ended December 31,									Change
	2012			2011			2010			2012 vs. 2011			2011 vs. 2010
	(in millions)
Net Income
REVENUES
Residential and commercial sales	$	788.4		$	893.0		$	833.0		$	(104.6	)	$	60.0
Industrial sales	27.4			29.7			26.7			(2.3		)	3.0
Transportation for industrial customers	11.9			11.3			9.7			0.6			1.6
Service	4.5			5.1			4.8			(0.6		)	0.3
Other	30.0			29.7			28.7			0.3			1.0
Total Revenues	862.2			968.8			902.9			(106.6		)	65.9
Cost of natural gas sold
From unaffiliated parties	185.6			318.4			278.5			(132.8		)	39.9
From affiliated companies	347.7			327.3			313.7			20.4			13.6
Total cost of natural gas sold	533.3			645.7			592.2			(112.4		)	53.5
Margin	328.9			323.1			310.7			5.8			12.4
OTHER OPERATING EXPENSES
Operating and maintenance	119.0			118.5			114.4			0.5			4.1
General and administrative	51.2			51.0			49.9			0.2			1.1
Retirement incentive	2.4			—			—			2.4			—
Depreciation and amortization	47.2			44.5			43.7			2.7			0.8
Other taxes	16.2			15.0			14.1			1.2			0.9
Total Other Operating Expenses	236.0			229.0			222.1			7.0			6.9
OPERATING INCOME	92.9			94.1			88.6			(1.2		)	5.5
Interest and other income	5.5			5.4			6.7			0.1			(1.3		)
Interest expense	(24.1		)	(25.9		)	(26.2		)	1.8			0.3
Income taxes	(27.2		)	(27.5		)	(25.2		)	0.3			(2.3		)
NET INCOME	$	47.1		$	46.1		$	43.9		$	1.0		$	2.2
Operating Statistics
Natural gas volumes (MMdth)
Residential and commercial sales	96.2			113.3			105.8			(17.1		)	7.5
Industrial sales	4.7			5.0			4.5			(0.3		)	0.5
Transportation for industrial customers	62.0			52.5			59.3			9.5			(6.8		)
Total industrial	66.7			57.5			63.8			9.2			(6.3		)
Total deliveries	162.9			170.8			169.6			(7.9		)	1.2
Natural gas revenue (per dth)
Residential and commercial	$	8.19		$	7.88		$	7.88		$	0.31		$	—
Industrial sales	5.79			6.03			5.89			(0.24		)	0.14
Transportation for industrial customers	0.19			0.21			0.16			(0.02		)	0.05
System natural gas cost (per dth)	$	4.77		$	5.05		$	5.34		$	(0.28	)	$	(0.29	)
Colder (warmer) than normal temperatures	(16%)			7%			1%			(23%)			6%
Temperature-adjusted usage per customer (dth)	108.4			111.1			106.9			(2.7		)	4.2
Customers at December 31, (in thousands)	931			919			910			12			9

•

Gas transportation consists of transportation of gas for industrial customers who buy their own gas supply; and

26• Other primarily consists of connection fees, royalties, miscellaneous product sales, etc.

~~Margin~~Cost ~~Analysis~~of Sales

Questar Gas's ~~margin~~obtains ~~(revenues~~the ~~less~~majority of its gas ~~costs)~~supply from ~~increased~~Wexpro’s ~~$5.8~~cost-of-service ~~million~~production inand ~~2012~~pays ~~compared~~Wexpro toan ~~2011~~operator service fee based on the terms of the Wexpro Agreement and ~~increased~~the ~~$12~~Wexpro II Agreement.4 ~~million~~Questar inGas also ~~2011~~obtains ~~compared~~transportation toand ~~2010~~storage services from Questar Pipeline. ~~Following~~See isNote 18 for more information. During the second and third quarters of the year, a ~~summary~~significant portion of ~~major~~the ~~changes~~natural gas from Wexpro production is injected into underground storage. This gas is withdrawn from storage as needed during the heating season in ~~Questar~~the ~~Gas's~~first ~~margin~~and ~~for~~fourth ~~2012~~quarters. ~~compared~~The tocost ~~2011~~of natural gas sold is credited with the value of natural gas as it is injected into storage and ~~2011~~debited ~~compared~~as toit ~~2010:~~is withdrawn from storage.

	Change
	2012 vs. 2011			2011 vs. 2010
	(in millions)
New customers	$	3.1		$	2.7
Change in rates	0.2			1.2
Demand-side-management cost recovery	(3.3		)	0.8
Feeder line tracker	5.9			4.3
Recovery of gas-cost portion of bad-debt costs	(0.9		)	0.3
Other	0.8			3.1
Increase	$	5.8		$	12.4

The details of Questar Gas’ cost of sales are as follows:

At December 31, 2012, Questar Gas served 930,760 customers, up from 919,236 at December 31, 2011, and 909,570 at December 31, 2010. New-customer growth increased the margin by $3.1 million in 2012 and $2.7 million in 2011.


Year Ended December 31,	2016			2015			2014
(millions)
Gas purchases	$	102.0		$	82.5		$	136.5
Affiliated operator service fee		311.7			319.0			349.7
Transportation and storage⁽¹⁾		79.3			79.2			79.6
Gathering		23.7			22.1			21.0
Royalties		26.3			33.3			60.1
Storage (injection), net		(5.5	)		(3.5	)		(1.1	)
Purchased-gas account adjustment		(0.6	)		20.5			(45.8	)
Other		5.2			5.0			4.8
Total cost of sales	$	542.1		$	558.1		$	604.8

~~Temperature-adjusted~~(1) ~~usage~~See ~~per~~Note ~~customer~~18 ~~decreased~~for 2%amounts inattributable ~~2012 compared~~ to ~~2011~~related ~~and increased 4% in 2011 compared to 2010~~parties. The impact on the company margin from changes in usage per customer has been mitigated by a CET that was approved by the PSCU beginning 2006. The CET adjustment decreased revenues by $2.9 million in 2012, decreased revenues by $3.6 million in 2011 and increased revenues by $2.9 million in 2010, which offset changes in customer usage.

~~Weather, as measured in degree days, was 16% warmer than normal in 2012, 7% colder than normal in 2011 and 1% colder than normal in 2010. A weather~~Purchased Gas-~~normalization~~Deferred ~~adjustment~~Costs ~~on customer bills generally offsets financial impacts of temperature variations.~~

~~Questar~~Where ~~Gas~~permitted ~~has~~by anregulatory ~~infrastructure~~authorities, ~~cost-tracking~~the ~~mechanism~~differences ~~that~~between ~~allows~~Questar ~~the~~Gas’ purchased ~~company~~gas toexpenses ~~place~~and ~~into~~the ~~rate~~related ~~base~~levels ~~and~~of ~~earn~~recovery onfor ~~capital~~these ~~expenditures~~expenses ~~associated~~in ~~with~~current arates ~~multi-year~~are ~~high-pressure~~deferred ~~natural~~and ~~gas~~matched ~~feeder-line~~against ~~replacement~~recoveries ~~program,~~in ~~and~~future doperiods. itThe ~~immediately~~deferral ~~upon~~of ~~the~~gas ~~completion~~costs ofin ~~each~~excess ~~project.~~of ~~Questar~~current ~~Gas~~period ~~realized~~recovery anis ~~increase~~recognized inas ~~margin~~a ofregulatory asset, ~~$5.9~~while ~~million~~rate recovery in ~~2012~~excess ~~and~~of ~~$4.3~~current ~~million~~period ingas ~~2011~~costs ~~under~~is ~~this~~recognized ~~mechanism~~as a regulatory liability.

~~Questar~~Virtually ~~Gas~~all ~~has an allowed return on equity~~ of ~~10.35% in Utah.~~ Questar Gas’ isnatural ~~required~~gas topurchases ~~file~~are aeither ~~general~~subject ~~rate~~to ~~case~~deferral inaccounting ~~Utah~~or byare ~~mid-2013.~~recovered ~~Questar~~from ~~Gas~~the ~~filed~~customer ~~a general rate case~~ in ~~Wyoming~~the insame ~~December~~accounting ~~2011~~period ~~and~~as ~~received~~the ~~an order in 2012, which increased rates by $0~~sale.6 ~~million per year and authorized a return on equity of 9.16%.~~

~~Expenses~~Income Taxes

~~Cost~~For ~~of natural gas sold decreased 17% in 2012 compared to 2011 and increased 9% in 2011 compared to 2010. The 2012 decrease was due to a 15% decrease in volumes sold~~2016, ~~and~~ a 6%consolidated ~~decrease~~federal inincome ~~the~~tax ~~purchase~~return ~~cost~~will ofbe ~~natural~~filed ~~gas.~~for ~~The~~Dominion ~~2011 increase was due to a 7% increase in volumes sold~~Questar, ~~partially~~including ~~offset by a 5% decrease in the purchase cost of natural gas. Cost of natural gas from affiliates includes cost-of-service gas supplies from Wexpro and transportation and storage from~~ Questar Pipeline. These costs increased 6% in 2012 and 4% in 2011 due to Wexpro's higher investment in gas development properties resulting in higher volumes of cost-of-service gas. Wexpro provided 68% of Questar Gas, ~~natural~~for ~~gas~~the ~~supply~~period inJanuary ~~2012~~1, ~~52%~~2016 through inSeptember ~~2011~~16, ~~and 51% in 2010~~2016. Questar Gas ~~accounts~~will ~~for~~also ~~purchased-gas~~be ~~costs~~part inof ~~accordance with procedures authorized by~~ the ~~PSCU~~consolidated ~~and~~federal ~~the~~income ~~PSCW.~~tax ~~Purchased-gas~~return ~~costs~~filed ~~that~~by ~~are~~Dominion ~~different from those provided~~ for inthe ~~present~~period ~~rates~~September ~~are~~17, ~~accumulated~~2016 ~~and recovered or credited~~ through ~~future~~December ~~rate~~31, ~~changes~~2016. ~~During the second quarter of 2012,~~ Questar Gas ~~credited~~will ~~customers~~be ~~with~~part ~~$42.9~~of ~~million~~the ofconsolidated ~~gas~~Dominion ~~costs~~federal income ~~previously~~tax ~~collected~~return ~~from~~for ~~customers~~the infull ~~excess~~year of2017 ~~costs~~and ~~incurred~~going forward. In addition, ~~the~~where ~~gas cost portion of rates was reduced by $20.1 million. As of December 31~~applicable, ~~2012,~~combined ~~Questar~~income ~~Gas~~tax ~~had~~returns afor ~~$15.2~~Dominion ~~million~~and ~~under-collected~~its ~~balance~~subsidiaries inare ~~the~~filed ~~purchased-gas adjustment account representing costs incurred~~ in ~~excess~~various ofstates; ~~costs~~otherwise, ~~recovered~~separate ~~from~~state ~~customers.~~income ~~Refer~~tax toreturns ~~Note~~are ~~1 to the consolidated financial statements included in Item 8 of Part II of this Annual Report for additional information regarding cost of natural gas sold~~filed.

~~Operating~~Questar ~~and~~Gas ~~maintenance~~participates ~~expenses increased $0.5 million~~ in ~~2012~~intercompany ~~compared~~tax tosharing ~~2011.~~agreements ~~Labor~~with ~~and~~Dominion ~~pension costs increased by $4.1 million~~ and ~~supplies~~its ~~and services increased by $1~~subsidiaries.1 ~~million.~~Current ~~These~~income ~~increases~~taxes ~~were~~are ~~partially~~based ~~offset~~on bytaxable income aor ~~$3.3~~loss ~~million~~and ~~decrease~~credits indetermined ~~DSM~~on ~~costs recovered from customers and~~ a ~~$1.3~~separate ~~million~~company ~~decrease in bad-debt costs~~basis. ~~Operating and maintenance expenses increased $4.1 million in 2011 compared to 2010 due largely to a $0.8 million increase in DSM costs recovered from~~

2720

customersTable and a $1.9 million increase in bad-debt costs. General and administrative costs increased $0.2 million in 2012 compared to 2011 and increased $1.1 million in 2011 compared to 2010 due to higher compensation, employee benefits and allocated corporate expenses. The sum of operating, maintenance, general and administrative expenses not including DSM costs per customer was $143 in 2012 compared to $141 in 2011 and $138 in 2010.Contents

~~Depreciation~~Under ~~and~~the ~~amortization~~agreements, ~~expense~~if ~~was~~a 6%subsidiary ~~higher~~incurs ina ~~2012~~tax ~~compared~~loss toor ~~2011~~earns ~~due~~a credit, recognition of current income tax benefits is limited to ~~higher~~refunds ~~depreciation~~of ~~expense~~prior ~~from~~year ~~plant~~taxes ~~additions.~~obtained ~~Depreciation~~by ~~and~~the ~~amortization~~carryback ~~expense~~of ~~increased~~the 2%net inoperating ~~2011~~loss ~~compared~~or tocredit ~~2010~~or asto ~~higher~~the ~~depreciation~~extent ~~expense~~the ~~from~~tax ~~plant~~loss ~~additions~~or ~~was~~credit ~~partially~~is ~~offset~~absorbed by ~~lower~~the ~~depreciation~~taxable ~~rates~~income ~~authorized~~of inother Dominion consolidated group members. Otherwise, the ~~last~~net ~~rate~~operating ~~case~~loss or credit is carried forward and is recognized as a deferred tax asset until realized.

~~WEXPRO~~Accounting for income taxes involves an asset and liability approach. Deferred income tax assets and liabilities are provided, representing future effects on income taxes for temporary differences between the bases of assets and liabilities for financial reporting and tax purposes. Accordingly, deferred taxes are recognized for the future consequences of different treatments used for the reporting of transactions in financial accounting and income tax returns. Questar Gas establishes a valuation allowance when it is more-likely-than-not that all, or a portion, of a deferred tax asset will not be realized. A regulatory asset is recognized if it is probable that future revenues will be provided for the payment of deferred tax liabilities.

~~Wexpro~~Questar ~~reported~~Gas ~~net~~recognizes ~~income~~positions oftaken, ~~$103.9~~or ~~million~~expected ~~in 2012 compared~~ to ~~$95.2~~be ~~million~~taken, in ~~2011~~income ~~and~~tax ~~$88.1~~returns ~~million~~that inare more-likely-than-not ~~2010.~~to ~~The~~be ~~growth~~realized, inassuming ~~net~~that ~~income~~the ~~resulted~~position ~~from~~will ~~increased~~be ~~investment~~examined inby ~~cost-of-service~~tax ~~gas~~authorities ~~development~~with ~~wells.~~full ~~Following~~knowledge ~~is a summary~~ of ~~Wexpro~~all ~~financial~~relevant ~~and~~information. ~~operating results:~~

	Year Ended December 31,									Change
	2012			2011			2010			2012 vs. 2011			2011 vs. 2010
	(in millions)
Net Income
REVENUES
Operator service fee	$	273.0		$	253.5		$	239.5		$	19.5		$	14.0
Oil and NGL sales	37.0			31.3			25.1			5.7			6.2
Other	0.2			0.3			0.2			(0.1		)	0.1
Total Revenues	310.2			285.1			264.8			25.1			20.3
OPERATING EXPENSES
Operating and maintenance	26.8			22.3			20.2			4.5			2.1
General and administrative	26.8			24.2			20.5			2.6			3.7
Retirement incentive	0.2			—			—			0.2			—
Production and other taxes	20.8			25.6			26.8			(4.8		)	(1.2		)
Depreciation, depletion and amortization	77.4			63.9			62.1			13.5			1.8
Oil income sharing	2.5			3.3			1.1			(0.8		)	2.2
Total Operating Expenses	154.5			139.3			130.7			15.2			8.6
Net gain (loss) from asset sales	2.4			(0.1		)	(0.4		)	2.5			0.3
OPERATING INCOME	158.1			145.7			133.7			12.4			12.0
Interest and other income	2.8			4.2			3.2			(1.4		)	1.0
Interest expense	—			—			(0.3		)	—			0.3
Income taxes	(57.0		)	(54.7		)	(48.5		)	(2.3		)	(6.2		)
NET INCOME	$	103.9		$	95.2		$	88.1		$	8.7		$	7.1
Operating Statistics
Production volumes
Natural gas (Bcf)	57.5			50.5			50.2			7.0			0.3
Oil and NGL (Mbbl)	665			467			437			198			30
Oil and NGL average sales price (per bbl)	$	80.61		$	82.11		$	65.55		$	(1.50	)	$	16.56
Investment base at Dec. 31, (in millions)	$	531.1		$	474.4		$	456.6		$	56.7		$	17.8

If it is not more-likely-than-not that a tax position, or some portion thereof, will be sustained, the related tax benefits are not recognized in the financial statements. Unrecognized tax benefits may result in an increase in income taxes payable, a reduction of income tax refunds receivable or changes in deferred taxes. Also, when uncertainty about the deductibility of an amount is limited to the timing of such deductibility, the increase in income taxes payable (or reduction in tax refunds receivable) is accompanied by a decrease in deferred tax liabilities. Except when such amounts are presented net with amounts receivable from or amounts prepaid to tax authorities, noncurrent income taxes payable related to unrecognized tax benefits are classified in other deferred credits and other liabilities in the Balance Sheets and current payables are included in accounts payable and accrued expenses in the Balance Sheets.

28Questar Gas recognizes interest on underpayments and overpayments of income taxes in interest expense and other income, respectively. Penalties are also recognized in other income.

~~Revenues~~Questar Gas’ interest and penalties were immaterial in 2016, 2015 and 2014.

~~Wexpro~~At ~~earned~~December a31, ~~19.9% after-tax return on average investment base in 2012 compared to 20.0% in 2011 and 2010. Pursuant to the Wexpro Agreement~~2016, ~~Wexpro~~Questar ~~recovers~~Gas’ ~~its~~Balance ~~costs~~Sheet ~~and~~included ~~receives an after-tax return on its investment base~~$1.4 million ~~Wexpro's investment base includes its costs~~ of ~~commercial~~federal ~~wells and related facilities adjusted for working capital and reduced for deferred~~ income taxes ~~and~~payable ~~accumulated depreciation, depletion~~ and ~~amortization~~$1.7 million ~~Following is a summary~~ of state ~~changes~~income intaxes ~~the~~payable. ~~Wexpro investment base:~~

	Year Ended December 31,
	2012			2011			2010
	(in millions)
Investment base at beginning of year	$	474.4		$	456.6		$	431.9
Successful development wells and related equipment	149.3			118.0			99.9
Depreciation, depletion and amortization	(73.9		)	(60.2		)	(57.9		)
Change in deferred taxes	(18.7		)	(40.0		)	(17.3		)
Investment base at end of year	$	531.1		$	474.4		$	456.6

At December 31, 2015, Questar Gas’ Balance Sheet included $34.2 million of affiliated receivables, representing excess federal income tax payments expected to be refunded, and $1.1 million of state income taxes payable. In April 2016, Questar Gas received a $35.0 million refund of its 2015 income tax payments.

~~Wexpro~~Investment ~~produced~~tax ~~57.5~~credits ~~Bcf~~are ofdeferred ~~cost-of-service natural gas for Questar Gas during 2012, compared to 50.5 Bcf in 2011~~ and ~~50.2~~amortized ~~Bcf~~over inthe ~~2010. The higher production levels are due to increased investment in gas-development wells. Cost-of-~~service ~~natural~~lives ~~gas production provided approximately 68%~~ of ~~Questar~~the ~~Gas's~~properties ~~supply~~giving ~~requirements~~rise ~~in 2012 compared~~ to ~~52%~~the ~~in 2011 and 51% in 2010~~credits. ~~The higher percentage in 2012 was due to increased production and lower Questar Gas sales volumes driven by significantly warmer than normal weather.~~

~~Revenues~~Cash ~~from oil~~ and ~~NGL~~Cash ~~sales~~Equivalents increased 18% in 2012 compared to 2011 after increasing 25% in 2011 compared to 2010. Volumes of oil and NGLs increased 42% in 2012 from increased liquid production related to the Vermillion drilling program. The average selling price for oil and NGL decreased 2% in 2012 compared to 2011 and increased 25% in 2011 compared to 2010.

~~Expenses~~Current banking arrangements generally do not require checks to be funded until they are presented for payment. At December 31, 2016 and 2015, accounts payable and accrued expenses included $7.7 million and $4.0 million, respectively, of checks outstanding

~~Operating~~ but ~~and~~not ~~maintenance~~yet ~~expenses~~presented ~~were~~for $0payment.44 ~~per~~For ~~Mcfe~~purposes inof ~~2012,~~the ~~$0.42~~Statements ~~per~~of ~~Mcfe~~Cash inFlows, ~~2011~~cash and ~~$0.38~~cash ~~per~~equivalents ~~Mcfe~~include incash ~~2010.~~on ~~The~~hand, ~~increases~~cash in ~~2012~~banks and ~~2011~~temporary ~~were~~investments ~~due~~purchased towith ~~increased~~an ~~water~~original maturity ~~disposal costs and higher costs~~ of ~~outside~~three ~~operated~~months ~~properties.~~or ~~General and administrative expenses were $2~~less.6 million higher in 2012 compared to 2011 and $3.7 million higher in 2011 compared to 2010. The 2012 and 2011 increases were due to higher compensation, employee benefits and allocated corporate expenses.

~~Production~~Derivative ~~and~~Instruments other taxes were $4.8 million lower in 2012 compared to 2011 and $1.2 million lower in 2011 compared to 2010. These taxes were $0.33 per Mcfe in 2012, $0.48 per Mcfe in 2011 and $0.51 per Mcfe in 2010. The variability in production and other taxes is due to changes in the wellhead market value of natural gas, oil and NGL production. The average price of natural gas used to calculate production taxes was $2.87 per Mcf in 2012, $4.22 per Mcf in 2011 and $4.48 per Mcf in 2010.

~~Depreciation,~~Questar ~~depletion~~Gas uses derivative instruments such as physical forwards and ~~amortization~~options ~~expense~~to ~~was~~manage $1the commodity risk of its business operations.49 ~~per~~All ~~Mcfe~~derivatives, except those for which an exception applies, are required to be reported in ~~2012~~the ~~and~~Balance ~~2011~~Sheets at fair value. Derivative contracts representing unrealized gain positions and $1purchased options are reported as derivative assets.47 ~~per~~Derivative ~~Mcfe~~contracts representing inunrealized ~~2010~~losses and options sold are reported as derivative liabilities. ~~The~~One ~~depreciation~~of the exceptions to fair value accounting, ~~depletion~~normal purchases and ~~amortization~~normal ~~rate~~sales, inmay ~~2011~~be ~~increased~~elected ~~compared~~when tothe ~~2010~~contract ~~because~~satisfies certain criteria, including a requirement that physical delivery of ~~higher~~the ~~development~~underlying ~~costs~~commodity is probable. Expenses and ~~the~~revenues ~~depletion~~resulting offrom ~~older~~deliveries ~~lower-cost~~under ~~natural~~normal ~~gas~~purchase ~~reserves~~contracts and normal sales contracts, respectively, are included in earnings at the time of contract performance.

~~Under~~Questar ~~the~~Gas ~~terms~~does ofnot ~~the~~offset ~~Wexpro~~amounts ~~Agreement,~~recognized ~~Wexpro~~for ~~shares~~the ~~54%~~right ofto ~~its~~reclaim ~~operating~~cash ~~income~~collateral ~~from~~or ~~oil~~the ~~development~~obligation ~~with~~to ~~Questar Gas after recovery of expenses and a~~ return oncash collateral ~~Wexpro's~~against ~~investment~~amounts inrecognized ~~successful~~for ~~wells.~~derivative ~~Questar~~instruments ~~Gas~~executed ~~received~~with ~~oil-income~~the ~~sharing~~same ~~amounting~~counterparty tounder ~~$2.5~~the ~~million~~same inmaster ~~2012,~~netting $3arrangement.3 ~~million~~See inNote ~~2011~~6 ~~and~~for ~~$1.1~~further ~~million~~information inabout ~~2010, which was credited to customers~~derivatives.

29Changes in the fair value of derivative instruments result in the recognition of regulatory assets or regulatory liabilities. Realized gains or losses on the derivative instruments are generally recognized when the related transactions impact earnings.

~~QUESTAR~~Property, ~~PIPELINE~~Plant and Equipment

~~Questar~~Property, ~~Pipeline~~plant ~~reported~~and ~~2012~~equipment ~~net~~is ~~income~~recorded ofat ~~$64.7~~lower ~~million~~of ~~compared~~original tocost ~~$67.9~~or ~~million~~fair invalue, ~~2011~~if ~~and $67~~impaired.4 ~~million~~Capitalized incosts ~~2010.~~include ~~The~~labor, ~~$3.2~~materials ~~million~~and orother 5%direct and ~~decrease~~indirect incosts ~~2012~~such ~~was~~as ~~due~~asset toretirement ~~lower NGL revenues, increased operating~~ costs, ~~depreciation~~AFUDC and ~~interest~~overhead ~~expense~~costs. ~~This~~The ~~was~~cost ~~partially~~of ~~offset~~repairs byand amaintenance, ~~gain~~including onminor ~~sale~~additions ~~of assets~~ and ~~lower~~replacements, ~~property taxes. Following~~ is agenerally ~~summary~~charged ofto ~~Questar~~expense ~~Pipeline~~as ~~financial~~it ~~and~~is ~~operating~~incurred. ~~results:~~

	Year Ended December 31,									Change
	2012			2011			2010			2012 vs. 2011			2011 vs. 2010
	(in millions)
Net Income
REVENUES
Transportation	$	194.5		$	195.2		$	188.7		$	(0.7	)	$	6.5
Storage	38.3			38.3			37.6			—			0.7
NGL sales - transportation	7.1			8.9			12.3			(1.8		)	(3.4		)
NGL sales - field services	8.4			8.3			11.6			0.1			(3.3		)
Energy services	15.3			16.2			14.0			(0.9		)	2.2
Gas processing	2.7			2.5			3.3			0.2			(0.8		)
Natural gas sold	4.4			—			—			4.4			—
Other	6.8			2.4			3.7			4.4			(1.3		)
Total Revenues	277.5			271.8			271.2			5.7			0.6
OPERATING EXPENSES
Operating and maintenance	35.2			35.3			41.4			(0.1		)	(6.1		)
General and administrative	50.0			46.5			41.0			3.5			5.5
Retirement incentive	0.9			—			—			0.9			—
Depreciation and amortization	54.3			51.2			47.4			3.1			3.8
Other taxes	9.1			10.1			9.0			(1.0		)	1.1
Cost of sales	6.7			3.1			2.4			3.6			0.7
Total Operating Expenses	156.2			146.2			141.2			10.0			5.0
Net gain from asset sales	2.7			0.3			0.8			2.4			(0.5		)
OPERATING INCOME	124.0			125.9			130.8			(1.9		)	(4.9		)
Interest and other income	0.6			0.9			0.4			(0.3		)	0.5
Income from unconsolidated affiliate	3.7			3.8			3.8			(0.1		)	—
Interest expense	(26.3		)	(24.5		)	(28.8		)	(1.8		)	4.3
Income taxes	(37.3		)	(38.2		)	(38.8		)	0.9			0.6
NET INCOME	$	64.7		$	67.9		$	67.4		$	(3.2	)	$	0.5
Operating Statistics
Natural gas-transportation volumes (MMdth)
For unaffiliated customers	785.4			665.8			642.4			119.6			23.4
For Questar Gas	107.2			116.9			112.0			(9.7		)	4.9
Total transportation	892.6			782.7			754.4			109.9			28.3
Transportation revenue (per dth)	$	0.22		$	0.25		$	0.25		$	(0.03	)	$	—
Net firm-daily transportation demand at December 31, (including White River Hub of 1,020 Mdth in 2012, 2011 and 2010)	5,039			4,973			4,744			66			229
Natural gas processing
NGL sales (Mbbl)	253			233			427			20			(194		)
NGL sales price (per bbl)	$	61.16		$	73.77		$	56.04		$	(12.61	)	$	17.73

In 2016, 2015 and 2014, Questar Gas capitalized AFUDC to property, plant and equipment of $0.4 million, $0.1 million and $1.4 million, respectively.

30The undepreciated cost of property, less salvage value, is generally charged to accumulated depreciation at retirement. Cost of removal collections from utility customers not representing AROs are recorded as regulatory liabilities. For property subject to cost-of-service rate regulation that will be abandoned significantly before the end of its useful life, the net carrying value is reclassified from plant-in-service when it becomes probable it will be abandoned.

~~Revenues~~21

AsTable of December 31, 2012, Questar Pipeline had firm-transportation contracts of 5,039 Mdth per day, including 1,020 Mdth per day from Questar Pipeline's 50% ownership of White River Hub, compared with 4,973 Mdth per day as of December 31, 2011, and 4,744 Mdth per day as of December 31, 2010. In February 2011, Questar Overthrust Pipeline completed a 43-mile, 36-inch diameter pipeline loop of its system from Rock Springs to its Cabin 31 facility near Blacks Fork, Wyoming. Questar Pipeline completed an expansion of its Main Line 104 southern system in November 2011.Contents

~~Questar~~Notes ~~Pipeline~~to ~~earns~~Financial ~~its largest transportation revenue from Questar Gas~~Statements, ~~with~~Continued contracts for 916 Mdth per day during the heating season and 841 Mdth per day during off-peak months. The majority of Questar Gas transportation contracts extend through mid-2017. Rockies Express Pipeline has leased capacity on the Questar Overthrust Pipeline for 625 Mdth per day through 2027. Wyoming Interstate Company has contracts on Questar Overthrust Pipeline for 532 Mdth per day with a weighted-average remaining life of 8.4 years.

~~Questar~~Depreciation ~~Pipeline~~of ~~owns~~property, plant and ~~operates~~equipment ~~the Clay Basin underground storage complex in eastern Utah. This facility~~ is ~~100%~~computed ~~subscribed~~on ~~under~~the ~~long~~straight-~~term~~line ~~contracts.~~method Inbased ~~addition~~on projected toservice ~~Clay Basin, Questar Pipeline also owns and operates three smaller aquifer gas storage facilities~~lives. Questar Gas’ ~~has~~average ~~contracted~~composite ~~for~~depreciation ~~25%~~rates ofon ~~firm-storage~~utility ~~capacity~~property, atplant ~~Clay Basin for terms extending from 2013 to 2019~~ and ~~100%~~equipment ofare ~~the~~as ~~firm-storage~~follows: ~~capacity at the aquifer facilities for terms extending to 2018. In 2011, Questar Pipeline received FERC approval to expand its working capacity in Clay Basin by 2.7 Bcf.~~

Questar Pipeline charges FERC-approved transportation and storage rates that are based on straight-fixed-variable rate design. Under this rate design, all fixed costs of providing service, including depreciation and return on investment, are recovered through the demand charge. About 95% of Questar Pipeline costs are fixed and recovered through these demand charges. Questar Pipeline's earnings are driven primarily by demand revenues from firm shippers. Since only about 5% of operating costs are recovered through volumetric charges, changes in transportation volumes do not have a significant impact on earnings.


Year Ended December 31,	2016		2015		2014
(percent)
Distribution		2.42		2.60		2.71
General and other		3.79		3.49		4.29

~~Questar~~Long-Lived ~~Pipeline has three primary sources of NGL revenue. These sources include two major regulated processing facilities~~ and anIntangible ~~unregulated~~Assets ~~subsidiary that provides third-party processing services.~~

~~Within~~ Questar ~~Pipeline,~~Gas ~~regulated~~performs ~~processing~~an ~~facilities~~evaluation atfor ~~Clay~~impairment ~~Basin~~whenever ~~condition~~events ~~the~~or ~~gas~~changes toin ~~meet~~circumstances ~~pipeline~~indicate ~~gas-quality specifications. These facilities are part of an agreement~~ that ~~allows Questar Pipeline to recover any shortfall between~~ the ~~NGL~~carrying ~~revenues~~amount ~~and the cost~~ of ~~service~~long-lived ~~for~~assets ~~conditioning~~or intangible ~~the~~assets ~~gas.~~with ~~Other~~finite ~~processing~~lives ~~facilities~~may ~~on Questar Pipeline's transmission system are~~ not ~~subject~~be ~~to the Clay Basin gas processing agreement~~recoverable. ~~NGL~~A ~~sales~~long-lived ~~for~~or ~~the~~intangible ~~regulated~~asset ~~operations~~is ~~decreased~~written ~~20%~~down ~~in 2012 compared~~ to ~~2011~~fair ~~and~~value ~~decreased~~if ~~28%~~the insum ~~2011~~of ~~compared~~its toexpected ~~2010.~~future ~~For~~undiscounted ~~2012,~~cash ~~volumes~~flows ~~decreased~~is 5%less ~~and~~than ~~net~~its ~~revenue~~carrying ~~per barrel decreased 17% when compared to 2011~~amount. ~~For~~Intangible ~~2011,~~assets awith ~~46%~~finite lives ~~decrease~~are inamortized ~~volumes~~over ~~was~~their ~~partially~~estimated ~~offset~~useful ~~by a 34% increase in net revenue per barrel compared to 2010~~lives.

~~NGL~~Regulatory ~~sales~~Assets ~~for the unregulated subsidiary increased 1% in 2012 compared to 2011~~ and ~~decreased~~Liabilities 28% in 2011 compared to 2010. The 2012 increase was driven by a 24% increase in volumes that was mostly offset by an 18% decrease in net revenue per barrel. The 2011 decrease was driven by a 45% decrease in volumes that was partially offset by a 29% increase in net revenue per barrel. Upstream processing is expected to adversely impact volumes beginning in 2013 for the unregulated subsidiary.

InThe ~~2012,~~accounting for Questar ~~Pipeline~~Gas’ ~~sold~~operations ~~1.3~~differs ~~MMdth~~from ofthe ~~natural~~accounting ~~gas~~ for anonregulated ~~net~~operations ~~gain~~in that it is required to reflect the effect of ~~$1.3~~rate regulation ~~million~~in its Financial Statements. ~~Questar~~For ~~Pipeline~~regulated ~~received~~businesses ~~this~~subject ~~gas~~to state cost-of-service rate regulation, regulatory practices that assign costs to ~~settle~~accounting periods ~~the~~may ~~shortfall~~differ ~~between~~from ~~NGL~~accounting ~~revenue~~methods ~~and~~generally applied by nonregulated companies. When it is probable that regulators will permit the ~~cost~~recovery of ~~service~~current costs through future rates charged to customers, these costs that otherwise would be expensed by nonregulated companies are deferred as regulatory assets. Likewise, regulatory liabilities are recognized when it is probable that regulators will require customer refunds through future rates or when revenue is collected from customers for ~~conditioning~~expenditures ~~gas~~that athave ~~Clay~~yet ~~Basin~~to be incurred. Generally, regulatory assets and liabilities are amortized into income over the period authorized by the regulator.

~~Expenses~~Questar Gas evaluates whether or not recovery of its regulatory assets through future rates is probable and makes various assumptions in its analyses. The expectations of future recovery are generally based on orders issued by regulatory commissions, legislation or historical experience, as well as discussions with applicable regulatory authorities and legal counsel. If recovery of a regulatory asset is determined to be less than probable, it will be written off in the period such assessment is made.

~~Operating~~Asset ~~and~~Retirement ~~maintenance~~Obligations expenses totaled $35.2 million in 2012 compared to $35.3 million in 2011 and $41.4 million in 2010. The decrease in 2011 was due to lower maintenance costs. General and administrative expenses increased to $50.0 million in 2012 compared to $46.5 million in 2011 and $41.0 million in 2010. The increases in 2012 and 2011 were due to higher compensation, employee benefits and allocated corporate expenses. Operating, maintenance, general and administrative expenses per dth transported were $0.10 in 2012 and 2011 and $0.11 in 2010. Operating, maintenance, general and administrative expenses include processing and storage costs.

~~Depreciation~~Questar ~~and~~Gas ~~amortization~~recognizes ~~expense~~AROs ~~increased~~at 6%fair invalue ~~2012~~as ~~compared~~incurred or when sufficient information becomes available to ~~2011~~determine ~~and~~a ~~increased~~reasonable 8%estimate inof ~~2011~~the ~~compared~~fair tovalue ~~2010~~of future ~~due~~retirement activities to ~~investment~~be performed for which a legal obligation exists. These amounts are generally capitalized as costs of the related tangible long-lived assets. Since relevant market information is not available, fair value is estimated using discounted cash flow analyses. Periodically, Questar Gas evaluates the key assumptions underlying its AROs including estimates of the amounts and timing of future cash flows associated with retirement activities. AROs are adjusted when significant changes in ~~pipeline~~these ~~expansions~~assumptions are identified. Questar Gas reports accretion of AROs and depreciation on asset retirement costs associated with its natural gas pipeline assets as an

31 adjustment to the related regulatory liabilities when revenue is recoverable from customers for AROs.

~~Other~~Debt Issuance ~~Consolidated~~Costs ~~Results~~

~~Retirement~~Questar ~~Incentive~~Gas defers and amortizes debt issuance costs and debt premiums or discounts over the expected lives of the respective debt issues, considering maturity dates and, if applicable, redemption rights held by others. Effective January 2016, deferred debt issuance costs are recorded as a reduction in long-term debt in the Balance Sheets. Such costs had previously been recorded as an asset in other noncurrent assets in the Balance Sheets. Amortization of the issuance costs is reported as interest expense. Unamortized costs associated with redemptions of debt securities prior to stated maturity dates are generally recognized and recorded in interest expense immediately. As permitted by regulatory authorities, gains or losses resulting from the refinancing of debt allocable to utility operations subject to cost-based rate regulation are deferred and amortized over the lives of the new issuances.

InInventories 2012 Questar offered a retirement incentive to employees eligible for retirement of six months additional salary. Approximately 100 employees accepted this offer and will retire in early 2013. The $4.9 million incentive cost was recognized in 2012.

~~Separation~~Materials and ~~Costs~~supplies inventories are valued primarily using the weighted-average cost method. Stored gas inventory for Questar Gas used in gas distribution operations is valued using the weighted-average cost method.

InGoodwill 2010, Questar's share of costs directly related to the Spinoff of QEP was $11.5 million before income taxes, or $8.8 million after income taxes. These costs include legal, advisory and severance costs. The tax impact was reduced by non-deductible costs.

~~Net~~Questar ~~Gain~~Gas ~~from~~evaluates ~~Asset~~goodwill ~~Sales~~for impairment annually as of December 31 through 2016 (as of April 1 effective 2017) and whenever an event occurs or circumstances change in the interim that would more-likely-than-not reduce the fair value of a reporting unit below its carrying amount.

InNew ~~2012~~Accounting ~~Questar~~Standards Pipeline sold real estate for a gain of $2.4 million before income taxes. Also in 2012, Wexpro sold real estate for a gain of $2.4 million; however, this gain was credited back to Questar Gas customers through the operator service fee.

~~Interest~~In May 2014, the FASB issued revised accounting guidance for revenue recognition from contracts with customers. The core principle of this revised accounting guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in this update also require disclosure of the nature, amount, timing and uncertainty ~~Other~~of ~~Income~~revenue and cash flows arising from contracts with customers.

~~Interest~~For Questar Gas, the revised accounting guidance is effective for interim and ~~other~~annual ~~income~~periods ~~decreased~~beginning $3January 1, 2018.4 ~~million~~We inhave ~~2012~~completed ~~compared~~the topreliminary ~~2011~~stages of evaluating the impact of this guidance and, ~~decreased~~pending $1evaluation of the items discussed below, expect no significant impact on our results of operations.3 ~~million~~Now inthat ~~2011~~our ~~compared~~preliminary evaluation is complete, we will expand the scope of our assessment to ~~2010~~include all contracts with customers. ~~The~~In ~~details~~addition, ofwe ~~interest~~are ~~and~~considering ~~other~~certain ~~income~~issues that could potentially change the accounting for certain transactions. Among the ~~last~~issues ~~three~~being ~~years~~considered are ~~shown~~accounting for contributions in aid of construction, recognition of revenue when collectability is in question, recognition of revenue in contracts with variable consideration and accounting for alternative revenue programs. Questar Gas plans on applying the ~~table~~standard ~~below:~~using the modified retrospective method as opposed to the full retrospective method.

	Year Ended December 31,						Change
	2012		2011		2010		2012 vs. 2011			2011 vs. 2010
	(in millions)
Interest income and other earnings	$	0.1	$	1.5	$	4.5	$	(1.4	)	$	(3.0	)
Inventory sales	0.6		0.7		0.7		(0.1		)	—
Allowance for other funds used during construction (capitalized finance costs)	2.3		4.4		2.7		(2.1		)	1.7
Return earned on working-gas inventory and purchased-gas-adjustment account	4.0		3.8		3.8		0.2			—
Total	$	7.0	$	10.4	$	11.7	$	(3.4	)	$	(1.3	)


22

IncomeTable fromof unconsolidated affiliateContents

~~Income~~NOTE ~~from White River Hub, Questar's sole unconsolidated affiliate, was $~~3.7 ~~million~~OPERATING inREVENUE ~~2012 and $3.8 million in 2011 and 2010.~~

~~Interest~~Questar ~~expense~~Gas’ operating revenue consists of the following:

Interest expense increased 2% in 2012 compared to 2011 after decreasing 1% in 2011 compared to 2010. The increase in 2012 was due to higher balances of long-term debt. The decrease in 2011 was due to the replacement of higher cost long-term debt with lower rates as long-term debt matured and the use of short-term debt in the period between the retirement of long-term debt and the issuance of new long-term debt. Interest rates on the Company's commercial-paper borrowings in 2012, 2011 and 2010 averaged less than 1% per annum. Capitalized interest charges on construction projects amounted to $0.2 million in 2012, $0.6 million in 2011 and $1.2 million in 2010.


Year Ended December 31,	2016		2015		2014
(millions)
Residential and commercial gas sales	$	854.6	$	847.3	$	875.7
Industrial gas sales		17.3		23.6		29.9
Gas transportation		24.6		21.2		17.9
Other⁽¹⁾		24.8		25.5		37.4
Total operating revenue	$	921.3	$	917.6	$	960.9

~~Income~~(1) ~~taxes~~See Note 18 for amounts attributable to related parties.

~~The~~NOTE ~~effective combined federal and state income tax rate was 35~~4.5% inINCOME TAXES 2012, 35.9% in 2011 and 36.3% in 2010. The rate has declined due to changes in the allocated state income tax factors. Due to the effects of bonus depreciation and other significant book/tax timing differences, the Company incurred a net operating loss (NOL) for federal income tax purposes in 2011. The 2011 NOL was $124.8 million. The Company's estimated taxable income for 2012 is $69.7 million, resulting in an estimated NOL carryforward of $55.1 million. It is anticipated that the Company will be able to utilize the NOL by offsetting it against future taxable income.

AsDetails ~~a result~~ of ~~the~~Questar ~~Spinoff~~Gas’ ofincome ~~QEP,~~tax ~~the~~expense ~~2010~~and ~~federal~~deferred income ~~tax~~taxes ~~return~~are ~~(filed~~provided in ~~September 2011) included~~ the ~~first~~following ~~six months of 2010's financial results from discontinued operations~~tables. The ~~inclusion~~ components of ~~the~~income ~~discontinued~~tax ~~operations~~expense ~~and~~were ~~bonus~~as ~~depreciation~~follows: ~~claimed in 2010 resulted in a federal taxable loss of $27.5 million. The Company utilized the 2010 NOL by carrying it back to previous years that had taxable income.~~


Year Ended December 31,	2016			2015			2014
(millions)
Current:
Federal	$	1.2		$	(16.0	)	$	(11.9	)
State		0.2			(2.0	)		(1.9	)
Total current expense (benefit)		1.4			(18.0	)		(13.8	)
Deferred:
Federal		29.9			48.8			42.4
State		5.9			4.2			3.6
Investment tax credits		(0.1	)		(0.2	)		(0.2	)
Total deferred expense		35.7			52.8			45.8
Total income tax expense	$	37.1		$	34.8		$	32.0

~~LIQUIDITY~~The ~~AND~~difference ~~CAPITAL~~between ~~RESOURCES~~the statutory federal income tax rate and Questar Gas’ effective income tax rate is explained as follows:

Operating Activities


Year Ended December 31,	2016			2015			2014
Federal income taxes statutory rate		35.0	%		35.0	%		35.0	%
Increases (reductions) resulting from:
State taxes, net of federal benefit		4.2			1.4			1.3
Amortization of investment tax credits related to rate- regulated assets		(0.1	)		(0.2	)		(0.2	)
Other		0.2			(1.1	)		0.6
Effective income tax rate		39.3	%		35.1	%		36.7	%

~~Following~~Significant iscomponents ~~a summary~~ of ~~net~~Questar ~~cash~~Gas’ ~~provided~~deferred byincome ~~operating~~taxes ~~activities~~were ofas ~~continuing operations for 2012, 2011 and 2010~~follows:

	Year Ended December 31,											Change
At December 31,		2016				2015
	2012				2011				2010			2012 vs. 2011			2011 vs. 2010
(millions)
	(in millions)
Deferred income taxes:
Income from continuing operations	$	212.0			$	207.9			$	192.3		$	4.1		$	15.6
Total deferred income tax assets		$	2.0			$	3.4
Noncash adjustments to income	313.8				276.2				266.9			37.6			9.3
Total deferred income tax liabilities			477.8				440.1
Changes in operating assets and liabilities	(58.1		)		4.9				(108.3		)	(63.0		)	113.2
Total deferred income tax liabilities		$	475.8			$	436.7
Net cash provided by operating activities of continuing operations	$	467.7			$	489.0			$	350.9		$	(21.3	)	$	138.1
Total deferred income taxes:
Property, plant and equipment		$	448.2			$	403.0
Employee benefits			27.9				28.0
Deferred compensation			(0.6	)			(0.9	)
Purchased gas costs			0.1				8.5
Other			0.2				(1.9	)
Total net deferred income tax liabilities		$	475.8			$	436.7

~~Noncash~~There ~~adjustments to income consisted primarily of depreciation, depletion and amortization, and deferred income taxes. Depreciation, depletion and amortization~~ were ~~higher~~no inunrecognized ~~2012 compared to 2011 due to investment in plant and equipment. Deferred income taxes were higher in 2012 compared to 2011 due to bonus-~~tax ~~depreciation.~~benefits ~~Cash~~at ~~sources~~the ~~from~~beginning ~~operating~~or ~~assets~~end ~~and liabilities were lower in 2012 compared to 2011 due to customer credits~~ of ~~gas~~the ~~costs~~years ~~previously~~ended ~~collected~~December ~~from~~31, 2016, ~~customers~~2015 inor ~~excess of costs incurred and higher pension contributions~~2014. ~~Cash~~The ~~sources~~2016 ~~from~~federal ~~operating assets and liabilities were higher in 2011 compared to 2010 due to refunds of~~ income ~~taxes~~tax ~~and~~return ~~recovery~~has ofnot ~~regulatory~~been ~~assets~~filed.

~~Investing~~NOTE ~~Activities~~5. FAIR VALUE MEASUREMENTS

~~Capital~~Fair ~~spending~~value inis ~~2012~~defined ~~amounted~~as the price that would be received to ~~$370.7~~sell ~~million~~an ~~compared~~asset or paid to ~~$367.7~~transfer ~~million~~a liability (exit price) in ~~2011~~an orderly transaction between market participants at the measurement date. ~~The~~However, ~~details~~the use of ~~capital~~a ~~expenditures~~mid-market pricing convention (the mid-point between bid and ask prices) is permitted. Fair values are based on assumptions that market participants would use when pricing an asset or liability, including assumptions about risk and the risks inherent in ~~2012~~valuation techniques and ~~2011~~the inputs to valuations. This includes not only the credit standing of counterparties involved and the impact of credit enhancements but also the impact of Questar Gas’ own nonperformance risk on its liabilities. Fair value measurements assume that the transaction occurs in the principal market for the asset or liability (the market with the most volume and activity for the asset or liability from the perspective of the reporting entity), or in the absence of a ~~forecast~~principal market, the most advantageous market for ~~2013~~the ~~are~~asset ~~shown~~or liability (the market in which the ~~table~~reporting ~~below:~~entity would be able to maximize the amount received or minimize the amount paid). Questar Gas applies fair value measurements to commodity derivative instruments in accordance with the requirements described above. Questar Gas applies credit adjustments to its derivative fair values in accordance with the requirements described above.

	Year Ended December 31,
	2013
	Forecast		2012		2011
	(in millions)
Questar Gas	$	195	$	162.1	$	121.5
Wexpro	140		144.5		136.2
Questar Pipeline	85		60.6		104.5
Corporate and other	30		3.5		5.5
Total capital expenditures	$	450	$	370.7	$	367.7

Inputs and Assumptions

Questar Gas maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. Fair value is based on actively-quoted market prices, if available. In the absence of actively-quoted market prices, price information is sought from external sources, including broker quotes and industry publications. When evaluating pricing information provided by brokers and other pricing services, Questar Gas considers whether the broker is willing and able to trade at the quoted price, if the broker quotes are based on an active market or an inactive market and the extent to which brokers are utilizing a particular model if pricing is not readily available. If pricing information from external sources is not available, or if Questar Gas believes that observable pricing is not indicative of fair value, judgment is required to develop the estimates of fair value. In those cases Questar Gas must estimate prices based on available historical and near-term future price information and certain statistical methods, including regression analysis, that reflect its market assumptions.

~~During 2012,~~ Questar Gas’ ~~added~~commodity ~~197~~derivative valuations ~~miles~~are ofprepared ~~main,~~by ~~feeder~~Dominion’s ~~and~~Enterprise ~~service~~Risk ~~lines~~Management todepartment ~~provide~~which ~~service~~creates mark-to-market ~~11,524~~valuations ~~additional~~for ~~customers~~Questar ~~and~~Gas’ ~~spent~~derivative ~~$58~~transactions using computer-based statistical models.4 ~~million~~The toinputs ~~replace~~that ~~high-pressure~~go ~~feeder~~into ~~lines.~~the ~~Questar~~market ~~Gas's~~valuations ~~2013~~are ~~capital-spending~~transactional ~~forecast~~information ofand ~~about~~market ~~$195~~pricing ~~million~~information ~~includes~~that ~~customer~~resides ~~additions~~in data warehouse databases. The majority of ~~approximately~~forward ~~12,500~~prices ~~customers,~~are ~~distribution~~automatically uploaded into the data warehouse databases from various third-~~system~~party ~~upgrades~~sources. ~~and~~Inputs ~~expansions,~~obtained ~~and~~from ~~high~~third-~~pressure~~party ~~feeder~~sources ~~line~~are ~~replacements~~evaluated offor ~~about~~reliability ~~$55~~considering ~~million.~~the reputation,

~~Wexpro~~23

DuringTable 2012,of Wexpro participated in 98 gross wells (57.9 net), resulting in 43.5 net successful gas wells and 2.7 net dry or abandoned wells. The 2012 net drilling-success rate was 94.2%. There were 21 gross wells (11.7 net) in progress at year-end. Wexpro expects to spend about $140 million in 2013 primarily for developmental gas drilling.Contents

~~Questar~~Notes ~~Pipeline~~to Financial Statements, Continued

~~Questar~~ independence, ~~Pipeline~~market ~~invested~~presence, inand ~~several~~methodology ~~transmission~~used ~~system~~by ~~expansion~~the ~~projects~~third-party. ~~and~~If ~~replacement~~forward ~~projects~~prices inare ~~2012.~~not ~~Questar~~available ~~Pipeline'~~from third-party sources, then Dominion’s ~~2013~~Enterprise ~~capital-spending~~Risk ~~forecast~~Management isdepartment models ~~about~~the ~~$85~~forward ~~million~~prices ~~for~~based ~~transmission-system~~on ~~expansions~~other ~~and~~available ~~pipeline~~market ~~replacements~~data. ~~Additional~~A ~~investment~~team consisting of ~~$10~~risk ~~million~~management and risk quantitative analysts meets to ~~$15~~assess ~~million~~the ~~will~~validity beof ~~required~~market inprices ~~2013~~and mark-to- ifmarket avaluations. ~~decision~~During isthis ~~made~~meeting, the changes in mark-to-market ~~proceed~~valuations from ~~with~~period ~~the~~to ~~conversion~~period ofare ~~Southern~~examined ~~Trails~~and ~~Pipeline~~qualified against historical expectations. If any discrepancies are identified during this process, the mark-to-market anvaluations or ~~oil~~the ~~pipeline~~market pricing information is evaluated further and adjusted, if necessary.

33For options and contracts with option-like characteristics where observable pricing information is not available from external sources, Questar Gas generally uses a modified Black-Scholes Model or other option model.

~~Financing~~The ~~Activities~~inputs and assumptions used in measuring fair value for commodity derivative contracts include the following:

~~Following~~• isForward acommodity ~~summary of financing activities for 2012, 2011 and 2010:~~prices

	Year Ended December 31,									Change
	2012			2011			2010			2012 vs. 2011			2011 vs. 2010
	(in millions)
Common stock issues, net of repurchases	$	(80.3	)	$	2.7		$	6.8		$	(83.0	)	$	(4.1	)
Change in long-term debt and capital lease	56.5			(7.1		)	244.6			63.6			(251.7		)
Change in short-term debt	44.0			(23.0		)	20.1			67.0			(43.1		)
Dividends paid	(117.4		)	(110.1		)	(94.8		)	(7.3		)	(15.3		)
Other	—			9.2			8.4			(9.2		)	0.8
Net cash provided by (used in) financing activities of continuing operations	$	(97.2	)	$	(128.3	)	$	185.1		$	31.1		$	(313.4	)

•

Transaction prices

In• ~~2012~~Price Questar repurchased 4.1 million shares of its common stock on the open market for $82.4 million. These repurchases were under a $100 million program approved by the Board of Directors to reduce the number of shares outstanding to about 175 million. The Board of Directors has authorized additional repurchases of up to 1 million shares per year to maintain outstanding shares at the current level.correlation

~~Questar~~• Gas repaid $91.5 million of long-term debt that matured in 2012. An additional $40.0 million of maturing long-term debt was repaid in January 2013 and $2.0 million will be repaid in September 2013. These maturities had a weighted-average interest rate of 6.06%. In December 2012, Questar Gas issued $110.0 million of 15-year notes at 3.28% and $40.0 million of 12-year notes at 2.98% in the private placement market to refinance these maturing amounts and for general corporate purposes.Volumes

~~Questar~~• ~~Pipeline~~Commodity entered into forward starting swaps totaling $150.0 million in the second and third quarters of 2011 in anticipation of issuing $180.0 million of notes in December 2011. Settlement of these swaps required payments of $37.3 million because of declines in interest rates. These swaps qualified as cash flow hedges and the settlement payments are being amortized to interest expense over the 30-year life of the debt. The effective interest rate on the $180.0 million debt after adjusting the net proceeds for issuance costs and the swap settlements was 6.66%.location

In• ~~December~~Interest 2010, Questar issued $250.0 million of 2.75% Senior Notes due 2016. In the second quarter of 2011, Questar executed a fixed-to-floating interest rate swap transaction with a counterparty and converted $125.0 million of its 2.75% fixed-rate long-term debt to floating-rate debt. Questar settled this hedge transaction in March 2012, for a deferred gain of $7.2 million, which is being amortized to interest expense over the remaining debt term.rates

~~Questar's~~• ~~consolidated~~Credit ~~capital~~quality ~~structure consisted~~ of ~~58%~~counterparties ~~combined short-~~ and ~~long-term~~Questar debt and 42% common shareholders' equity at December 31, 2012, compared to 56% combined short- and long-term debt and 44% common shareholders' equity at December 31, 2011. The Company does not expect the ratio of debt in the capital structure to materially change over the next several years.Gas

~~Questar~~• ~~Gas~~Credit has $42.0 million of long-term debt maturing in 2013. Questar Gas refinanced this debt in 2012 as described above. The Company believes it will have adequate access to long-term capital based on current credit markets and its investment-grade credit ratings.enhancements

~~Questar~~• ~~issues~~Time commercial paper to meet short-term financing requirements. Questar has a revolving credit arrangement with various banks to provide back-up credit liquidity support for Questar's commercial paper program. Credit commitments under the revolving credit arrangement totaled $500.0 million at December 31, 2012, with no amounts borrowed. Questar amended its revolving credit arrangement on September 2, 2011, by increasing the lender commitments from $350.0 million to $500.0 million and extending the maturity date from July 1, 2013, to August 31, 2016. The amendment also replaced the previous debt covenant ratio of consolidated funded debt to EBITDA with a new ratio of consolidated funded debt to capitalization. On October 29, 2012, the Company amended its revolving credit arrangement to enable Questar Gas to issue $150.0 million in the private placement market in December 2012. Under both amendments, consolidated funded debt cannot exceed 70% of consolidated capitalization. Questar is in compliance with this covenant.value

34Levels

~~Commercial~~Questar ~~paper~~Gas ~~outstanding~~also ~~amounted~~utilizes tothe ~~$263.0~~following ~~million~~fair atvalue ~~December 31~~hierarchy, ~~2012,~~which ~~compared~~prioritizes with $219.0 million a year earlier. The Company's short-term financing requirements are seasonal and typically peak at December 31 because of Questar Gas's gas-purchasing requirements. The Company believes the ~~credit~~inputs ~~commitments~~to ~~are~~valuation ~~adequate~~techniques ~~for~~used ~~its~~to ~~working~~measure ~~capital~~fair ~~and~~value ~~short-term~~into ~~financing~~three ~~requirements~~broad levels: ~~during 2013.~~

In• ~~June~~Level ~~2010,~~1-Quoted ~~Questar~~prices ~~entered~~(unadjusted) ~~into~~in aactive ~~lease~~markets ~~agreement~~ for aidentical ~~new~~assets ~~headquarters building. The lease term is 17 years~~ and ~~commenced~~liabilities inthat ~~May 2012.~~it ~~Questar~~has ~~accounts~~the ~~for~~ability ~~this~~to ~~lease~~access asat athe ~~capital~~measurement ~~lease~~date. ~~The Company's lease on its former headquarters building expired in April 2012.~~

~~The~~• ~~Company~~Level ~~increased~~2-Inputs ~~its~~other ~~annualized~~than ~~dividend~~quoted ~~per~~prices ~~share~~included bywithin 5%Level ~~from~~1 ~~$0.65~~that inare ~~2011~~either todirectly ~~$0.68~~or indirectly observable for the asset or liability, including quoted prices for similar assets or liabilities in ~~2012.~~active ~~The~~markets, ~~annualized~~quoted ~~fourth~~prices ~~quarter~~for ~~dividend~~identical ~~payout~~or ~~was~~similar ~~57%~~assets ofor ~~earnings.~~liabilities ~~The~~in ~~Company~~inactive ~~expects~~markets, toinputs ~~increase~~other ~~dividends~~than ~~over~~quoted prices that are observable for the ~~next~~asset ~~several~~or ~~years~~liability, ~~somewhat~~and ~~faster~~inputs ~~than~~that ~~earnings~~are ~~growth~~derived tofrom ~~reach~~observable amarket ~~dividend~~data ~~payout~~by ofcorrelation ~~about~~or ~~60%~~other means. Instruments categorized in Level 2 primarily include commodity forwards and options.

~~Contractual~~• ~~Cash~~Level ~~Obligations~~3-Unobservable ~~and~~inputs ~~Other~~for ~~Commitments~~the asset or liability, including situations where there is little, if any, market activity. Instruments categorized in Level 3 primarily include long-dated commodity derivatives.

The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1) and the lowest priority to unobservable data (Level 3). In some cases, the ~~course~~inputs used to measure fair value might fall in different levels of ~~ordinary~~the ~~business~~fair ~~activities~~value hierarchy. In these cases, ~~Questar~~the ~~enters~~lowest ~~into~~level input that is significant to a ~~variety~~fair ofvalue ~~contractual~~measurement ~~cash~~in ~~obligations~~its ~~and~~entirety ~~other~~determines ~~commitments~~the applicable level in the fair value hierarchy. ~~The~~Assessing ~~following~~the ~~table~~significance ~~summarizes~~of a particular input to the ~~significant~~fair ~~contractual~~value ~~cash~~measurement ~~obligations~~in asits ofentirety ~~December 31~~requires judgment, ~~2012:~~considering factors specific to the asset or liability.

	Payments Due by Year
	Total			2013			2014			2015			2016			2017			After 2017
	(in millions)
Long-term debt
Questar Gas	$	426.5		$	42.0		$	—		$	—		$	—		$	14.5		$	370.0
Questar Pipeline	460.1			—			—			25.1			—			—			435.0
Questar Corporation	250.0			—			—			—			250.0			—			—
Total	1,136.6			42.0			—			25.1			250.0			14.5			805.0
Interest on fixed-rate long-term debt
Questar Gas	290.9			19.1			19.9			19.9			19.9			19.6			192.5
Questar Pipeline	335.0			25.3			25.3			25.0			23.7			23.7			212.0
Questar Corporation	24.0			6.9			6.9			6.9			3.3			—			—
Total	649.9			51.3			52.1			51.8			46.9			43.3			404.5
Gas-purchase contracts - Questar Gas	199.8			29.5			16.0			16.0			16.1			19.3			102.9
Transportation, gathering and storage contracts - Questar Gas
With unaffiliated pipelines	257.6			27.9			27.9			27.9			27.9			27.9			118.1
With Questar Pipeline	348.9			73.0			71.1			71.1			71.1			44.5			18.1
Total	606.5			100.9			99.0			99.0			99.0			72.4			136.2
Capital lease	65.2			2.9			3.3			3.4			3.5			3.6			48.5
Drilling-rig contracts - Wexpro	0.7			0.7			—			—			—			—			—
Less intercompany commitments	(348.9		)	(73.0		)	(71.1		)	(71.1		)	(71.1		)	(44.5		)	(18.1		)
Total - Questar Consolidated	$	2,309.8		$	154.3		$	99.3		$	124.2		$	344.4		$	108.6		$	1,479.0
Total - Questar Gas	$	1,523.7		$	191.5		$	134.9		$	134.9		$	135.0		$	125.8		$	801.6
Total - Questar Pipeline	$	795.1		$	25.3		$	25.3		$	50.1		$	23.7		$	23.7		$	647.0

For derivative contracts, Questar Gas recognizes transfers among Level 1, Level 2 and Level 3 based on fair values as of the first day of the month in which the transfer occurs. Transfers out

~~The~~ of ~~Company's~~Level 3 ~~projected~~represent ~~funding~~assets ~~for~~and ~~its~~liabilities ~~qualified~~that ~~defined~~were ~~benefit~~previously ~~pension~~classified ~~plan~~as Level 3 for ~~2013,~~ which isthe ~~not~~inputs ~~reflected~~became inobservable ~~the~~for ~~above~~classification ~~table,~~in iseither ~~$57.7~~Level 1 ~~million~~or Level 2. Because ~~For~~the ~~more~~activity ~~information~~and ~~regarding~~liquidity ~~Questar's~~of ~~pension~~commodity ~~and~~markets ~~other~~vary ~~postretirement~~substantially ~~benefits,~~between ~~refer~~regions toand ~~Note~~time 12periods, to the ~~consolidated~~availability ~~financial~~of ~~statements~~observable ~~included~~inputs infor ~~Item~~substantially 8the offull ~~Part~~term IIand value of ~~this~~Questar ~~Annual~~Gas’ over-the-counter ~~Report~~derivative contracts is subject to change.

35Level 3 Valuations

~~CRITICAL~~Fair ~~ACCOUNTING~~value ~~POLICIES,~~measurements ~~ESTIMATES~~are ~~AND~~categorized ~~ASSUMPTIONS~~as Level 3 when price or other inputs that are considered to be unobservable are significant to their valuations. Long-dated commodity derivatives are generally based on unobservable inputs due to the length of time to settlement and the absence of market activity and are therefore categorized as Level 3.

Questar's ~~significant~~Gas ~~accounting~~enters ~~policies~~into certain physical forwards, which are ~~summarized~~considered inLevel 3 ~~Note~~as 1they have one or more inputs that are not observable and are significant to the ~~consolidated~~valuation. ~~financial~~The ~~statements~~discounted ~~included~~cash inflow ~~Item~~method 8is ofused ~~Part~~to IIvalue ofLevel 3 ~~this~~physical ~~Annual~~forward ~~Report~~contracts. The ~~Company's~~discounted ~~consolidated~~cash ~~financial~~flow ~~statements~~model ~~are~~for ~~prepared~~forwards incalculates mark-to-market ~~accordance~~valuations ~~with~~based ~~U.S.~~on ~~generally~~forward ~~accepted~~market ~~accounting~~prices, ~~principles.~~original ~~The~~transaction ~~preparation~~prices, volumes, risk-free rate of ~~consolidated~~return, ~~financial~~and ~~statements~~credit ~~requires~~spreads. ~~management~~For toLevel 3 ~~make~~fair ~~assumptions~~value measurements, forward market prices are considered unobservable. The unobservable inputs are developed and ~~estimates~~substantiated ~~that~~using ~~affect~~historical ~~the~~information, ~~reported~~available ~~results~~market ofdata, ~~operations~~third-party data, and ~~financial~~statistical ~~position~~analysis. ~~The~~Periodically, ~~following~~inputs ~~accounting~~to valuation ~~policies~~models ~~may~~are ~~involve~~reviewed aand ~~higher~~revised ~~degree~~as ofneeded, ~~complexity~~based on historical information, updated market data, market liquidity and ~~judgment~~relationships, onand ~~the~~changes ~~part~~in ofthird-party ~~management~~pricing sources.

~~Gas~~The ~~and~~fair ~~Oil~~value ~~Reserves~~of Level 3 derivatives were not material at December 31, 2016.

~~Gas~~Recurring ~~and~~Fair ~~oil~~Value ~~reserve~~Measurements estimates require significant judgments in the evaluation of all available geological, geophysical, engineering and economic data. The data for a given field may change substantially over time as a result of numerous factors including, but not limited to, additional development activity, production history, and economic assumptions relating to commodity prices, production costs, severance and other taxes, capital expenditures and remediation costs. The subjective judgments and variances in data for various fields make these estimates less precise than other estimates included in the financial statement disclosures.

~~Changes~~The infollowing ~~expected~~table ~~performance~~presents Questar ~~from~~Gas’ ~~the~~assets ~~properties~~ and ~~economic~~liabilities ~~data~~that ~~can~~are ~~result~~measured inat afair ~~revision~~value toon ~~the~~a ~~amount~~recurring ofbasis ~~estimated~~for ~~reserves~~each ~~held~~hierarchy ~~by the Company. If reserves are revised upward~~level, ~~operating~~including ~~results~~both ~~could~~current ~~be affected due to lower depreciation, depletion~~ and ~~amortization~~noncurrent ~~expense per unit of production~~portions. ~~Likewise,~~Questar ifGas ~~reserves~~did ~~are~~not ~~revised~~have ~~downward,~~any ~~operating~~such ~~results~~items ~~could~~at beDecember ~~affected due to higher depreciation~~31, ~~depletion and amortization expense or a potential writedown of a property's book value if an impairment is warranted~~2015.

Asset Impairments

Level 1

Level 2

Level 3

Total

(millions)

At December 31, 2016

Assets:

Derivatives:

Commodity

—

0.1

—

0.1

Total assets

—

0.1

—

0.1

Liabilities:

Derivatives:

Commodity

—

0.1

—

0.1

Total liabilities

—

0.1

—

0.1

~~When~~The afollowing ~~triggering~~table ~~event~~presents occurs, Questar evaluates assets for possible impairment using estimated undiscounted future cash flows. Triggering events may include operating losses or significant changes in contracts, revenues and expenses for a specific asset. Impairment losses are recorded when the ~~undiscounted future cash flows are less than the current~~ net ~~book~~change ~~value~~in ofQuestar ~~the~~Gas’ ~~asset.~~assets ~~The~~and ~~amount~~liabilities ofmeasured ~~impairment~~at ~~loss recorded is the difference between the~~ fair value on ofa ~~the~~recurring ~~asset~~basis and ~~the~~included ~~current~~in ~~net book value. The fair value is generally estimated using discounted future cash flows. Estimates of~~ the ~~undiscounted~~Level 3 ~~future cash flows and~~ fair value ~~of the asset require significant assumptions for many years into the future regarding revenues and expenses for assets evaluated for impairment~~category. ~~Changes~~Questar inGas ~~assumptions~~did ~~may make a difference in whether or~~ not anhave ~~asset~~any issuch ~~impaired~~items ~~and~~at inDecember ~~the~~31, ~~amount~~2015 ofor ~~the impairment~~2014.

Unbilled Revenues


	2016
(millions)
Beginning balance	$	—
Total realized and unrealized gains (losses):
Included in earnings⁽¹⁾		0.2
Included in regulatory assets/liabilities		—
Settlements		(0.2	)
Ending balance	$	—

~~Questar~~(1) ~~Gas estimates revenues on a calendar basis even though bills are sent to customers on a cycle basis throughout the month.~~ The ~~company~~gains ~~estimates unbilled revenues for the period from the date meters are read to the end of the month, using customer-usage history~~ and ~~weather~~losses ~~information.~~included ~~Approximately~~in ~~one-half~~earnings ~~month~~were ofclassified ~~revenues is estimated~~ in ~~any~~cost ~~period. The gas costs and other variable costs are recorded on the same basis to ensure proper matching~~ of ~~revenues and expenses~~sales. Questar Gas has a CET. Under the CET, Questar Gas non-gas revenues are decoupled from the volume of gas used by customers. The tariff specifies a margin per customer for each month with differences to be deferred and recovered from customers or refunded to customers through periodic rate adjustments. Differences between Questar Gas's estimate of unbilled revenues and actual revenues subsequently billed do not have a significant impact on operating results because of the CET.

~~Regulatory Assets and Liabilities~~24

QuestarTable Gas and Questar Pipeline follow accounting standards on regulated operations that require the recording of regulatory assets and liabilities by companies subject to cost-based regulation. Regulatory assets are recorded if it is probable that a cost will be recoverable in the future through regulated rates. Regulatory liabilities are recorded if it is probable that future rates will be reduced for a current item. The Company makes assumptions about the probability of future rate changes. The Company's regulatory assets and liabilities are supported by orders, rulings and practices of the regulatory agencies.Contents

~~Allowance~~There were no unrealized gains or losses included in earnings in the Level 3 fair value category relating to assets/liabilities still held at the reporting date for ~~Bad~~the ~~Debts~~year ended December 31, 2016.

~~Questar~~Fair ~~Gas~~Value ~~records an allowance for bad debts based on its experience with collecting accounts receivable. The amount recorded at the end~~ of ~~each~~Financial ~~period~~Instruments is the estimated net writeoffs of its outstanding accounts receivable, including unbilled revenues. The Company uses writeoff history, accounts receivable aging reports, and specific evaluation of large customers to estimate the allowance for bad debts. Questar Gas recovers bad debt costs related to the gas-cost portion of rates in its Utah operations through a purchased-gas adjustment to rates.

36Substantially all of Questar Gas’ financial instruments are recorded at fair value, with the exception of the instruments described below, which are reported at historical cost. Estimated fair values have been determined using available market information and valuation methodologies considered appropriate by management. The carrying amount of cash and cash equivalents, customer receivables, receivables from affiliates, short-term debt, accounts payable to affiliates, affiliated current borrowings, and accounts payable are representative of fair value because of the short-term nature of these instruments. For Questar Gas’ financial instruments that are not recorded at fair value, the carrying amounts and estimated fair values are as follows:

Employee Pension and Postretirement Benefit Plans

December 31, 2016

December 31, 2015

Carrying
Amount

Estimated Fair
Value⁽¹⁾

Carrying
Amount

Estimated Fair
Value⁽²⁾

(millions)

Long-term debt, including securities due within one year⁽³⁾

630.8

672.6

531.2

568.4

~~The~~(1) ~~Company~~Fair ~~has~~value ais ~~noncontributory~~estimated ~~defined~~using ~~benefit~~market ~~pension~~prices, ~~plan~~where ~~and~~available, ~~a life insurance plan covering a majority of its employees~~ and ainterest ~~postretirement~~rates ~~medical~~currently ~~plan~~available ~~providing~~for ~~coverage~~issuance ~~to less than half~~ of ~~its~~debt ~~employees.~~with ~~The~~similar ~~calculation~~terms ~~of the Company's expense~~ and ~~liability~~remaining ~~associated with its benefit plans requires the use of assumptions that the Company deems to be critical~~maturities. ~~Changes~~The infair ~~these~~value ~~assumptions~~measurements ~~can~~are ~~result~~classified inas ~~different~~Level ~~expenses and liabilities and actual experience can differ from these assumptions~~2.

~~Independent~~(2) ~~consultants~~Fair ~~hired~~value byis ~~the~~estimated ~~Company~~using ~~use~~the ~~actuarial~~discounted ~~models~~present tovalue ~~calculate estimates~~ of ~~pension~~cash ~~and~~flows ~~postretirement~~using ~~benefits~~Questar ~~expense.~~Gas’ ~~The~~current ~~models~~credit ~~use key factors such as mortality estimations, liability discount rates, long~~risk-~~term~~adjusted ~~rates~~borrowing ~~of return on investments,~~ rates ~~of compensation increases, amortized gain or loss from investments and medical-cost trend rates~~. ~~Management formulates assumptions based on market indicators and advice from consultants.~~ The ~~Company~~fair ~~believes~~value ~~that~~measurements ~~the~~are ~~liability~~classified ~~discount~~as ~~rate~~Level ~~and the expected long-term rate of return on benefit plan assets are critical assumptions~~2.

~~The~~(3) ~~assumed~~Carrying ~~liability~~amount ~~discount~~includes ~~rate~~amounts ~~reflects the current rate at~~ which ~~the~~represent ~~pension benefit obligations could effectively be settled and considers~~ the ~~rates~~unamortized ofdebt ~~return~~issuance ~~available on a portfolio of high-quality, fixed-income investments~~costs. The Company discounted its future qualified pension liabilities using rates of 4.20% as of December 31, 2012, and 4.80% as of December 31, 2011. A 0.25% decrease in the discount rate would increase the Company's 2013 estimated annual qualified pension expense by about $2.5 million.

~~The~~NOTE ~~expected long-term rate of return on qualified benefit plan assets reflects the average rate of earnings expected on funds invested or to be invested for purposes of paying pension benefits~~6. DERIVATIVES ~~The~~AND ~~Company~~HEDGE ~~establishes~~ACCOUNTING ~~the~~ACTIVITIES expected long-term rate of return at the beginning of each fiscal year giving consideration to the benefit plan's investment mix and historical and forecast rates of return on these types of securities. The expected long-term rate of return determined by the Company was 7.25% as of January 1, 2013, and January 1, 2012. Benefit plan expense typically increases as the expected long-term rate of return on plan assets decreases. A 0.25% decrease in the expected long-term rate of return would cause an approximate $1.3 million increase in the 2013 qualified pension expense.

~~ITEM~~Questar 7AGas uses derivative instruments to manage exposure to supply and price risk. ~~QUANTITATIVE~~ ~~AND~~As ~~QUALITATIVE~~discussed ~~DISCLOSURES~~in ~~ABOUT~~Note ~~MARKET~~2, ~~RISK~~changes in the fair value of derivatives are deferred as regulatory assets or regulatory liabilities until the related transactions impact earnings. See Note 5 for further information about fair value measurements and associated valuation methods for derivatives.

~~Questar~~Derivative ~~Gas's~~assets ~~primary market risk exposures arise from changes in demand for natural gas~~ and ~~competition~~liabilities ~~from~~are presented ~~other~~gross ~~energy sources. The demand for natural gas will vary based~~ on ~~economic~~Questar ~~conditions,~~Gas’ ~~conservation~~Balance ~~efforts and prices~~Sheets. ~~The~~Questar ~~temperature-adjusted~~Gas’ ~~usage~~derivative ~~per~~contracts ~~residential~~include ~~customer has decreased~~ over-the-counter ~~time due to more energy efficient appliances and homes~~transactions, ~~and~~which ~~behavior~~are ~~changes~~bilateral incontracts ~~response~~that toare ~~changing~~transacted ~~natural~~directly ~~gas~~with ~~prices~~a counterparty. ~~The~~At ~~economic~~December ~~impact~~31, of2016, ~~this~~substantially ~~decline~~all inof ~~usage~~Questar ~~per~~Gas’ ~~customer~~derivative ~~has~~assets ~~been~~and ~~somewhat~~liabilities ~~offset~~were bynot ~~the~~subject ~~addition~~to ofa ~~new~~master ~~customers~~netting ~~and~~or ~~the~~similar ~~CET~~arrangement.

~~Wexpro~~Volumes operations are subject to various government controls and regulation at the federal, state and local levels. Wexpro must obtain permits to drill and produce, maintain bonding requirements to drill and operate wells, submit and implement spill-prevention plans, and file notices relating to the presence, use, and release of specified contaminants incidental to gas and oil production. Wexpro is also subject to various conservation matters, including the regulation of the size of drilling and spacing units, the number of wells that may be drilled in a unit and the unitization or pooling of gas and oil properties. In addition, the Utah Division of Public Utilities and the staff of the PSCW are entitled to monitor the performance of the Company and Wexpro under the Wexpro Agreement and have retained two monitors, an independent certified public accountant and an independent petroleum engineer, to review the performance of the agreement.

~~Questar~~The ~~Pipeline's~~following ~~primary~~table ~~market-risk~~presents ~~exposures~~the ~~arise~~volume ~~from~~of ~~changes~~Questar Gas’ inderivative ~~demand~~activity ~~for~~at ~~transportation~~December ~~and~~31, ~~storage services and competition from other pipelines~~2016. ~~The~~These ~~demand~~volumes ~~for~~are ~~transportation and storage services will vary~~ based on ~~the~~open ~~market's~~derivative ~~expectations~~positions ~~about~~and ~~future~~represent ~~volumes of natural gas likely to be produced in~~ the ~~basins~~combined ~~served~~absolute byvalue ~~Questar Pipeline and changes in market demand for natural gas. On some portions~~ of ~~its~~their ~~pipeline~~long ~~system~~and ~~the~~short ~~Company~~positions, ~~faces~~except ~~the risk that it will not be successful~~ in ~~recontracting~~the ~~capacity under current terms once existing contracts expire. Revenue may be reduced if NGL market prices or volumes decline.~~case

~~Credit~~ of ~~Risk~~offsetting transactions, for which they represent the absolute value of the net volume of their long and short positions.

Questar Gas requires deposits from customers that pose unfavorable credit risks. No single customer accounted for a significant portion of revenue in 2012.


	Current		Noncurrent
Natural Gas (bcf):
Basis		8.8		30.5

~~Questar~~Fair ~~Pipeline~~Value ~~requests~~and ~~credit~~Gains ~~support, such as letters of credit~~ and ~~cash~~Losses ~~deposits, from companies that pose unfavorable credit risks. All companies posing such concerns were current~~ on ~~their~~Derivative ~~accounts~~Instruments at December 31, 2012. Questar Pipeline's largest customers include Questar Gas, Rockies Express Pipeline, Wyoming Interstate Pipeline, EOG Resources, EnCana Marketing, PacifiCorp, Anadarko Energy Services and Shell Energy North America.

37The following table presents the fair values of Questar Gas’ derivatives and where they are presented in its Balance Sheets. Questar Gas did not have any derivative balances at December 31, 2015.

Interest-Rate Risk


	Fair Value - Derivatives not under Hedge Accounting		Total Fair Value
(millions)
At December 31, 2016
ASSETS
Current Assets
Commodity	$	0.1	$	0.1
Total current derivative assets⁽¹⁾		0.1		0.1
Total derivative assets	$	0.1	$	0.1
LIABILITIES
Current Liabilities
Commodity	$	0.1	$	0.1
Total current derivative liabilities⁽²⁾		0.1		0.1
Total derivative liabilities	$	0.1	$	0.1

The fair value of fixed-rate debt is subject to change as interest rates fluctuate. The Company's ability to borrow and the rates quoted by lenders can be adversely affected by illiquid credit markets. The Company had $(1~~,140.9~~) ~~million~~Current ofderivative ~~fixed-rate~~assets ~~long-term~~are ~~debt~~presented ~~with~~in aprepaid ~~fair~~expenses ~~value of $1,303.1 million~~ and aother ~~weighted-average~~current ~~life~~assets to maturity of 11.2 years at December 31, 2012. This compared to $1,084.5 million of fixed-rate long-term debt with a fair value of $1,223.4 million and a weighted-average life to maturity of 10.8 years at December 31, 2011. If interest rates had declined 10%, fair value would increase to $1,335.8 million in ~~2012~~Questar ~~and~~Gas’ ~~$1,255.3~~Balance ~~million in 2011~~Sheets. ~~The fair value calculations do not represent the cost to retire the debt securities.~~

~~In December 2010, Questar issued $250.0 million of~~ (2~~.75%~~) ~~Senior~~Current ~~Notes~~derivative ~~due~~liabilities ~~2016.~~are Inpresented ~~the~~in ~~second~~other ~~quarter~~current ofliabilities ~~2011,~~in Questar ~~executed~~Gas’ aBalance ~~fixed-to-floating interest rate swap transaction with a counterparty and converted $125~~Sheets.0 million of its 2.75% fixed-rate long-term debt to floating-rate debt. Questar settled this hedge transaction in March 2012, for a deferred gain of $7.2 million, which is being amortized to interest expense over the remaining debt term.

38The following tables present the gains and losses on Questar Gas’ derivatives, as well as where the associated activity is presented in its Statements of Income.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.


Derivatives not designated as hedging instruments	Amount of Gain (Loss) Recognized in Income on Derivatives⁽¹⁾
Year Ended December 31,	2016			2015		2014
(millions)
Derivative Type and Location of Gains (Losses)
Commodity⁽²⁾
Purchased gas	$	(0.2	)	$	—	$	—
Total	$	(0.2	)	$	—	$	—

	Page
Financial Statements:
Questar Corporation
Report of Independent Registered Public Accounting Firm	40
Consolidated Statements of Income, three years ended December 31, 2012	41
Consolidated Statements of Comprehensive Income, three years ended December 31, 2012	42
Consolidated Balance Sheets at December 31, 2012 and 2011	43
Consolidated Statements of Equity, three years ended December 31, 2012	45
Consolidated Statements of Cash Flows, three years ended December 31, 2012	46
Questar Gas Company
Report of Independent Registered Public Accounting Firm	48
Statements of Income, three years ended December 31, 2012	49
Balance Sheets at December 31, 2012 and 2011	50
Statements of Common Shareholder's Equity, three years ended December 31, 2012	52
Statements of Cash Flows, three years ended December 31, 2012	53
Questar Pipeline Company
Report of Independent Registered Public Accounting Firm	54
Consolidated Statements of Income, three years ended December 31, 2012	55
Consolidated Statements of Comprehensive Income, three years ended December 31, 2012	56
Consolidated Balance Sheets at December 31, 2012 and 2011	57
Consolidated Statements of Common Shareholder's Equity, three years ended December 31, 2012	59
Consolidated Statements of Cash Flows, three years ended December 31, 2012	60
Notes Accompanying the Financial Statements	61
Financial Statement Schedules:
Questar Corporation
Valuation and Qualifying Accounts, for the three years ended December 31, 2012	97
Questar Gas Company
Valuation and Qualifying Accounts, for the three years ended December 31, 2012	97
Questar Pipeline Company
Valuation and Qualifying Accounts, for the three years ended December 31, 2012	97

(1)

Includes derivative activity amortized out of regulatory assets/liabilities. Amounts deferred into regulatory assets/liabilities have no associated effect in Questar Gas’ Statements of Income.

39(2) Amounts recorded in Questar Gas’ Statements of Income are classified in cost of sales.

~~Report of Independent Registered Public Accounting Firm~~25

TheTable Board of Directors and Shareholders ofContents

~~Questar~~Notes ~~Corporation~~to Financial Statements, Continued

WeNOTE ~~have~~7. ~~audited the accompanying consolidated balance sheets of Questar Corporation as of December 31~~PROPERTY, ~~2012~~PLANT ~~and~~AND ~~2011,~~EQUIPMENT and the related consolidated statements of income and comprehensive income, equity, and cash flows for each of the three years in the period ended December 31, 2012. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

WeMajor ~~conducted~~classes ~~our audits in accordance with the standards~~ of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examiningproperty, onplant ~~a test basis, evidence supporting the amounts~~ and ~~disclosures~~equipment ~~in the financial statements. An audit also includes assessing the accounting principles used~~ and ~~significant~~their ~~estimates~~respective ~~made~~balances byfor ~~management,~~Questar asGas ~~well~~are as ~~evaluating~~follows: ~~the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.~~

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Questar Corporation at December 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.


At December 31,	2016		2015
(millions)
Distribution	$	2,436.7	$	2,186.9
General and other		369.5		320.9
Plant under construction		76.8		62.5
Total property, plant and equipment	$	2,883.0	$	2,570.3

WeNOTE ~~also~~8. ~~have~~GOODWILL audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), Questar Corporation's internal control over financial reporting as of December 31, 2012, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 21, 2013 expressed an unqualified opinion thereon.

~~/s/Ernst~~The changes &in ~~Young~~Questar ~~LLP~~Gas’ carrying amount and segment allocation of goodwill are presented below:

Salt Lake City, Utah


	Questar Gas		Corporate and Other		Total
(millions)
Balance at December 31, 2014⁽¹⁾	$	5.6	$	—	$	5.6
No events affecting goodwill		—		—		—
Balance at December 31, 2015⁽¹⁾	$	5.6	$	—	$	5.6
No events affecting goodwill		—		—		—
Balance at December 31, 2016⁽¹⁾	$	5.6	$	—	$	5.6

~~February~~(1) ~~21,~~There ~~2013~~are no accumulated impairment losses.

40NOTE 9. REGULATORY ASSETS AND LIABILITIES

~~QUESTAR~~Regulatory ~~CORPORATION~~ assets and liabilities include the following:

CONSOLIDATED STATEMENTS OF INCOME


At December 31,	2016		2015
(millions)
Regulatory assets:
Purchased-gas adjustment⁽¹⁾	$	3.4	$	18.9
EEP⁽²⁾		1.1		1.1
Contract withholding⁽³⁾		2.6		20.3
Deferred cost-of-service gas charges⁽⁴⁾		—		19.5
Pipeline integrity costs⁽⁵⁾		1.9		6.3
CET⁽⁶⁾		—		3.6
Other		0.6		0.1
Regulatory assets-current		9.6		69.8
Deferred cost-of-service gas charges⁽⁴⁾		—		8.1
Cost of reacquired debt⁽⁷⁾		3.2		3.8
Pipeline integrity costs⁽⁵⁾		2.3		—
Regulatory assets-non-current		5.5		11.9
Total regulatory assets	$	15.1	$	81.7
Regulatory liabilities:
CET⁽⁶⁾	$	2.9	$	—
Cost of plant removal and AROs⁽⁸⁾		3.5		3.7
Other		0.1		0.3
Regulatory liabilities-current⁽⁹⁾		6.5		4.0
Cost of plant removal and AROs⁽⁸⁾		189.1		65.5
Income taxes refundable to customers⁽¹⁰⁾		—		0.1
Regulatory liabilities-non-current		189.1		65.6
Total regulatory liabilities	$	195.6	$	69.6

	Year Ended December 31,
	2012			2011			2010
	(in millions, except per-share amounts)
REVENUES
Questar Gas	$	859.7		$	965.5		$	901.8
Wexpro	36.1			31.5			24.6
Questar Pipeline	203.1			197.4			197.2
Total Revenues	1,098.9			1,194.4			1,123.6
OPERATING EXPENSES
Cost of sales (excluding operating expenses shown separately)	192.3			321.5			280.9
Operating and maintenance	180.8			175.9			175.8
General and administrative	120.8			117.9			108.5
Retirement incentive	4.9			—			—
Separation costs	—			—			11.5
Production and other taxes	47.9			52.5			50.6
Depreciation, depletion and amortization	181.6			159.9			153.4
Total Operating Expenses	728.3			827.7			780.7
Net gain from asset sales	5.1			0.2			0.4
OPERATING INCOME	375.7			366.9			343.3
Interest and other income	7.0			10.4			11.7
Income from unconsolidated affiliate	3.7			3.8			3.8
Interest expense	(57.9		)	(56.8		)	(57.1		)
Income From Continuing Operations Before Income Taxes	328.5			324.3			301.7
Income taxes	(116.5		)	(116.4		)	(109.4		)
INCOME FROM CONTINUING OPERATIONS	212.0			207.9			192.3
Discontinued operations, net of income taxes	—			—			148.2
Discontinued operations, noncontrolling interest	—			—			(1.3		)
Total Discontinued Operations, Net Of Income Taxes	—			—			146.9
NET INCOME ATTRIBUTABLE TO QUESTAR	$	212.0		$	207.9		$	339.2
Earnings Per Common Share Attributable To Questar
Basic from continuing operations	$	1.20		$	1.17		$	1.09
Basic from discontinued operations	—			—			0.84
Basic total	$	1.20		$	1.17		$	1.93
Diluted from continuing operations	$	1.19		$	1.16		$	1.08
Diluted from discontinued operations	—			—			0.83
Diluted total	$	1.19		$	1.16		$	1.91
Weighted-average common shares outstanding
Used in basic calculation	176.5			177.4			175.4
Used in diluted calculation	177.5			178.8			178.0

(1)

Purchased-gas costs that are different from those provided for in present rates are accumulated and recovered or credited through future rate changes.

~~See~~(2) ~~notes~~The ~~accompanying~~EEP relates to funds expended for promoting the ~~financial~~conservation ~~statements~~of natural gas through advertising, rebates for efficient homes and appliances and home energy audits. Costs are recovered from customers through periodic rate adjustments. Costs incurred in excess of recoveries result in an asset; recoveries in excess of costs incurred result in a liability.

41(3) In 2016, Questar Gas recorded a regulatory asset of $2.6 million for a disputed amount withheld from a supplier of storage services. The amount withheld is expected to be recovered from customers if it is determined that Questar Gas is required to pay the supplier. The $20.3 million withheld from a supplier of gathering services as of year-end 2015, per the dispute settlement agreement, was resolved and reversed in March 2016. For further details, see Note 16.

~~QUESTAR~~(4) ~~CORPORATION~~ Operating and maintenance, depreciation, depletion and amortization, production taxes and royalties on cost-of-service gas production and future expenses related to abandonment of Wexpro-operated gas and oil wells. Noncurrent cost-of-service gas charges also include amounts for production imbalances that will be recovered from customers at the end of the related gas wells’ useful lives. These costs were transferred to Wexpro in September 2016.

~~CONSOLIDATED~~(5) ~~STATEMENTS~~The OFcosts ~~COMPREHENSIVE~~of ~~INCOME~~ complying with pipeline-integrity regulations are recovered in rates subject to a Utah Commission order. Questar Gas is allowed to recover $7.0 million per year. Costs incurred in excess of this amount will be recovered in future rate changes.

	Year Ended December 31,
	2012			2011			2010
	(in millions)
Net income	$	212.0		$	207.9		$	340.5
Other comprehensive income (loss)
Change in unrecognized actuarial loss	(35.7		)	(162.9		)	17.7
Change in unrecognized prior-service costs	2.7			3.0			3.8
Interest rate cash flow hedges	0.4			(37.2		)	—
Change in fair value of long-term investment	0.1			—			0.1
Discontinued operations
Change in unrealized fair value of derivatives held by QEP	—			—			(138.7		)
Income taxes	12.3			75.0			43.4
Net other comprehensive loss	(20.2		)	(122.1		)	(73.7		)
COMPREHENSIVE INCOME	191.8			85.8			266.8
Discontinued operations, noncontrolling interest	—			—			(1.3		)
COMPREHENSIVE INCOME ATTRIBUTABLE TO QUESTAR	$	191.8		$	85.8		$	265.5

(6)

Represents the difference between actual and allowed revenues. Any deficiency in amounts collected are recovered through periodic rate adjustments.

~~See~~(7) ~~notes~~Gains ~~accompanying~~and losses on the ~~financial~~reacquisition ~~statements~~of debt by rate-regulated companies are deferred and amortized as interest expense over the would-be remaining life of the reacquired debt. The reacquired debt costs had a weighted-average life of approximately 6.1 years as of December 31, 2016.

42(8) Cost of plant removal and AROs represent amounts recovered from customers for costs of future activities to remove assets that are expected to be incurred at the time of retirement.

~~QUESTAR~~(9) ~~CORPORATION~~Current regulatory liabilities are presented in other current liabilities in the Balance Sheets.

~~CONSOLIDATED~~(10) ~~BALANCE~~Income ~~SHEETS~~taxes refundable to customers arise from adjustments to deferred taxes, refunded over the life of the related property, plant and equipment.

	December 31,
	2012			2011
	(in millions)
ASSETS
Current Assets
Cash and cash equivalents	$	16.8		$	11.6
Federal income taxes receivable	10.7			—
Accounts receivable, net	103.6			123.9
Unbilled gas accounts receivable	78.3			75.4
Inventories at lower of average cost or market:
Gas stored underground	39.0			40.3
Materials and supplies	24.5			25.7
Current regulatory assets	46.7			31.7
Prepaid expenses and other	13.1			10.7
Deferred income taxes - current	13.0			16.1
Total Current Assets	345.7			335.4
Property, Plant and Equipment
Distribution property, plant and equipment	2,040.9			1,927.0
Cost-of-service gas and oil property, plant and equipment, successful efforts method	1,397.6			1,253.6
Transportation property, plant and equipment	1,840.1			1,790.4
Other property, plant and equipment	54.7			13.1
Total property, plant and equipment	5,333.3			4,984.1
Distribution accumulated depreciation and amortization	(762.8		)	(749.6		)
Cost-of-service gas and oil accumulated depreciation, depletion and amortization	(617.2		)	(545.0		)
Transportation accumulated depreciation and amortization	(629.3		)	(586.7		)
Other accumulated depreciation and amortization	(7.0		)	(4.4		)
Total accumulated depreciation, depletion and amortization	(2,016.3		)	(1,885.7		)
Total Property, Plant and Equipment, net	3,317.0			3,098.4
Investment in unconsolidated affiliate	26.5			27.3
Other Assets
Goodwill	9.8			9.8
Noncurrent regulatory assets	21.6			21.0
Other noncurrent assets	36.5			40.9
Total Other Assets	67.9			71.7
TOTAL ASSETS	$	3,757.1		$	3,532.8

At December 31, 2016 and 2015, Questar Gas had approximately $2.6 million and $20.3 million, respectively, of regulatory assets that were not earning a return. These amounts represented amounts withheld from suppliers for storage and gathering services.

43NOTE 10. REGULATORY MATTERS

~~QUESTAR~~As ~~CORPORATION~~a public utility, Questar Gas is subject to the jurisdiction of the Utah Commission and the Wyoming Commission. Natural gas sales and transportation services are provided under rate schedules approved by the two regulatory commissions.

~~CONSOLIDATED~~Questar ~~BALANCE~~Gas ~~SHEETS~~has an infrastructure cost-tracking mechanism that allows it to place into rate base, and earn a return on, capital expenditures associated with a multi-year natural gas infrastructure-replacement program upon the completion of each project. A 2014 Utah general rate case reset the recovery of costs under the infrastructure-replacement program into general rates until Questar Gas invested $84 million in new pipelines. This dollar threshold was met in November 2014, and thereafter Questar Gas has been able to recover program capital expenditures through the infrastructure-replacement mechanism. Questar Gas spent approximately $70 million in 2016 under this program.

	December 31,
	2012			2011
	(in millions)
LIABILITIES AND COMMON SHAREHOLDERS' EQUITY
Current Liabilities
Short-term debt	$	263.0		$	219.0
Accounts payable and accrued expenses	167.5			175.7
Production and other taxes	28.0			31.5
Customer advances	30.2			25.0
Interest payable	9.5			10.7
Current regulatory liabilities	5.8			15.4
Current portion of long-term debt	42.0			91.5
Current portion of capital lease obligation	0.7			—
Total Current Liabilities	546.7			568.8
Long-term debt, less current portion	1,098.9			993.0
Capital lease obligation	39.3			—
Deferred income taxes	603.4			500.2
Asset retirement obligations	67.2			63.8
Defined benefit pension plan	246.9			255.0
Other postretirement benefits	56.8			54.7
Customer contributions in aid of construction	22.9			26.6
Regulatory and other noncurrent liabilities	39.4			37.2
Commitments and contingencies - Note 8
COMMON SHAREHOLDERS' EQUITY
Common stock - without par value; 500.0 million shares authorized; 175.0 million outstanding at Dec. 31, 2012, and 177.9 million outstanding at Dec. 31, 2011	442.4			514.7
Retained earnings	839.5			744.9
Accumulated other comprehensive loss	(246.3		)	(226.1		)
Total Common Shareholders' Equity	1,035.6			1,033.5
TOTAL LIABILITIES AND COMMON SHAREHOLDERS' EQUITY	$	3,757.1		$	3,532.8

In July 2016, Questar Gas filed a general rate case with the Utah Commission. However, as part of the Settlement Stipulation Agreement approved in August 2016 relating to the Dominion Questar Combination, Questar Gas agreed to withdraw the general rate case and not file a new general rate case to adjust its base distribution non-gas rates until July 1, 2019, unless

~~See notes accompanying the financial statements~~26

44Table of Contents

~~QUESTAR~~ otherwise ~~CORPORATION~~ordered by the Utah Commission. A Settlement Stipulation Agreement was also approved by the Wyoming Commission in September 2016, relating to the Dominion Questar Combination, in which Questar Gas agreed to not file a general rate case application with a requested rate effective date earlier than January 1, 2020. Information regarding the Dominion Questar Combination was also provided to the Idaho Commission, who acknowledged the Dominion Questar Combination in October 2016 and directed Dominion Questar to notify the Idaho Commission when it makes filings with the Utah Commission.

~~CONSOLIDATED~~In ~~STATEMENTS~~October OF2016, ~~EQUITY~~Questar Gas filed for a combined $8.7 million gas cost increase with the Utah and Wyoming Commissions. The Utah and Wyoming Commissions approved the rate filing effective November 1, 2016, reflecting a forecasted increase in commodity costs.

	Common Shareholders' Equity
	Common Stock					Retained Earnings			Accum.Other Comp. Loss						Non-control.Interest
																		Total Equity
	Shares		Amount									Total
	(in millions)
Balances at December 31, 2009	174.6		$	454.8		$	3,077.7		$	(30.3	)	$	3,502.2		$	54.9		$	3,557.1
Common stock issued	2.3		18.4			—			—			18.4			—			18.4
Common stock repurchased	(0.4	)	(11.1		)	—			—			(11.1		)	—			(11.1		)
Dividends paid ($0.54 per share)	—		—			(94.8		)	—			(94.8		)	—			(94.8		)
Share-based compensation	—		22.5			—			—			22.5			—			22.5
Tax benefits from share-based compensation	—		8.4			—			—			8.4			—			8.4
Spinoff of QEP	—		—			(2,675.0		)	—			(2,675.0		)	(53.8		)	(2,728.8		)
Distribution to noncontrolling interest	—		—			—			—			—			(2.4		)	(2.4		)
2010 net income	—		—			339.2			—			339.2			1.3			340.5
Net other comprehensive loss	—		—			—			(73.7		)	(73.7		)	—			(73.7		)
Balances at December 31, 2010	176.5		493.0			647.1			(104.0		)	1,036.1			—			1,036.1
Common stock issued	1.6		7.6			—			—			7.6			—			7.6
Common stock repurchased	(0.2	)	(4.9		)	—			—			(4.9		)	—			(4.9		)
Dividends paid ($0.62 per share)	—		—			(110.1		)	—			(110.1		)	—			(110.1		)
Share-based compensation	—		9.8			—			—			9.8			—			9.8
Tax benefits from share-based compensation	—		9.2			—			—			9.2			—			9.2
2011 net income	—		—			207.9			—			207.9			—			207.9
Net other comprehensive loss	—		—			—			(122.1		)	(122.1		)	—			(122.1		)
Balances at December 31, 2011	177.9		514.7			744.9			(226.1		)	1,033.5			—			1,033.5
Common stock issued	1.5		7.2			—			—			7.2			—			7.2
Common stock repurchased	(4.4	)	(88.5		)	—			—			(88.5		)	—			(88.5		)
Dividends paid ($0.665 per share)	—		—			(117.4		)	—			(117.4		)	—			(117.4		)
Share-based compensation	—		9.0			—			—			9.0			—			9.0
2012 net income	—		—			212.0			—			212.0			—			212.0
Net other comprehensive loss	—		—			—			(20.2		)	(20.2		)	—			(20.2		)
Balances at December 31, 2012	175.0		$	442.4		$	839.5		$	(246.3	)	$	1,035.6		$	—		$	1,035.6

NOTE 11. ASSET RETIREMENT OBLIGATIONS

~~See~~AROs ~~notes~~represent ~~accompanying~~obligations that result from laws, statutes, contracts and regulations related to the ~~financial~~eventual ~~statements~~retirement of certain of Questar Gas’ long-lived assets. Revisions to estimates result from material changes in the expected timing or amount of cash flows associated with AROs. As a result of a change in the estimated timing of cash flows for the interim retirement of natural gas pipeline components, Questar Gas recorded an increase of $75.1 million to AROs in the third quarter of 2016. The current portion of the ARO balance is $1.6 million and is included in other current liabilities in the Balance Sheets. The ARO liability is adjusted to present value each period through an accretion calculation using a credit-adjusted risk-free interest rate. Changes in Questar Gas’ AROs from the Balance Sheets were as follows:


	Amount
(millions)
AROs at December 31, 2014	$	0.6
AROs at December 31, 2015	$	0.6
Accretion		2.9
Revisions in estimated cash flows		75.1
Liabilities settled		(0.8	)
AROs at December 31, 2016	$	77.8

~~QUESTAR~~NOTE ~~CORPORATION~~12. SHORT-TERM DEBT AND CREDIT AGREEMENTS

~~CONSOLIDATED~~Questar ~~STATEMENTS~~Gas OFuses ~~CASH~~short-term ~~FLOWS~~debt to fund working capital requirements and as a bridge to long-term debt financings. The levels of borrowing may vary significantly during the course of the year, depending upon the timing and amount of cash requirements not satisfied by cash from operations.

	Year Ended December 31,
	2012			2011			2010
	(in millions)
OPERATING ACTIVITIES
Net income	$	212.0		$	207.9		$	340.5
Discontinued operations, net of income taxes	—			—			(148.2		)
Adjustments to reconcile net income to net cash provided by operating activities of continuing operations:
Depreciation, depletion and amortization	189.2			169.4			161.8
Deferred income taxes	118.6			96.2			91.4
Share-based compensation	9.9			10.1			15.4
Net (gain) from asset sales	(5.1		)	(0.2		)	(0.4		)
(Income) from unconsolidated affiliate	(3.7		)	(3.8		)	(3.8		)
Distributions from unconsolidated affiliate	4.5			4.4			4.0
Other operating	0.4			0.1			(1.5		)
Changes in operating assets and liabilities
Accounts receivable	23.7			7.7			2.9
Inventories	2.5			(3.3		)	0.1
Prepaid expenses	(2.8		)	(2.1		)	—
Interest rate hedges - current	7.6			(37.3		)	—
Accounts payable and accrued expenses	(5.1		)	11.7			(18.4		)
Federal income taxes	(10.7		)	37.1			(33.8		)
Current regulatory assets and liabilities	(24.6		)	31.2			(34.8		)
Other	(48.7		)	(40.1		)	(24.3		)
Net Cash Provided By Operating Activities Of Continuing Operations	467.7			489.0			350.9
INVESTING ACTIVITIES
Property, plant and equipment	(370.7		)	(367.7		)	(320.3		)
Equity investment in QEP	—			—			(250.0		)
Cash used in disposition of assets	(3.0		)	(3.5		)	(2.6		)
Proceeds from disposition of assets	8.4			0.3			0.6
Change in notes receivable	—			—			39.3
Distribution from QEP	—			—			7.3
Net Cash Used In Investing Activities Of Continuing Operations	(365.3		)	(370.9		)	(525.7		)
FINANCING ACTIVITIES
Common stock issued	7.2			7.6			17.9
Common stock repurchased	(87.5		)	(4.9		)	(11.1		)
Long-term debt issued, net of issuance costs	148.8			174.9			244.6
Long-term debt repaid	(91.5		)	(182.0		)	—
Capital lease obligation repaid	(0.8		)	—			—
Change in short-term debt	44.0			(23.0		)	73.0
Change in notes payable	—			—			(52.9		)
Dividends paid	(117.4		)	(110.1		)	(94.8		)
Tax benefits from share-based compensation	—			9.2			8.4

Questar Gas’ short-term financing is supported by the two joint revolving credit facilities with Dominion, Virginia Power and Dominion Gas, to which Questar Gas was added as a co-borrower in November 2016. In December 2016, Questar Gas entered into a commercial paper program pursuant to which it

46 began accessing the commercial paper markets. These credit facilities can be used for working capital, as support for the combined commercial paper programs of Dominion, Virginia Power, Dominion Gas and Questar Gas and for other general corporate purposes.

Net Cash Provided By (Used In) Financing Activities Of Continuing Operations	(97.2		)	(128.3		)	185.1
CASH PROVIDED BY (USED IN) CONTINUING OPERATIONS	5.2			(10.2		)	10.3
Cash provided by operating activities of discontinued operations	—			—			475.5
Cash used in investing activities of discontinued operations	—			—			(598.6		)
Cash provided by financing activities of discontinued operations	—			—			103.8
Effect of change in cash and cash equivalents of discontinued operations	—			—			19.3
Change in cash and cash equivalents	5.2			(10.2		)	10.3
Beginning cash and cash equivalents	11.6			21.8			11.5
Ending cash and cash equivalents	$	16.8		$	11.6		$	21.8
Supplemental Disclosure of Cash Paid (Received) During the Year for:
Interest	$	58.5		$	54.2		$	55.4
Income taxes	9.1			(29.2		)	44.6
Supplemental Disclosure of Noncash Investing and Financing Transaction:
During 2012, Questar incurred a capital lease obligation of $40.8 million in connection with a lease agreement on a new headquarters building.

Questar Gas’ share of commercial paper and letters of credit outstanding under its joint credit facilities with Dominion, Virginia Power and Dominion Gas were as follows:

See notes accompanying the financial statements

Facility
Limit⁽¹⁾

Outstanding
Commercial
Paper⁽²⁾

Outstanding
Letters of Credit

(millions)

At December 31, 2016

Joint revolving credit facility⁽¹⁾

500.0

200.0

—

Joint revolving credit facility⁽¹⁾

500.0

—

Total

1,000.0

200.0

—

47(1) A maximum of a combined $1.0 billion of the facilities is available to Questar Gas, assuming adequate capacity is available after giving effect to uses by co-borrowers Dominion, Virginia Power and Dominion Gas. Sub-limits for Questar Gas are set within the facility limit but can be changed at the option of the borrowers multiple times per year. At December 31, 2016, the sub-limit for Questar Gas was an aggregate $250 million. If Questar Gas has liquidity needs in excess of its sub-limit, the sub-limit may be changed or such needs may be satisfied through short-term intercompany borrowings from Dominion. The maturity date for these facilities is April 2020. These credit facilities can be used to support bank borrowings and the issuance of commercial paper, as well as to support up to $1.0 billion (or the sub-limit, whichever is less) of letters of credit.

~~Report~~(2)The weighted-average interest rate of ~~Independent~~the ~~Registered~~outstanding ~~Public~~commercial ~~Accounting~~paper ~~Firm~~supported by these credit facilities was 1.10% at December 31, 2016.

~~The~~NOTE ~~Board~~13. ofLONG-TERM ~~Directors~~DEBT ~~and Shareholder of~~

Questar Gas Company


At December 31,	2016 Weighted- average Coupon⁽¹⁾			2016			2015
(millions, except percentages)
Unsecured Senior and Medium-Term Notes:
2.98% to 7.20%, due 2017 to 2051		4.84	%	$	634.5		$	534.5
Total principal					634.5			534.5
Securities due within one year		6.85	%		(14.5	)		—
Debt issuance costs					(3.7	)		(3.3	)
Total long-term debt				$	616.3		$	531.2

We(1) ~~have~~Represents ~~audited~~weighted-average ~~the~~coupon ~~accompanying~~rates ~~balance~~for ~~sheets~~debt ofoutstanding ~~Questar Gas Company~~ as of December 31, ~~2012 and 2011, and the related statements of income, common shareholder's equity, and cash flows for each of the three years in the period ended December 31, 2012~~2016. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

WeBased ~~conducted~~on ~~our~~stated ~~audits~~maturity in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Company's internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstancesdates, ~~but not for~~ the ~~purpose~~scheduled ofprincipal ~~expressing~~payments ~~an opinion on the effectiveness~~ of ~~the~~long-term ~~Company's~~debt ~~internal~~at ~~control~~December ~~over financial reporting. Accordingly~~31, ~~we express no such opinion. An audit includes examining~~2016, onwere ~~a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,~~ as ~~well~~follows: ~~as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.~~

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Questar Gas Company at December 31, 2012 and 2011, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, in conformity with U.S. generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.


	2017			2018			2019		2020		2021		Thereafter			Total
(millions, except percentages)
Questar Gas	$	14.5		$	120.0		$	—	$	—	$	—	$	500.0		$	634.5
Weighted-average coupon		6.85	%		5.72	%								4.57	%

~~/s/Ernst~~Questar &Gas ~~Young~~short-term ~~LLP~~credit facilities and long-term debt agreements contain customary covenants and default provisions.

~~Salt Lake City, Utah~~27

FebruaryTable 21,of 2013Contents

48Notes to Financial Statements, Continued

~~QUESTAR~~ As ~~GAS~~of ~~COMPANY~~December 31, 2016, there were no events of default under these covenants.

~~STATEMENTS~~Any new OFdebt ~~INCOME~~issuance by Questar Gas is subject to approval by the Wyoming Commission.

	Year Ended December 31,
	2012			2011			2010
	(in millions)
REVENUES
From unaffiliated customers	$	859.7		$	965.5		$	901.8
From affiliated company	2.5			3.3			1.1
Total Revenues	862.2			968.8			902.9
OPERATING EXPENSES
Cost of natural gas sold
From unaffiliated parties	185.6			318.4			278.5
From affiliated companies	347.7			327.3			313.7
Total cost of natural gas sold (excluding operating expenses shown separately)	533.3			645.7			592.2
Operating and maintenance	119.0			118.5			114.4
General and administrative	51.2			51.0			49.9
Retirement incentive	2.4			—			—
Depreciation and amortization	47.2			44.5			43.7
Other taxes	16.2			15.0			14.1
Total Operating Expenses	769.3			874.7			814.3
OPERATING INCOME	92.9			94.1			88.6
Interest and other income	5.5			5.4			6.7
Interest expense	(24.1		)	(25.9		)	(26.2		)
INCOME BEFORE INCOME TAXES	74.3			73.6			69.1
Income taxes	(27.2		)	(27.5		)	(25.2		)
NET INCOME	$	47.1		$	46.1		$	43.9

NOTE 14. DIVIDEND RESTRICTIONS

~~See~~The ~~notes~~Utah ~~accompanying~~Commission may prohibit any public service company, including Questar Gas, from declaring or paying a dividend to an affiliate if it is determined that the ~~financial~~capital ~~statements~~of Questar Gas is being impaired or that its service to the public is likely to become impaired. At December 31, 2016, the Utah Commission had not restricted the payment of dividends by Questar Gas.

49NOTE 15. EMPLOYEE BENEFITS

~~QUESTAR~~Questar ~~GAS~~Gas ~~COMPANY~~participates in retirement benefit plans sponsored by Dominion Questar, which provide certain retirement benefits to eligible active employees, retirees and qualifying dependents of Questar Gas. Under the terms of its benefit plans, Dominion Questar reserves the right to change, modify or terminate the plans. From time to time in the past, benefits have changed, and some of these changes have reduced benefits.

~~BALANCE~~Pension ~~SHEETS~~benefits for Questar Gas employees are covered by the Dominion Questar Corporation Retirement Plan, a defined benefit pension plan sponsored by Dominion Questar that provides benefits to multiple Dominion Questar subsidiaries. Retirement benefits payable are based primarily on years of service, age and the employee’s compensation. As a participating employer, Questar Gas is subject to Dominion Questar’s funding policy, which is to contribute annually an amount that is in accordance with the provisions of ERISA. During 2016, Questar Gas made $11.3 million of contributions to the Dominion Questar Corporation Retirement Plan. No contributions to this plan by Questar Gas are currently expected in 2017. Net periodic pension cost related to this plan was $6.4 million, $10.4 million and $8.5 million in 2016, 2015 and 2014, respectively, recorded in other operations and maintenance expense in the Statements of Income. The funded status of various Dominion Questar subsidiary groups and employee compensation are the basis for determining the share of total pension costs for participating Dominion Questar subsidiaries. At December 31, 2016 and 2015, the amount due from Dominion Questar associated with this plan was $87.8 million and $82.8 million, respectively, recorded in receivables from affiliates in Questar Gas’ Balance Sheet.

	December 31,
	2012			2011
	(in millions)
ASSETS
Current Assets
Cash and cash equivalents	$	1.4		$	5.0
Federal income taxes receivable	—			1.5
Accounts receivable, net	67.0			76.1
Unbilled gas accounts receivable	78.2			75.2
Accounts receivable from affiliates	31.8			1.8
Inventories, at lower of average cost or market:
Gas stored underground	38.3			40.3
Materials and supplies	13.5			12.2
Current regulatory assets	41.0			26.5
Prepaid expenses and other	3.2			3.1
Deferred income taxes - current	1.5			5.6
Total Current Assets	275.9			247.3
Property, Plant and Equipment
Distribution	1,690.5			1,583.1
General and other	281.6			284.4
Construction work in progress	68.8			59.5
Total Property, Plant and Equipment	2,040.9			1,927.0
Accumulated depreciation and amortization	(762.8		)	(749.6		)
Total Property, Plant and Equipment, net	1,278.1			1,177.4
Other Assets
Noncurrent regulatory assets	16.4			15.1
Goodwill	5.6			5.6
Other noncurrent assets	3.1			2.3
Total Other Assets	25.1			23.0
TOTAL ASSETS	$	1,579.1		$	1,447.7

Retiree healthcare and life insurance benefits for Questar Gas employees are covered by the Dominion Questar Corporation Umbrella Health Plan, a plan sponsored by Dominion Questar that provides certain retiree healthcare and life insurance benefits to multiple Dominion Questar subsidiaries. Annual employee premiums are based on several factors such as retirement date and years of service. Net periodic benefit cost related to this plan was $0.8 million, $0.9 million and $0.8 million for 2016, 2015 and 2014, respectively, recorded in other operations and maintenance expense in the Statements of Income. Employee headcount is the basis for determining the share of total other postretirement benefit costs for participating Dominion Questar subsidiaries. At

50 December 31, 2016, the amount due to Dominion Questar associated with this plan was $13.0 million and is reflected as payables to affiliates in Questar Gas’ Balance Sheet. The amount due to Dominion Questar at December 31, 2015 was $15.3 million and is included in receivables from affiliates in Questar Gas’ Balance Sheet.

~~QUESTAR~~Dominion ~~GAS~~Questar ~~COMPANY~~holds investments in trusts to fund employee benefit payments for the pension and other postretirement benefit plans in which Questar Gas’ employees participate. Any investment-related declines in these trusts will result in future increases in the net periodic cost recognized for such employee benefit plans and will be included in the determination of the amount of cash that Questar Gas will provide to Dominion Questar for its share of employee benefit plan contributions.

~~BALANCE~~Defined ~~SHEETS~~Contribution Plan

	December 31,
	2012		2011
	(in millions)
LIABILITIES AND COMMON SHAREHOLDER'S EQUITY
Current Liabilities
Notes payable to Questar	$	166.1	$	142.7
Accounts payable and accrued expenses	100.5		106.5
Accounts payable to affiliates	50.9		41.9
Customer advances	30.2		25.0
Interest payable	4.5		5.8
Current regulatory liabilities	4.3		14.2
Current portion of long-term debt	42.0		91.5
Total Current Liabilities	398.5		427.6
Long-term debt, less current portion	384.5		276.5
Deferred income taxes	301.6		259.8
Customer contributions in aid of construction	22.9		26.6
Regulatory and other noncurrent liabilities	4.0		4.8
Commitments and contingencies - Note 8
COMMON SHAREHOLDER'S EQUITY
Common stock - par value $2.50 per share; authorized 50.0 million shares; 9.2 million issued and outstanding	23.0		23.0
Additional paid-in capital	172.5		171.4
Retained earnings	272.1		258.0
Total Common Shareholder's Equity	467.6		452.4
TOTAL LIABILITIES AND COMMON SHAREHOLDER'S EQUITY	$	1,579.1	$	1,447.7

Questar Gas also participates in a Dominion Questar-sponsored defined contribution plan, the Dominion Questar 401(k) Retirement Income Plan, which covers multiple Dominion Questar subsidiaries. Questar Gas recognized $4.7 million, $4.5 million and $4.5 million of expense in other operations and maintenance expense in the Statements of Income in 2016, 2015 and 2014, respectively, as employer matching contributions to this plan.

~~See~~Share-based ~~notes~~Compensation ~~accompanying the financial statements~~

51Prior to the Dominion Questar Combination, Questar Gas employees participated in certain share-based compensation plans of Dominion Questar. Effective with the Dominion Questar Combination all such awards vested on September 16, 2016. Questar Gas had no share-based compensation balances as of December 31, 2016. Total share-based compensation expense amounted to $3.0 million in 2016 compared to $1.4 million in 2015 and $1.6 million in 2014.

~~QUESTAR~~NOTE ~~GAS~~16. ~~COMPANY~~COMMITMENTS AND CONTINGENCIES

~~STATEMENTS~~As OFa ~~COMMON~~result ~~SHAREHOLDER'S~~of ~~EQUITY~~issues generated in the ordinary course of business, Questar Gas is involved in legal proceedings before various courts and is periodically subject to governmental examinations (including by regulatory authorities), inquiries and investigations. Certain legal proceedings and governmental examinations involve demands for unspecified amounts of damages, are in an initial procedural phase, involve uncertainty as to the outcome of pending appeals or motions, or involve significant factual issues that need to be resolved, such that it is not possible for Questar Gas to estimate a range of possible loss. For such matters for which Questar Gas cannot estimate a range of possible loss, a statement to this effect is made in the description of the matter. Other matters may have progressed sufficiently through the litigation or investigative processes such that Questar Gas is able to estimate a range of possible loss. For legal proceedings and governmental examinations for which Questar Gas is able to reasonably estimate a range of possible losses, an estimated range of possible loss is provided, in excess of the accrued liability (if any) for such matters. Any accrued liability is recorded on a gross basis with a receivable also recorded for any probable insurance recoveries. Estimated ranges of loss are inclusive of legal fees and net of any anticipated insurance recoveries. Any estimated range is based on currently available information and involves elements of judgment and significant uncertainties. Any estimated range of possi-

	CommonStock		AdditionalPaid-inCapital		RetainedEarnings			Total
	(in millions)
Balances at December 31, 2009	$	23.0	$	148.9	$	227.1		$	399.0
Dividends paid	—		—		(28.8		)	(28.8		)
Share-based compensation	—		1.4		—			1.4
2010 net income	—		—		43.9			43.9
Balances at December 31, 2010	23.0		150.3		242.2			415.5
Equity contribution	—		20.0		—			20.0
Dividends paid	—		—		(30.3		)	(30.3		)
Share-based compensation	—		1.1		—			1.1
2011 net income	—		—		46.1			46.1
Balances at December 31, 2011	23.0		171.4		258.0			452.4
Dividends paid	—		—		(33.0		)	(33.0		)
Share-based compensation	—		1.1		—			1.1
2012 net income	—		—		47.1			47.1
Balances at December 31, 2012	$	23.0	$	172.5	$	272.1		$	467.6


28

SeeTable notesof accompanying the financial statementsContents

52 ble loss may not represent Questar Gas’ maximum possible loss exposure. The circumstances of such legal proceedings and governmental examinations will change from time to time and actual results may vary significantly from the current estimate. For current proceedings not specifically reported below, management does not anticipate that the liabilities, if any, arising from such proceedings would have a material effect on the financial position, liquidity or results of operations of the Questar Gas.

~~QUESTAR~~In ~~GAS~~May ~~COMPANY~~2012, Questar Gas filed a complaint against a supplier for breach of contract relating to certain charges for gathering services. In March 2016, Questar Gas settled this matter which resulted in no material impact to Questar Gas’ results of operation, financial position or cash flows.

~~STATEMENTS~~The OFCERCLA, ~~CASH~~as ~~FLOWS~~amended, provides for immediate response and removal actions coordinated by the EPA in the event of threatened releases of hazardous substances into the environment and authorizes the U.S. government either to clean up sites at which hazardous substances have created actual or potential environmental hazards or to order persons responsible for the situation to do so. Under the CERCLA, as amended, generators and transporters of hazardous substances, as well as past and present owners and operators of contaminated sites, can be jointly, severally and strictly liable for the cost of cleanup. These potentially responsible parties can be ordered to perform a cleanup, be sued for costs associated with an EPA-directed cleanup, voluntarily settle with the U.S. government concerning their liability for cleanup costs, or voluntarily begin a site investigation and site remediation under state oversight.

	Year Ended December 31,
	2012			2011			2010
	(in millions)
OPERATING ACTIVITIES
Net income	$	47.1		$	46.1		$	43.9
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	52.1			49.2			48.0
Deferred income taxes	45.9			25.2			43.6
Share-based compensation	1.2			1.1			1.4
Changes in operating assets and liabilities
Accounts receivable	(12.7		)	5.0			(4.4		)
Inventories	0.7			(1.3		)	3.4
Prepaid expenses	(0.1		)	(0.2		)	0.5
Accounts payable and accrued expenses	7.8			(1.8		)	(21.6		)
Federal income taxes	1.5			6.2			(8.5		)
Current regulatory assets and liabilities	(24.4		)	37.6			(33.8		)
Other	(6.4		)	(20.2		)	(3.2		)
NET CASH PROVIDED BY OPERATING ACTIVITIES	112.7			146.9			69.3
INVESTING ACTIVITIES
Property, plant and equipment	(162.1		)	(121.5		)	(108.6		)
Cash used in disposition of assets	(2.3		)	(2.2		)	(1.5		)
Proceeds from disposition of assets	0.4			0.2			0.5
Affiliated-company property, plant and equipment transfers	—			0.1			—
NET CASH USED IN INVESTING ACTIVITIES	(164.0		)	(123.4		)	(109.6		)
FINANCING ACTIVITIES
Equity contribution	—			20.0			—
Long-term debt issued, net of issuance costs	148.8			—			—
Long-term debt repaid	(91.5		)	(2.0		)	—
Change in notes payable to Questar	23.4			(10.9		)	66.6
Dividends paid	(33.0		)	(30.3		)	(28.8		)
NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES	47.7			(23.2		)	37.8
Change in cash and cash equivalents	(3.6		)	0.3			(2.5		)
Beginning cash and cash equivalents	5.0			4.7			7.2
Ending cash and cash equivalents	$	1.4		$	5.0		$	4.7
Supplemental Disclosure of Cash Paid (Received) During the Year for:
Interest	$	24.7		$	25.1		$	25.5
Income taxes	(20.4		)	(3.3		)	(9.7		)

Questar Gas has determined that it is associated with two former manufactured gas plant sites that contain coal tar and other potentially harmful materials. None of the former sites with which Questar Gas is associated is under investigation by any state or federal environmental agency. Due to the uncertainty surrounding the sites, Questar Gas is unable to make an estimate of the potential financial statement impacts.

~~See~~Commitments ~~notes accompanying the financial statements~~

53Currently, the majority of Questar Gas’ natural gas supply is provided by cost-of-service reserves developed and produced by Wexpro. In 2016, Questar Gas purchased the remainder of its gas supply from multiple third parties under index-based or fixed- price contracts. Questar Gas has commitments to purchase gas for $29.3 million in 2017, $25.2 million in 2018 and 2019, $25.4 million in 2020 and $25.2 million in 2021 based on current prices. Generally, at the conclusion of the heating season and after a bid process, new agreements for the next heating season are put in place. Questar Gas bought natural gas under third-party purchase agreements amounting to $102.0 million in 2016, $82.4 million in 2015 and $135.8 million in 2014.

~~Report~~In ofaddition, ~~Independent~~Questar ~~Registered~~Gas ~~Public~~stores ~~Accounting~~gas ~~Firm~~during off-peak periods (typically during the summer) and withdraws gas from storage to meet peak gas demand (typically in the winter). Questar Gas has contracted for transportation and underground storage services with Questar Pipeline. Annual payments for these services are expected to amount to $44.0 million in 2017, $13.0 million in 2018, $3.8 million in 2019, $1.9 million in 2020, and $1.6 million in 2021. Questar Gas has third-party transportation and gathering commitments requiring yearly payments of

~~The~~ $27.8 million ~~Board~~in of2017, ~~Directors~~$24.4 million in 2018, $22.7 million in 2019 and ~~Shareholder~~2020, ofand $19.6 million in 2021.

~~Questar~~NOTE ~~Pipeline~~17. ~~Company~~CREDIT RISK

WeCredit ~~have~~risk ~~audited~~is the ~~accompanying~~risk ~~consolidated balance sheets~~ of ~~Questar~~financial ~~Pipeline~~loss ~~Company~~if ascounterparties offail ~~December~~to ~~31,~~perform ~~2012~~their ~~and~~contractual ~~2011,~~obligations. ~~and~~In ~~the~~order ~~related~~to ~~consolidated~~minimize ~~statements~~overall ofcredit ~~income and comprehensive income~~risk, ~~common~~credit policies ~~shareholder's~~are ~~equity~~maintained, ~~and~~including ~~cash~~requiring ~~flows~~customer ~~for~~deposits ~~each~~and of the ~~three~~evaluation ~~years~~of incounterparty ~~the~~financial ~~period~~condition. ~~ended~~In ~~December 31~~addition, ~~2012.~~counterparties ~~Our~~may ~~audits~~make ~~also~~available ~~included~~collateral, ~~the~~including ~~financial~~letters ~~statement~~of ~~schedule~~credit ~~listed~~or incash ~~the~~held ~~Index~~as atmargin ~~Item~~deposits, 8.as ~~These~~a result ~~financial~~of ~~statements~~exceeding ~~and~~agreed-upon ~~schedule~~credit ~~are~~limits, ~~the~~or ~~responsibility~~may ofbe ~~the~~required ~~Company's management. Our responsibility is~~ to ~~express~~prepay anthe ~~opinion on these financial statements based on our audits~~transaction.

WeQuestar ~~conducted~~Gas ~~our~~maintains ~~audits~~a inprovision ~~accordance~~for ~~with~~credit losses ~~the~~based ~~standards~~on offactors ~~the~~surrounding ~~Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform~~ the ~~audit~~credit torisk ~~obtain reasonable assurance about whether the financial statements are free~~ of ~~material~~its ~~misstatement.~~customers, Wehistorical ~~were~~trends ~~not~~and ~~engaged~~other ~~to perform an audit of the Company's internal control over financial reporting~~information. ~~Our~~Management ~~audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances~~believes, ~~but~~based ~~not for the purpose of expressing an opinion~~ on ~~the~~credit ~~effectiveness~~policies ofand the ~~Company's~~December ~~internal~~31, ~~control~~2016 ~~over~~provision ~~financial~~for ~~reporting.~~credit ~~Accordingly~~losses, wethat ~~express~~it nois ~~such~~unlikely ~~opinion.~~that Ana ~~audit~~material adverse ~~includes~~effect ~~examining,~~ on afinancial ~~test basis~~position, ~~evidence~~results ~~supporting~~of ~~the~~operations ~~amounts~~or ~~and~~cash ~~disclosures~~flows inwould ~~the~~occur ~~financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management,~~ as ~~well as evaluating the overall financial statement presentation. We believe that our audits provide~~ a ~~reasonable~~result ~~basis~~of ~~for~~counterparty ~~our opinion~~nonperformance.

InNOTE our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Questar Pipeline Company at December 31, 2012 and 2011, and the consolidated results of its operations and its cash flows for each of the three years in the period ended December 31, 2012, in conformity with U18.S. RELATED-PARTY ~~generally~~TRANSACTIONS accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein.

~~/s/Ernst~~Questar &Gas ~~Young~~engages ~~LLP~~in related-party transactions primarily with affiliates Wexpro, for cost-of-service natural gas supply, and Questar Pipeline, for transportation and storage services. See Notes 2 and 16 for more details. Questar Gas’ receivables and payables balances with affiliates are settled based on contractual terms or on a monthly basis, depending on the nature of the underlying transactions. A discussion of significant related party transactions follows.

~~Salt~~Questar ~~Lake~~Gas ~~City,~~participates ~~Utah~~in certain Dominion Questar benefit plans as discussed in Note 15.

~~February~~Dominion 21Questar and other affiliates provide accounting, ~~2013~~legal, finance and certain administrative and technical services to Questar Gas. These costs are included in other operations and maintenance in the Statements of Income. The administrative charges are generally allocated based on each affiliated company’s proportional share of revenues less product costs; property, plant and equipment; and labor costs. Management believes that the allocation method is reasonable. Questar Gas provides certain services to related parties, including technical services. The billed amounts of these services are allocated based on the specific nature of the charges. Management believes that the allocation methods are reasonable. The amounts of these services follow:


Year Ended December 31,	2016		2015		2014
(millions)
Transportation and storage services from affiliates⁽¹⁾	$	72.9	$	73.0	$	72.9
Services provided by related parties		65.0		55.7		51.5
Services provided to related parties		3.2		6.7		6.1

~~QUESTAR~~(1) ~~PIPELINE~~The ~~COMPANY~~costs of these services were included in cost of sales in Questar Gas’ Statements of Income.

~~CONSOLIDATED~~The ~~STATEMENTS~~Dominion OFQuestar ~~INCOME~~Combination resulted in merger and restructuring costs of $13.8 million charged from Dominion Questar for the year ended December 31, 2016. There were no merger and restructuring costs for the same prior year periods.

	Year Ended December 31,
	2012			2011			2010
	(in millions)
REVENUES
From unaffiliated customers	$	203.1		$	197.4		$	197.2
From affiliated companies	74.4			74.4			74.0
Total Revenues	277.5			271.8			271.2
OPERATING EXPENSES
Operating and maintenance	35.2			35.3			41.4
General and administrative	50.0			46.5			41.0
Retirement incentive	0.9			—			—
Depreciation and amortization	54.3			51.2			47.4
Other taxes	9.1			10.1			9.0
Cost of sales (excluding operating expenses shown separately)	6.7			3.1			2.4
Total Operating Expenses	156.2			146.2			141.2
Net gain from asset sales	2.7			0.3			0.8
OPERATING INCOME	124.0			125.9			130.8
Interest and other income	0.6			0.9			0.4
Income from unconsolidated affiliate	3.7			3.8			3.8
Interest expense	(26.3		)	(24.5		)	(28.8		)
INCOME BEFORE INCOME TAXES	102.0			106.1			106.2
Income taxes	(37.3		)	(38.2		)	(38.8		)
NET INCOME	$	64.7		$	67.9		$	67.4


29

SeeTable notesof accompanying the financial statementsContents

55Notes to Financial Statements, Continued

~~QUESTAR~~ These ~~PIPELINE~~costs ~~COMPANY~~primarily consist of employee related costs allocated to Questar Gas and are included in other operations and maintenance in Questar Gas’ Statements of Income.

~~CONSOLIDATED~~Questar ~~STATEMENTS~~Gas’ OFborrowings ~~COMPREHENSIVE~~under ~~INCOME~~the IRCA with Dominion totaled $48.0 million as of December 31, 2016. The weighted-average interest rate for these borrowings was 1.04%. Questar Gas’ borrowings as of December 31, 2015 under the IRCA with Dominion Questar was $273.3 million and was settled at the time of the Dominion Questar Combination. Interest charges related to Questar Gas’ total borrowings from Dominion and Dominion Questar totaled $1.3 million for the year ended December 31, 2016 and were immaterial for 2015 and 2014.

	Year Ended December 31,
	2012			2011			2010
	(in millions)
Net income	$	64.7		$	67.9		$	67.4
Other comprehensive income (loss)
Interest rate cash flow hedges	0.4			(37.2		)	—
Income taxes	(0.2		)	13.8			—
Net other comprehensive income (loss)	0.2			(23.4		)	—
COMPREHENSIVE INCOME	$	64.9		$	44.5		$	67.4

NOTE 19. OPERATING SEGMENT

~~See~~The ~~notes~~Corporate ~~accompanying~~and Other Segment primarily includes specific items attributable to Questar Gas’ operating segment that are not included in profit measures evaluated by executive management in assessing the ~~financial~~segment’s ~~statements~~performance or in allocating resources.

56The net expense for specific items in 2016 primarily related to a $15.9 million ($9.6 million after-tax) charge for transaction costs associated with the Dominion Questar Combination. These costs primarily consist of employee related costs allocated to Questar Gas and are included in other operations and maintenance in Questar Gas’ Statements of Income.

~~QUESTAR~~The ~~PIPELINE~~following ~~COMPANY~~table presents segment information pertaining to Questar Gas’ operations:

CONSOLIDATED BALANCE SHEETS


Year Ended December 31,	Questar Gas		Corporate and Other			Consolidated Total
(millions)
2016
Operating revenue	$	921.3	$	—		$	921.3
Depreciation and amortization		61.0		—			61.0
Interest income		0.3		—			0.3
Interest expense		30.2		—			30.2
Income taxes		43.4		(6.3	)		37.1
Net income (loss)		66.8		(9.6	)		57.2
Capital expenditures		240.4		—			240.4
Total assets (billions)		2.5		—			2.5
2015
Operating revenue	$	917.6	$	—		$	917.6
Depreciation and amortization		55.1		—			55.1
Interest income		1.2		—			1.2
Interest expense		28.3		—			28.3
Income taxes		34.8		—			34.8
Net income (loss)		64.3		—			64.3
Capital expenditures		217.4		—			217.4
Total assets (billions)		2.2		—			2.2
2014
Operating revenue	$	960.9	$	—		$	960.9
Depreciation and amortization		53.6		—			53.6
Interest income		1.7		—			1.7
Interest expense		28.2		—			28.2
Income taxes		32.0		—			32.0
Net income (loss)		55.2		—			55.2
Capital expenditures		174.7		—			174.7

	December 31,
	2012			2011
	(in millions)
ASSETS
Current Assets
Cash and cash equivalents	$	7.1		$	3.4
Notes receivable from Questar	38.7			8.8
Accounts receivable, net	19.1			19.1
Accounts receivable from affiliates	27.5			20.2
Materials and supplies, at lower of average cost or market	7.2			7.4
Current regulatory assets	5.7			5.2
Prepaid expenses and other	7.7			4.4
Deferred income taxes - current	1.6			1.8
Total Current Assets	114.6			70.3
Property, Plant and Equipment
Transportation	1,394.7			1,358.5
Storage	288.9			287.8
Processing	25.7			25.4
General and intangible	81.5			65.3
Construction work in progress	49.3			53.4
Total Property, Plant and Equipment	1,840.1			1,790.4
Accumulated depreciation and amortization	(629.3		)	(586.7		)
Total Property, Plant and Equipment, net	1,210.8			1,203.7
Investment in unconsolidated affiliate	26.5			27.3
Other Assets
Goodwill	4.2			4.2
Regulatory and other noncurrent assets	9.0			10.1
Total Other Assets	13.2			14.3
TOTAL ASSETS	$	1,365.1		$	1,315.6

NOTE 20. QUARTERLY FINANCIAL DATA (UNAUDITED)

57A summary of Questar Gas’ quarterly results of operations for the years ended December 31, 2016 and 2015 follows. Amounts reflect all adjustments necessary in the opinion of management for a fair statement of the results for the interim periods. Results for interim periods may fluctuate as a result of weather conditions, changes in rates and other factors.

QUESTAR PIPELINE COMPANY


	First Quarter		Second Quarter			Third Quarter			Fourth Quarter		Year
(millions)
2016
Operating revenue	$	407.9	$	128.2		$	87.9		$	297.3	$	921.3
Income (loss) from operations		83.4		3.8			(19.8	)		53.3		120.7
Net income (loss)		47.6		(1.6	)		(17.7	)		28.9		57.2
2015
Operating revenue	$	374.8	$	141.7		$	89.3		$	311.8	$	917.6
Income (loss) from operations		76.6		1.4			(8.9	)		53.5		122.6
Net income (loss)		43.8		(2.8	)		(8.8	)		32.1		64.3

~~CONSOLIDATED~~Questar ~~BALANCE~~Gas’ ~~SHEETS~~2016 results include the impact of the following significant item:

	December 31,
	2012			2011
	(in millions)
LIABILITIES AND COMMON SHAREHOLDER'S EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	23.6		$	29.7
Accounts payable to affiliates	16.9			5.5
Current regulatory liabilities	1.5			1.2
Interest payable	2.1			2.0
Total Current Liabilities	44.1			38.4
Long-term debt	458.9			459.0
Deferred income taxes	242.5			201.4
Regulatory and other noncurrent liabilities	13.8			14.7
Commitments and contingencies - Note 8
COMMON SHAREHOLDER'S EQUITY
Common stock - par value $1 per share; authorized 25.0 million shares; issued and outstanding 6.6 million shares	6.6			6.6
Additional paid-in capital	347.5			345.7
Retained earnings	274.9			273.2
Accumulated other comprehensive loss	(23.2		)	(23.4		)
Total Common Shareholder's Equity	605.8			602.1
TOTAL LIABILITIES AND COMMON SHAREHOLDER'S EQUITY	$	1,365.1		$	1,315.6

•

Third quarter results include a $7.7 million after-tax charge for transaction costs associated with the Dominion Questar Combination

~~See~~NOTE ~~notes~~21. ~~accompanying~~SUPPLEMENTAL ~~the~~OIL ~~financial~~AND ~~statements~~GAS INFORMATION (UNAUDITED)

58The following information is provided with respect to estimated natural gas reserves, which are managed, developed and delivered by Wexpro at cost-of-service pursuant to the Wexpro Agreement. The estimates of proved gas reserves were prepared by Wexpro’s reservoir engineers. Gas reserve estimates are subject to numerous uncertainties inherent in estimating quantities of proved reserves, projecting future rates or production and timing of development expenditures. The accuracy of these estimates depends on the quality of available data and on engineering and geological interpretation and judgment. Reserve estimates are imprecise and will change as additional information becomes available. Geological and engineering data demonstrate with reasonable certainty that these quantities are recoverable under existing economic and operating conditions. Since the gas reserves operated by Wexpro are delivered to Questar Gas at cost-of-service, SEC guidelines with respect to standard economic assumptions are not applicable. The SEC anticipated this potential difficulty and provides that companies may give appropriate recognition to differences because of the effect of the ratemaking process. Accordingly, Wexpro uses a minimum-producing rate or maximum well-life limit to determine the ultimate quantity of gas reserves.

QUESTAR PIPELINE COMPANY


Proved Reserves	Natural Gas
(bcf)
Balance at December 31, 2016		469.8
Balance at December 31, 2015		522.4
Balance at December 31, 2014		530.4

~~CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER'S EQUITY~~30

	CommonStock		AdditionalPaid-inCapital		RetainedEarnings			Accum. Other Comp. Loss			Total
	(in millions)
Balances at December 31, 2009	$	6.6	$	342.7	$	197.8		$	—		$	547.1
Dividends paid	—		—		(29.0		)	—			(29.0		)
Share-based compensation	—		1.3		—			—			1.3
2010 net income	—		—		67.4			—			67.4
Balances at December 31, 2010	6.6		344.0		236.2			—			586.8
Dividends paid	—		—		(30.9		)	—			(30.9		)
Share-based compensation	—		1.7		—			—			1.7
2011 net income	—		—		67.9			—			67.9
Net other comprehensive loss	—		—		—			(23.4		)	(23.4		)
Balances at December 31, 2011	6.6		345.7		273.2			(23.4		)	602.1
Dividends paid	—		—		(63.0		)	—			(63.0		)
Share-based compensation	—		1.8		—			—			1.8
2012 net income	—		—		64.7			—			64.7
Net other comprehensive income	—		—		—			0.2			0.2
Balances at December 31, 2012	$	6.6	$	347.5	$	274.9		$	(23.2	)	$	605.8

~~See~~Item 9. ~~notes~~Changes ~~accompanying~~in ~~the~~and ~~financial~~Disagreements ~~statements~~With Accountants on Accounting and Financial Disclosure

59None.

~~QUESTAR~~Item 9A. ~~PIPELINE~~Controls and ~~COMPANY~~Procedures

~~CONSOLIDATED~~Evaluation ~~STATEMENTS~~of OFDisclosure ~~CASH~~Controls ~~FLOWS~~and Procedures

	Year Ended December 31,
	2012			2011			2010
	(in millions)
OPERATING ACTIVITIES
Net income	$	64.7		$	67.9		$	67.4
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	56.8			53.9			49.9
Deferred income taxes	41.1			34.5			17.2
Share-based compensation	2.0			1.8			1.3
Net (gain) from asset sales	(2.7		)	(0.3		)	(0.8		)
(Income) from unconsolidated affiliate	(3.7		)	(3.8		)	(3.8		)
Distributions from unconsolidated affiliate	4.5			4.4			4.0
Other operating	0.4			0.1			(1.5		)
Changes in operating assets and liabilities
Accounts receivable	(2.1		)	(0.8		)	(2.0		)
Materials and supplies	0.2			(0.2		)	(1.2		)
Prepaid expenses	(3.3		)	—			(0.3		)
Accounts payable and accrued expenses	(3.4		)	0.8			8.5
Interest rate hedge - current liability	—			(37.3		)	—
Federal income taxes	—			1.1			0.6
Regulatory assets, liabilities and other	(0.9		)	(5.0		)	1.0
NET CASH PROVIDED BY OPERATING ACTIVITIES	153.6			117.1			140.3
INVESTING ACTIVITIES
Property, plant and equipment	(60.6		)	(104.5		)	(121.0		)
Cash used in disposition of assets	(0.7		)	(1.3		)	(1.1		)
Proceeds from disposition of assets	4.3			0.1			0.1
Affiliated-company property, plant and equipment transfers	—			(0.1		)	—
NET CASH USED IN INVESTING ACTIVITIES	(57.0		)	(105.8		)	(122.0		)
FINANCING ACTIVITIES
Long-term debt issued, net of issuance costs	—			176.2			—
Long-term debt repaid	—			(180.0		)	—
Change in notes receivable from Questar	(29.9		)	21.5			12.4
Change in notes payable to Questar	—			—			(0.2		)
Dividends paid	(63.0		)	(30.9		)	(29.0		)
NET CASH USED IN FINANCING ACTIVITIES	(92.9		)	(13.2		)	(16.8		)
Change in cash and cash equivalents	3.7			(1.9		)	1.5
Beginning cash and cash equivalents	3.4			5.3			3.8
Ending cash and cash equivalents	$	7.1		$	3.4		$	5.3
Supplemental Disclosure of Cash Paid (Received) During the Year for:
Interest	$	25.2		$	24.7		$	29.0
Income taxes	(3.8		)	2.9			19.2

Senior management, including Questar Gas’ CEO and CFO, evaluated the effectiveness of Questar Gas’ disclosure controls and procedures as of the end of the period covered by this report. Based on this evaluation process, Questar Gas’ CEO and CFO have concluded that Questar Gas’ disclosure controls and procedures are effective. There were no changes in Questar Gas’ internal control over financial reporting that occurred during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, Questar Gas’ internal control over financial reporting.

~~See~~MANAGEMENT’S ~~notes~~ANNUAL ~~accompanying~~REPORT ~~the~~ON ~~financial~~INTERNAL CONTROL ~~statements~~OVER FINANCIAL REPORTING

60Management of Questar Gas understands and accepts responsibility for Questar Gas’ financial statements and related disclosures and the effectiveness of internal control over financial reporting (internal control). Questar Gas continuously strives to identify opportunities to enhance the effectiveness and efficiency of internal control, just as Questar Gas does throughout all aspects of its business.

~~QUESTAR~~Questar ~~CORPORATION~~Gas maintains a system of internal control designed to provide reasonable assurance, at a reasonable cost, that its assets are safeguarded against loss from unauthorized use or disposition and that transactions are executed and recorded in accordance with established procedures. This system includes written policies, an organizational structure designed to ensure appropriate segregation of responsibilities, careful selection and training of qualified personnel and internal audits.

~~QUESTAR~~The ~~GAS~~Board ~~COMPANY~~of Directors also serves as Questar Gas’ Audit Committee and has periodic communications with the independent registered public accounting firm, the internal auditors and management concerning Questar Gas’ auditing, internal accounting control and financial reporting matters and to ensure that each is properly discharging its responsibilities.

~~QUESTAR~~SEC ~~PIPELINE~~rules ~~COMPANY~~implementing Section 404 of the Sarbanes-Oxley Act require Questar Gas’ 2016 Annual Report to contain a management’s report regarding the effectiveness of internal control. As a basis for the report, Questar Gas tested and evaluated the design and operating effectiveness of internal controls. Based on its assessment as of December 31, 2016, Questar Gas makes the following assertions:

~~NOTES~~Management ~~ACCOMPANYING~~is ~~THE~~responsible ~~FINANCIAL~~for ~~STATEMENTS~~establishing and maintaining effective internal control over financial reporting of Questar Gas.

~~The~~There ~~notes~~are ~~accompanying~~inherent limitations in the ~~financial~~effectiveness ~~statements~~of ~~apply~~any internal control, including the possibility of human error and the circumvention or overriding of controls. Accordingly, even effective internal controls can provide only reasonable assurance with respect to ~~Questar~~financial ~~Corporation~~statement preparation. Further, ~~Questar~~because ~~Gas~~of ~~Company~~changes ~~and~~in conditions, ~~Questar~~the ~~Pipeline~~effectiveness ~~Company~~of ~~unless~~internal ~~otherwise~~control ~~indicated~~may vary over time.

~~Note~~Management 1evaluated Questar Gas’ internal control over financial reporting as of December 31, 2016. This assessment was based on criteria for effective internal control over financial reporting described in Internal Control-Integrated ~~Summary~~Framework (2013) issued by the Committee of ~~Significant~~Sponsoring ~~Accounting~~Organizations ~~Policies~~of the Treadway Commission. Based on this assessment, management believes that Questar Gas maintained effective internal control over financial reporting as of December 31, 2016.

A.This ~~Nature~~annual report does not include an attestation report of ~~Business~~Questar Gas’ independent registered public accounting firm regarding internal control over financial reporting. Management’s report is not subject to attestation by Questar Gas’ independent registered public accounting firm pursuant to a permanent exemption under the Dodd-Frank Act.

~~Questar~~March 15, ~~Corporation~~2017 ~~(Questar or the Company) is a Rockies-based integrated natural gas company with three principal complementary and wholly-owned lines of business:~~

•Item 9B. ~~Questar~~Other Information ~~Gas Company (Questar Gas) provides retail natural gas distribution in Utah, Wyoming and Idaho.~~

~~• Wexpro Company (Wexpro) develops and produces natural gas from cost-of-service reserves for Questar Gas customers~~None.

~~• Questar Pipeline Company (Questar Pipeline) operates interstate natural gas pipelines and storage facilities in the western United States and provides other energy services.~~31

QuestarTable is headquartered in Salt Lake City, Utah. Shares of Questar common stock trade on the New York Stock Exchange (NYSE:STR).Contents

B.Part ~~Principles~~III ~~of Consolidation~~

The consolidated financial statements contain the accounts of Questar and its majority-owned or controlled subsidiaries. The consolidated financial statements were prepared in accordance with U.S. generally accepted accounting principles (GAAP) and with the instructions for Annual Reports on Form Item 10~~-K and SEC Regulations S-X and S-K~~. ~~All~~Directors, ~~significant~~Executive ~~intercompany~~Officers ~~accounts~~ and ~~transactions~~Corporate ~~have~~Governance ~~been eliminated in consolidation.~~

OnOmitted ~~June 30,~~pursuant ~~2010, Questar distributed all of the shares of common stock of QEP (formerly Questar Market Resources) held by Questar~~ to ~~Questar~~General ~~shareholders~~Instructions ~~in a tax-free, pro rata dividend~~ I.(~~the Spinoff~~2)~~. Each Questar shareholder received one share of QEP common stock for each share of Questar common stock held~~ (~~including fractional shares~~c) ~~at the close of business on the record date~~. ~~In connection with the Spinoff, QEP distributed Wexpro, a wholly-owned subsidiary of QEP, to Questar. In addition, Questar contributed $250.0 million of equity to QEP prior to the Spinoff.~~

~~The financial information presented in this Annual Report recasts QEP's financial condition and operating results as discontinued operations for all periods presented through June~~Item ~~30, 2010, and reflects Wexpro's financial condition and operating results as a separate line of business. A summary of discontinued operations can be found in Note 15. Questar incurred $~~11.5 ~~million~~Executive Compensation ~~of separation costs in 2010 in connection with the Spinoff.~~

C.Omitted ~~Investment~~pursuant into ~~Unconsolidated~~General ~~Affiliate~~Instructions I.(2)(c).

~~Questar uses the equity method to account for its investment in an unconsolidated affiliate where it does not have control, but has significant influence~~Item 12. ~~The~~Security Ownership ~~investment in the unconsolidated affiliate on the Company's Consolidated Balance Sheets equals the Company's proportionate share~~ of ~~equity~~Certain ~~reported~~Beneficial byOwners ~~the~~and ~~unconsolidated~~Management affiliate. The investment is assessed for possible impairment when events indicate that the fair value of the investment may be below the Company'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~~Related ~~amount~~Stockholder ofMatters ~~the write-down is included in the determination of net income.~~

~~White~~Omitted ~~River~~pursuant ~~Hub,~~to ~~LLC,~~General aInstructions ~~limited liability company and FERC-regulated transporter of natural gas, is the sole unconsolidated affiliate~~I. ~~Questar Pipeline owns 50% of White River Hub, LLC, and is the operator~~(2)(c).

DItem 13. ~~Use~~Certain ofRelationships ~~Estimates~~and Related Transactions, and Director Independence

~~The~~Omitted ~~preparation~~pursuant ofto ~~financial~~General ~~statements~~Instructions and notes in conformity with GAAP requires that management formulate estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses and the disclosure of contingent assets and liabilitiesI. ~~The Company also incorporates estimates of proved developed gas and oil reserves in the calculation of depreciation, depletion and amortization rates of its gas and oil properties~~(2)(c). Changes in estimated quantities of the Company's reserves could impact its reported financial results as well as disclosures regarding the quantities of proved gas and oil reserves. Actual results could differ from these estimates.

61Item 14. Principal Accountant Fees and Services

EEffective September 16, 2016, the Dominion Audit Committee approved the dismissal of Ernst & Young LLP, the independent registered public accounting firm, for the audit of the financial statements of Questar Gas as of and for the fiscal year ending December 31, 2016, in connection with the closing of the Dominion Questar Combination. ~~Revenue~~On ~~Recognition~~September 16, 2016, the Dominion Audit Committee appointed Deloitte & Touche LLP as the independent registered public accounting firm to audit the financial statements of Questar Gas for the fiscal year ending December 31, 2016. Deloitte & Touche LLP also serves as the independent registered public accounting firm for the audits of the consolidated financial statements of Dominion.

The following table presents fees paid to Ernst & Young LLP for services related to Questar Gas for the fiscal years ended December 31, 2016 and 2015.

Questar Gas records revenues in the period that gas is delivered, including gas delivered to residential and commercial customers but not billed as of the end of the accounting period. Unbilled gas deliveries are estimated for the period from the date meters are read to the end of the month. Approximately one-half month of revenue is estimated in any period. Gas costs and other variable costs are recorded on the same basis to ensure proper matching of revenues and expenses. Questar Gas's tariff allows for monthly adjustments to customer bills to approximate the effect of abnormal weather on non-gas revenues. The weather-normalization adjustment significantly reduces the impact of weather on gas-distribution earnings. The PSCU and PSCW approved a CET to promote energy conservation. Under the CET, Questar Gas non-gas revenues are decoupled from the volume of gas used by customers. The tariff specifies a margin per customer for each month with differences to be deferred and recovered from customers or refunded to customers through periodic rate adjustments. Rate adjustments occur every six months under the CET. The adjustments amortize deferred CET amounts over a 12-month period. These adjustments are limited to 5% of non-gas revenues.


Type of Fees	2016		2015
(millions)
Audit fees	$	0.3	$	0.5
Audit-related fees		—		—
Tax fees		—		—
All other fees		—		—
Total Fees	$	0.3	$	0.5

~~Questar~~The ~~Gas~~following ~~allows~~table ~~customers~~presents ~~the~~fees ~~option~~paid ofto ~~paying~~Deloitte & anTouche ~~estimated~~LLP ~~fixed~~for ~~monthly~~services ~~bill~~related ~~throughout the year on a budget-billing program. The estimated payments are adjusted~~ to actual usage annually. Amounts collected from customers under this program in excess of gas deliveries are recorded on the Consolidated Balance Sheets as customer advances. The budget-billing option does not impact revenue recognition. Questar Gas for ~~may~~the ~~collect~~fiscal ~~revenues~~year ~~subject~~ended toDecember ~~possible~~31, ~~refunds~~2016 ~~and establish reserves pending final orders from regulatory agencies.~~

Wexpro


Type of Fees	2016
(millions)
Audit fees	$	0.4
Audit-related fees		—
Tax fees		—
All other fees		—
Total Fees	$	0.4

~~Wexpro~~Audit ~~recognizes~~fees ~~revenues~~represent infees ~~the~~of ~~period~~Ernst & ~~that~~Young ~~services~~LLP ~~are~~prior ~~provided~~to orthe ~~products~~Dominion ~~are~~Questar ~~delivered.~~Combination ~~Wexpro recovers its costs~~ and ~~receives~~of Deloitte & anTouche ~~unlevered,~~LLP after~~-tax~~ ~~return~~the ofDominion ~~approximately~~Questar ~~20%~~Combination onfor ~~its~~the ~~investment~~audit ~~base.~~of InQuestar ~~accordance~~Gas’ ~~with~~annual ~~the~~financial ~~Wexpro Agreement~~statements, ~~production from~~ the ~~gas~~review ~~properties~~of ~~operated~~financial bystatements ~~Wexpro~~included isin ~~delivered to~~ Questar Gas’ atquarterly ~~Wexpro's cost of providing this service including a return on Wexpro's investment. Wexpro sells crude oil production from certain oil~~Form 10-~~producing~~Q ~~properties~~reports, atand ~~market prices with~~ the ~~revenues~~services ~~used~~that toan ~~recover~~independent ~~operating~~auditor ~~expenses~~would ~~and~~customarily to provide ~~Wexpro~~in aconnection ~~return~~with onsubsidiary ~~its~~audits, ~~investment.~~statutory ~~Any~~requirements, ~~operating~~regulatory ~~income~~filings, ~~remaining~~and ~~after~~similar ~~recovery~~engagements offor ~~expenses~~the ~~and~~fiscal year, ~~Wexpro's~~such ~~return~~as oncomfort ~~investment~~letters, isattest ~~divided~~services, ~~between~~consents, ~~Questar Gas~~ and ~~Wexpro,~~assistance with ~~Wexpro~~review ~~retaining~~of ~~46%.~~documents ~~Amounts~~filed ~~received~~with ~~by Questar Gas from~~ the ~~sharing of Wexpro's oil income are used to reduce natural gas costs to utility customers~~SEC.

~~Wexpro's~~Audit-related ~~investment~~fees consist ~~base consists~~ of ~~its~~assurance ~~investment in commercial wells~~ and related ~~facilities~~services ~~and~~that isare ~~adjusted~~reasonably ~~for~~related ~~working~~to ~~capital~~the ~~and~~performance ~~reduced~~of ~~for~~the ~~deferred~~audit ~~income~~or ~~taxes~~review ~~and~~of ~~accumulated~~Questar ~~depreciation,~~Gas’ ~~depletion~~financial ~~and amortization~~statements. ~~Revenue~~This ~~associated~~category ~~with~~may ~~the~~include ~~sale~~fees ofrelated ~~gas~~to ~~and oil is accounted for using~~ the ~~sales~~performance ~~method,~~of ~~whereby~~audits ~~revenue is recognized as gas~~ and ~~oil~~attest isservices ~~sold~~not required toby ~~purchasers.~~statute ~~Wexpro~~or ~~may~~regulations, ~~collect~~due ~~revenues~~diligence ~~subject~~related to ~~possible~~mergers, ~~refunds~~acquisitions, and ~~establish~~investments, ~~reserves~~and ~~pending~~accounting ~~final~~consultations ~~calculation~~about of the ~~after-tax~~application ~~return~~of onGAAP ~~investments,~~to ~~which~~proposed ~~is adjusted annually~~transactions.

Questar ~~Pipeline~~Gas’ Board of Directors has adopted the Dominion Audit Committee pre-approval policy for its independent auditor’s services and fees and has delegated the execution of this policy to the Dominion Audit Committee. In accordance with this delegation, each year the Dominion Audit Committee pre-approves a schedule that details the services to be provided for the following year and an estimated charge for such services. At its January 2017 meeting, the Dominion Audit Committee approved Questar Gas’ schedules of services and fees for 2017. In accordance with the pre-approval policy, any changes to the pre-approved schedule may be pre-approved by the Dominion Audit Committee or a delegated member of the Dominion Audit Committee.

Questar Pipeline and subsidiaries recognize revenues in the period that services are provided or products are delivered. The straight-fixed-variable rate design used by Questar Pipeline, which allows for recovery of substantially all fixed costs in the demand or reservation charge, reduces the earnings impact of volume changes on gas-transportation and storage operations. Questar Pipeline may collect revenues subject to possible refunds and establish reserves pending final orders from regulatory agencies.32

F.Table Cost of SalesContents

~~Questar~~Part ~~Gas~~IV 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. 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.

62Item 15. Exhibits and Financial Statement Schedules

~~The~~(a) ~~details~~Certain ofdocuments ~~Questar's~~are ~~consolidated~~filed ~~cost~~as part of ~~sales~~this Form 10-K and are asincorporated ~~follows:~~by reference and found on the pages noted.

	Year Ended December 31,
	2012			2011			2010
	(in millions)
Questar Gas
Gas purchases	$	104.2		$	221.2		$	245.4
Operator service fee	274.0			253.4			240.0
Transportation and storage	79.6			78.4			78.1
Gathering	20.5			25.0			23.6
Royalties	32.0			38.9			37.2
Storage (injection) withdrawal, net	1.9			3.0			(0.8		)
Purchased-gas account adjustment	16.1			20.6			(36.8		)
Other	5.0			5.2			5.5
Total Questar Gas cost of natural gas sold	533.3			645.7			592.2
Elimination of Questar Gas cost of natural gas sold - affiliated parties	(347.7		)	(327.3		)	(313.7		)
Total Questar Gas cost of natural gas sold - unaffiliated parties	185.6			318.4			278.5
Questar Pipeline
Total Questar Pipeline cost of sales	6.7			3.1			2.4
Total cost of sales	$	192.3		$	321.5		$	280.9

1. Financial Statements

GSee Index on page 11. ~~Regulation~~

~~The~~2. ~~Company~~All ~~applies~~schedules ~~the~~are ~~regulatory~~omitted ~~accounting~~because ~~principles~~they toare ~~the~~not ~~rate-regulated businesses. Under these principles~~applicable, or the ~~Company~~required ~~records~~information ~~regulatory~~is ~~assets~~either ~~and liabilities that would~~ not bematerial ~~otherwise recorded under GAAP for non-rate regulated entities. Regulatory assets and liabilities record probable future revenues~~ or ~~expenses~~is ~~associated~~shown ~~with~~in ~~certain~~the ~~charges~~financial statements or ~~credits that will be recovered from or refunded to customers through~~ the ~~rate-making~~related ~~process~~notes.

~~Questar~~3. ~~Gas~~Exhibits ~~accounts~~(incorporated ~~for purchased-gas costs in accordance with procedures authorized~~ by ~~the~~reference ~~PSCU~~unless ~~and~~otherwise ~~the~~noted) PSCW. Purchased-gas costs that are different from those provided for in present rates are accumulated and recovered or credited through future rate changes. Questar Gas may hedge a portion of its natural gas supply to mitigate price fluctuations for gas-distribution customers. The regulatory commissions allow Questar Gas to record periodic mark-to-market adjustments for commodity-price derivatives in the purchased-gas-adjustment account. Questar did not have any commodity-price derivatives at December 31, 2012 or 2011. See Note 10 for a description and comparison of regulatory assets and liabilities as of December 31, 2012 and 2011.

Wexpro manages and produces cost-of-service reserves for gas utility affiliate Questar Gas under the terms of the Wexpro Agreement, a long-standing comprehensive agreement with the states of Utah and Wyoming (see Note 9).


Exhibit Number		Description

3.1		Amended and Restated Consolidated Articles of Incorporation of Questar Gas Company (Exhibit 3.1, Form 8-K filed May 14, 2012, File No. 333-69210).

3.2		Bylaws of Questar Gas Company, effective as of October 17, 2016 (Exhibit 3.2, Form 10-Q for the quarter ended September 30, 2016 filed November 9, 2016, File No. 333-69210).

4.1		Indenture dated as of May 1, 1992 between Questar Gas Company (formerly known as Mountain Fuel Supply Company) and Wells Fargo Bank, National Association, as successor trustee (Exhibit 4.01, Registration Statement on Form S-3 filed September 10, 2001, File No. 333-69210).

4.2		Form of Questar Gas Company’s 6.30% Notes due 2018 (Exhibit 4.1, Form 8-K filed March 26, 2008, File No. 333-69210).

4.3		Form of Questar Gas Company’s 7.20% Notes due 2038 (Exhibit 4.3, Form 8-K filed March 26, 2008, File No. 333-69210).

4.4		Form of Questar Gas Company’s 2.98% Senior Notes, Series A, due 2024 (Exhibit 1(a) to the Note Purchase Agreement filed as Exhibit 99.1, Form 8-K filed November 7, 2012, File No. 333-69210).

4.5		Form of Questar Gas Company’s 3.28% Senior Notes, Series B, due 2027 (Exhibit 1(b) to the Note Purchase Agreement filed as Exhibit 99.1, Form 8-K filed November 7, 2012, File No. 333-69210).

4.6		Form of Questar Gas Company’s 4.78% Senior Notes, Series A, due 2043 (Exhibit 1(a) to the Note Purchase Agreement filed as Exhibit 1.1, Form 8-K filed December 24, 2013, File No. 333-69210).

4.7		Form of Questar Gas Company’s 4.83% Series B Senior Notes due 2048 (Exhibit 1(b) to the Note Purchase Agreement filed as Exhibit 1.1, Form 8-K filed December 24, 2013, File No. 333-69210).

4.8		Form of Questar Gas Company’s 3.62% Senior Notes, Series A, due 2046 (Exhibit 1(a) to the Note Purchase Agreement filed as Exhibit 1.1, Form 8-K filed December 19, 2016, File No. 333-69210).

4.9		Form of Questar Gas Company’s 3.67% Senior Notes, Series B, due 2051 (Exhibit 1(b) to the Note Purchase Agreement filed as Exhibit 1.1, Form 8-K filed December 19, 2016, File No. 333-69210).

10.1		Stipulation and Agreement, dated October 14, 1981, among the Utah Department of Business Regulation, Division of Public Utilities, the Utah Committee of Consumer Services, Questar Gas Company (formerly known as Mountain Fuel Supply Company), Wexpro Company and the Utah Public Service Commission (Exhibit 10.25, Form 10-K for the year ended December 31, 2011 filed February 24, 2012, File No. 333-69210).

10.2		Gas Gathering Agreement, dated October 11, 1993, between Questar Gas Company (formerly known as Mountain Fuel Supply Company) and Questar Pipeline, LLC (formerly known as Questar Pipeline Company) (Exhibit 10.11, Form 10-K for the year ended December 31, 1994 filed March 28, 1995, File No. 001-00935).

10.3		Amendment to Gas Gathering Agreement, dated February 6, 1998, between Questar Gas Company and Questar Management Company (Exhibit 10.12, Form 10-K for the year ended December 31, 1997 filed March 30, 1998, File No. 033-55866).

10.4		Second Amendment to Gas Gathering Agreement, dated March 22, 2016, between Questar Gas Company and QEPM Gathering I, LLC (Exhibit 10.1, Form 8-K filed March 24, 2016, File No. 333-69210).

10.5		Wexpro II Agreement, dated September 12, 2012, among Questar Gas Company, Wexpro Company, the Utah Division of Public Utilities and the Wyoming Office of Consumer Advocate (Exhibit 10.1, Form 10-Q for the quarter ended September 30, 2012 filed October 31, 2012, File No. 333-69210).

10.6		Settlement Stipulation, dated October 6, 2015, among Questar Gas Company, Wexpro Company, the Utah Division of Public Utilities, the Utah Office of Consumer Services and the Wyoming Office of Consumer Advocate (Exhibit 99.2, Form 8-K filed November 25, 2015, File No. 333-69210).

Questar Pipeline is regulated by the FERC. Questar Gas is regulated by the PSCU and the PSCW. The Idaho Public Utilities Commission has contracted with the PSCU for rate oversight of Questar Gas operations in a small area of southeastern Idaho. These regulatory agencies establish rates for the storage, transportation and sale of natural gas. The regulatory agencies also regulate, among other things, the extension and enlargement or abandonment of jurisdictional natural gas facilities. Regulation is intended to permit the recovery, through rates, of the cost of service, including a return on investment.33

H.Table Cashof and Cash EquivalentsContents

Cash equivalents consist principally of repurchase agreements with maturities of three months or less. In almost all cases, the repurchase agreements are highly liquid investments in overnight securities made through commercial bank accounts that result in available funds the next business day.


Exhibit Number		Description

10.7		Settlement Stipulation, dated August 15, 2016, among Questar Gas Company, Dominion Resources, Inc., the Utah Division of Public Utilities, the Utah Office of Consumer Services, the Utah Association of Energy Users; the American Natural Gas Council, Inc. and the State of Utah, Governor’s Office of Energy Development (Exhibit 10.1, Form 8-K filed August 25, 2016, File No. 333-69210).

10.8		Settlement Stipulation, dated August 1, 2016, among Questar Gas Company, Dominion Resources, Inc. and the Wyoming Office of Consumer Advocate (Exhibit 10, Form 8-K filed September 15, 2016, File No. 333-69210).

10.9		$750,000,000 Inter-Company Credit Agreement, dated as of September 16, 2016, by and between Dominion Resources, Inc. and Questar Gas Company (filed herewith).

10.10		$5,000,000,000 Second Amended and Restated Revolving Credit Agreement, dated November 10, 2016, among Dominion Resources, Inc., Virginia Electric and Power Company, Dominion Gas Holdings, LLC, Questar Gas Company, JPMorgan Chase Bank, N.A., as Administrative Agent, Mizuho Bank, Ltd., Bank of America, N.A., Barclays Bank PLC and Wells Fargo Bank, N.A., as Syndication Agents, and other lenders named therein (Exhibit 10.1, Form 8-K filed November 10, 2016, File No. 333-69210).

10.11		$500,000,000 Second Amended and Restated Revolving Credit Agreement, dated November 10, 2016, among Dominion Resources, Inc., Virginia Electric and Power Company, Dominion Gas Holdings, LLC, Questar Gas Company, KeyBank National Association, as Administrative Agent, U.S. Bank National Association, as Syndication Agent, and other lenders named therein (Exhibit 10.2, Form 8-K filed November 10, 2016, File No. 333-69210).

16		Letter from Ernst & Young LLP, dated September 22, 2016 (Exhibit 16.1, Form 8-K filed September 22, 2016, File No. 333-69210).

31.a		Certification by Chief Executive Officer of Questar Gas Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.b		Certification by Chief Financial Officer of Questar Gas Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32		Certification to the Securities and Exchange Commission by Chief Executive of Officer and Chief Financial Officer of Questar Gas Company as required by Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

99		Qualifications of Reservoir Engineer (filed herewith).

101		The following financial statements from Questar Gas Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 15, 2017, formatted in XBRL: (i) Statements of Income, (ii) Balance Sheets, (iii) Statements of Common Shareholder’s Equity, (iv) Statements of Cash Flows, and (v) the Notes to Financial Statements.

IItem 16. ~~Notes~~Form ~~Receivable~~10-K ~~and~~Summary ~~Notes Payable~~

~~Notes receivable and notes payable represent pre-Spinoff interest bearing demand notes with former subsidiaries of Questar~~None.

6334

J.Table Property,of Plant and EquipmentContents

~~Property,~~Signatures ~~plant and equipment balances are stated at historical cost. Maintenance and repair costs are expensed as incurred.~~

~~Cost-~~Pursuant to the requirements of~~-service~~ ~~gas~~Section 13 ~~and~~or ~~oil~~15(d) ~~operations~~of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

~~The~~QUESTAR ~~successful~~GAS ~~efforts~~COMPANY ~~method~~By: of/s/ ~~accounting~~Thomas ~~is used for cost-of-service reserves developed and produced by Wexpro for gas utility affiliate Questar Gas~~F. ~~Cost-of-service~~Farrell ~~reserves~~II ~~are properties for which the operations and return on investment are subject to the Wexpro Agreement~~ (~~see~~Thomas ~~Note 9)~~F. ~~Under~~Farrell ~~the successful efforts method~~II, ~~Wexpro~~Chairman ~~capitalizes~~of the ~~costs~~Board of ~~acquiring~~Directors ~~leaseholds, drilling development wells, drilling successful exploratory wells,~~ and ~~purchasing~~Chief ~~related~~Executive support equipment and facilities. Geological and geophysical studies and other exploratory activities are expensed as incurred. Costs of production and general corporate activities are expensed in the period incurred. A gain or loss is generally recognized on assets as they are retired from service.Officer)

~~Contributions~~Date: inMarch ~~aid~~15, of2017 ~~construction~~

~~Customer~~Pursuant ~~contributions~~to inthe ~~aid~~requirements of ~~construction reduce plant unless~~ the ~~amounts~~Securities ~~are~~Exchange ~~refundable~~Act toof ~~customers.~~1934, ~~Contributions~~this ~~for~~report ~~main-line~~has ~~extensions~~been ~~may~~signed bebelow ~~refundable~~by ~~to customers if additional customers connect to~~ the ~~main-line~~following ~~segment~~persons ~~within~~on ~~five~~behalf ~~years.~~of ~~Refundable contributions are recorded as liabilities until refunded or~~ the ~~five-year~~registrant and ~~period expires without additional customer connections. Amounts not refunded reduce plant. Capital expenditures~~ in the ~~Consolidated~~capacities ~~Statements~~indicated ofon ~~Cash~~the ~~Flows~~15th ~~are~~day ~~reported net~~ of ~~non-refundable~~March, ~~contributions~~2017.

~~Depreciation~~Signature Title /s/ Thomas F. Farrell II Thomas F. Farrell II Chairman of the Board of Directors and Chief Executive Officer /s/ Mark F. McGettrick Mark F. McGettrick Director, ~~depletion~~Executive Vice President and ~~amortization~~Chief Financial Officer /s/ Mark O. Webb Mark O. Webb Director /s/ Michele L. Cardiff Michele L. Cardiff Vice President, Controller and Chief Accounting Officer

Major categories of fixed assets in gas distribution, transportation and storage operations are grouped together and depreciated using a straight-line method. Gains and losses on asset disposals are recorded as adjustments in accumulated depreciation. The Company has not capitalized future abandonment costs on a majority of its long-lived gas distribution and transportation assets due to a lack of a legal obligation to restore the area surrounding abandoned assets. In these cases, the regulatory agencies have opted to leave retired facilities in the ground undisturbed rather than excavate and dispose of the assets. Depreciation rates for Questar Gas and Questar Pipeline are established through rate proceedings.35

CapitalizedTable costs of development wells are depreciated on a field-by-field basis using the unit-of-production method and the estimated proved developed gas and oil reserves. Oil and NGL volumes are converted to natural gas equivalents using the ratio of one barrel of crude oil, condensate or NGL to 6,000 cubic feet of natural gas. The Company capitalizes an estimate of the fair value of future abandonment costs associated with cost-of-service reserves and depreciates these costs using a unit-of-production method. Depreciation, depletion and amortization for the remaining gas and oil properties is based upon rates that will systematically charge the costs of assets against income over the estimated useful lives of those assets using a straight-line method. Contents

~~The~~Exhibit ~~following~~Index ~~represent average depreciation, depletion and amortization rates of the Company's capitalized costs:~~

	Year Ended December 31,
ExhibitNumber		Description
	2012			2011			2010
3.1		Amended and Restated Consolidated Articles of Incorporation of Questar Gas Company (Exhibit 3.1, Form 8-K filed May 14, 2012, File No. 333-69210).
Questar Gas distribution plant	2.8		%	2.8		%	2.9		%
3.2		Bylaws of Questar Gas Company, effective as of October 17, 2016 (Exhibit 3.2, Form 10-Q for the quarter ended September 30, 2016 filed November 9, 2016, File No. 333-69210).
Cost-of-service gas and oil properties, per Mcfe	$	1.49		$	1.49		$	1.47
4.1		Indenture dated as of May 1, 1992 between Questar Gas Company (formerly known as Mountain Fuel Supply Company) and Wells Fargo Bank, National Association, as successor trustee (Exhibit 4.01, Registration Statement on Form S-3 filed September 10, 2001, File No. 333-69210).
Questar Pipeline transportation, storage and other energy services	3.4		%	3.5		%	3.5		%
4.2		Form of Questar Gas Company’s 6.30% Notes due 2018 (Exhibit 4.1, Form 8-K filed March 26, 2008, File No. 333-69210).
4.3		Form of Questar Gas Company’s 7.20% Notes due 2038 (Exhibit 4.3, Form 8-K filed March 26, 2008, File No. 333-69210).
4.4		Form of Questar Gas Company’s 2.98% Senior Notes, Series A, due 2024 (Exhibit 1(a) to the Note Purchase Agreement filed as Exhibit 99.1, Form 8-K filed November 7, 2012, File No. 333-69210).
4.5		Form of Questar Gas Company’s 3.28% Senior Notes, Series B, due 2027 (Exhibit 1(b) to the Note Purchase Agreement filed as Exhibit 99.1, Form 8-K filed November 7, 2012, File No. 333-69210).
4.6		Form of Questar Gas Company’s 4.78% Senior Notes, Series A, due 2043 (Exhibit 1(a) to the Note Purchase Agreement filed as Exhibit 1.1, Form 8-K filed December 24, 2013, File No. 333-69210).
4.7		Form of Questar Gas Company’s 4.83% Series B Senior Notes due 2048 (Exhibit 1(b) to the Note Purchase Agreement filed as Exhibit 1.1, Form 8-K filed December 24, 2013, File No. 333-69210).
4.8		Form of Questar Gas Company’s 3.62% Senior Notes, Series A, due 2046 (Exhibit 1(a) to the Note Purchase Agreement filed as Exhibit 1.1, Form 8-K filed December 19, 2016, File No. 333-69210).
4.9		Form of Questar Gas Company’s 3.67% Senior Notes, Series B, due 2051 (Exhibit 1(b) to the Note Purchase Agreement filed as Exhibit 1.1, Form 8-K filed December 19, 2016, File No. 333-69210).
10.1		Stipulation and Agreement, dated October 14, 1981, among the Utah Department of Business Regulation, Division of Public Utilities, the Utah Committee of Consumer Services, Questar Gas Company (formerly known as Mountain Fuel Supply Company), Wexpro Company and the Utah Public Service Commission (Exhibit 10.25, Form 10-K for the year ended December 31, 2011 filed February 24, 2012, File No. 333-69210).
10.2		Gas Gathering Agreement, dated October 11, 1993, between Questar Gas Company (formerly known as Mountain Fuel Supply Company) and Questar Pipeline, LLC (formerly known as Questar Pipeline Company) (Exhibit 10.11, Form 10-K for the year ended December 31, 1994 filed March 28, 1995, File No. 001-00935).
10.3		Amendment to Gas Gathering Agreement, dated February 6, 1998, between Questar Gas Company and Questar Management Company (Exhibit 10.12, Form 10-K for the year ended December 31, 1997 filed March 30, 1998, File No. 033-55866).
10.4		Second Amendment to Gas Gathering Agreement, dated March 22, 2016, between Questar Gas Company and QEPM Gathering I, LLC (Exhibit 10.1, Form 8-K filed March 24, 2016, File No. 333-69210).
10.5		Wexpro II Agreement, dated September 12, 2012, among Questar Gas Company, Wexpro Company, the Utah Division of Public Utilities and the Wyoming Office of Consumer Advocate (Exhibit 10.1, Form 10-Q for the quarter ended September 30, 2012 filed October 31, 2012, File No.333-69210).
10.6		Settlement Stipulation, dated October 6, 2015, among Questar Gas Company, Wexpro Company, the Utah Division of Public Utilities, the Utah Office of Consumer Services and the Wyoming Office of Consumer Advocate (Exhibit 99.2, Form 8-K filed November 25, 2015, File No. 333-69210).
10.7		Settlement Stipulation, dated August 15, 2016, among Questar Gas Company, Dominion Resources, Inc., the Utah Division of Public Utilities, the Utah Office of Consumer Services, the Utah Association of Energy Users; the American Natural Gas Council, Inc. and the State of Utah, Governor’s Office of Energy Development (Exhibit 10.1, Form 8-K filed August 25, 2016, File No. 333-69210).
10.8		Settlement Stipulation, dated August 1, 2016, among Questar Gas Company, Dominion Resources, Inc. and the Wyoming Office of Consumer Advocate (Exhibit 10, Form 8-K filed September 15, 2016, File No. 333-69210).

~~K. Impairment of Long-Lived Assets~~36

ProvedTable gas and oil properties are evaluated on a field-by-field basis for potential impairment. Other properties are evaluated on a specific-asset basis or in groups of similar assets, as applicable. Impairment is indicated when a triggering event occurs and the sum of the estimated undiscounted future net cash flows of an evaluated asset is less than the asset's carrying value. Triggering events could include, but are not limited to, an impairment of gas and oil reserves caused by mechanical problems, faster-than-expected decline of reserves, lease-ownership issues, other-than-temporary decline in gas and oil prices, and changes in the utilization of pipeline assets. If impairment is indicated, fair value is calculated using a discounted-cash-flow approach. Cash flow estimates require forecasts and assumptions for many years into the future for a variety of factors, including commodity prices and operating costs. There were no impairments in 2012, 2011 or 2010.Contents

L. Goodwill and Other Intangible Assets


Exhibit Number		Description

10.9		$750,000,000 Inter-Company Credit Agreement, dated as of September 16, 2016, by and between Dominion Resources, Inc. and Questar Gas Company (filed herewith).

10.10		$5,000,000,000 Second Amended and Restated Revolving Credit Agreement, dated November 10, 2016, among Dominion Resources, Inc., Virginia Electric and Power Company, Dominion Gas Holdings, LLC, Questar Gas Company, JPMorgan Chase Bank, N.A., as Administrative Agent, Mizuho Bank, Ltd., Bank of America, N.A., Barclays Bank PLC and Wells Fargo Bank, N.A., as Syndication Agents, and other lenders named therein (Exhibit 10.1, Form 8-K filed November 10, 2016, File No. 333-69210).

10.11		$500,000,000 Second Amended and Restated Revolving Credit Agreement, dated November 10, 2016, among Dominion Resources, Inc., Virginia Electric and Power Company, Dominion Gas Holdings, LLC, Questar Gas Company, KeyBank National Association, as Administrative Agent, U.S. Bank National Association, as Syndication Agent, and other lenders named therein (Exhibit 10.2, Form 8-K filed November 10, 2016, File No. 333-69210).

16		Letter from Ernst & Young LLP, dated September 22, 2016 (Exhibit 16.1, Form 8-K filed September 22, 2016, File No. 333-69210).

31.a		Certification by Chief Executive Officer of Questar Gas Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

31.b		Certification by Chief Financial Officer of Questar Gas Company pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).

32		Certification to the Securities and Exchange Commission by Chief Executive of Officer and Chief Financial Officer of Questar Gas Company as required by Section 906 of the Sarbanes-Oxley Act of 2002 (furnished herewith).

99		Qualifications of Reservoir Engineer (filed herewith).

101		The following financial statements from Questar Gas Company’s Annual Report on Form 10-K for the year ended December 31, 2016, filed on March 15, 2017, formatted in XBRL: (i) Statements of Income, (ii) Balance Sheets, (iii) Statements of Common Shareholder’s Equity, (iv) Statements of Cash Flows, and (v) the Notes to Financial Statements.

Goodwill represents the excess of the amount paid over the fair value of net assets acquired in a business combination and is not subject to amortization. Goodwill and indefinite lived intangible assets are tested for impairment at a minimum of once a year or when a triggering event occurs. The Company evaluates whether it is more likely than not that the carrying value of a reporting unit is greater than its fair value using events and circumstances such as economic conditions, industry changes, 37

financial performance, etc. Fair value is measured using actively traded market values of other comparable companies in the same businesses. If the fair value of the reporting unit exceeds its carrying value then goodwill is considered not to be impaired. If the carrying value of the business unit is greater than the fair value, an impairment of goodwill is recognized equal to the excess of carrying amount of goodwill over its fair value.

M. Capitalized Interest and Allowance for Funds Used During Construction

The Company capitalizes interest costs when applicable. The FERC, PSCU and PSCW require the capitalization of funds used during construction (AFUDC) for rate-regulated plant and equipment. The Wexpro Agreement requires capitalization of AFUDC on cost-of-service gas and oil development projects. Amounts recorded in the Consolidated Statements of Income for the capitalization of AFUDC and interest costs are disclosed in the table below:

	Year Ended December 31,
	2012		2011		2010
	(in millions)
AFUDC (recorded as an increase in interest and other income)
Wexpro	$	2.1	$	3.3	$	2.4
Questar Pipeline	0.2		1.1		0.3
Total AFUDC	$	2.3	$	4.4	$	2.7
Capitalized interest costs (recorded as a reduction of interest expense)
Questar Gas	$	0.1	$	0.1	$	0.2
Questar Pipeline	0.1		0.5		1.0
Total capitalized interest costs	$	0.2	$	0.6	$	1.2

N. Derivative Instruments and Hedging Activities

The Company may elect to designate a derivative instrument as a hedge of exposure to changes in fair value or cash flows. A derivative instrument qualifies as a hedge if all of the following tests are met:

• The item to be hedged exposes the Company to market risk.

• The derivative reduces the risk exposure and is designated as a hedge at the inception of the hedging relationship.

• At the inception of the hedge and throughout the hedge period, there is a high correlation between changes in the fair value of the derivative instrument and the fair value of the underlying hedged item.

If the hedged exposure is a fair value exposure, the gain or loss on the derivative instrument is recognized in earnings in the period of the change together with the offsetting gain or loss from the change in fair value of the hedged item. If the hedged exposure is a cash flow exposure, the effective portion of the gain or loss on the derivative instrument is reported initially as a component of accumulated other comprehensive income (loss) (AOCI) and subsequently reclassified into earnings when the forecasted transaction affects earnings. Any amount excluded from the assessment of hedge effectiveness, as well as the ineffective portion of the gain or loss, is reported currently in earnings. When a derivative instrument is designated as a cash flow hedge of a forecasted transaction that becomes probable of not occurring, the gain or loss on the derivative is immediately reclassified into earnings from AOCI. See Note 5 for further discussion on derivatives and hedging.

O. Credit Risk

The Rocky Mountain region is the Company's primary market area. Exposure to credit risk may be affected by the concentration of customers in this region due to changes in economic or other conditions. Customers include individuals and numerous commercial and industrial enterprises that may react differently to changing conditions. Management believes that its credit-review procedures, loss reserves, customer deposits and collection procedures have adequately provided for usual and customary credit-related losses. Loss reserves are periodically reviewed for adequacy and may be established on a specific-case basis.

Bad debt expense associated with accounts receivable amounted to $1.2 million in 2012, $2.4 million in 2011 and $0.5 million in 2010. The 2010 bad-debt expense was reduced by $1.5 million from the settlement of a revenue dispute that had been previously accrued for in the allowance for bad debts. The allowance for bad debts was $3.1 million at December 31, 2012 and $3.2 million at December 31, 2011. Questar Gas's retail-gas operations account for a majority of the bad debt expense. Questar Gas estimates bad debt expense as a percentage of general-service revenues with periodic adjustments. Uncollected accounts are generally written off six months after gas is delivered and interest is no longer accrued. Questar Gas recovers bad debt costs related to the gas-cost portion of rates in its Utah operations through a purchased-gas adjustment to rates.

P. Asset Retirement Obligations

Questar records an asset retirement obligation (ARO) when there is a legal obligation associated with the retirement of a tangible long-lived asset. The Company has not capitalized future abandonment costs on a majority of its long-lived transportation and distribution assets because the Company does not have a legal obligation to restore the area surrounding abandoned assets. In these cases, the regulatory agencies have opted to leave retired facilities in the ground undisturbed rather than requiring the Company to excavate and dispose of the assets. Cost-of-service AROs apply primarily to abandonment costs associated with gas and oil wells and certain other properties. If recording an ARO is warranted, the fair value of retirement costs is estimated by Company personnel based on abandonment costs of similar properties available to field operations and depreciated over the life of the related assets. Revisions to estimates result from material changes in the expected timing or amount of cash flows associated with AROs. Income or expense resulting from the settlement of ARO liabilities is included in net gain (loss) from asset sales on the Consolidated Statements of Income. The ARO liability is adjusted to present value each period through an accretion calculation using a credit-adjusted risk-free interest rate. See Note 3 for further discussion on AROs.

Q. Income Taxes

Questar and its subsidiaries file a consolidated federal income tax return. Questar Gas and Questar Pipeline account for income tax expense on a separate return basis and record tax benefits as they are generated. Deferred income taxes are provided for the temporary differences arising between the book and tax carrying amounts of assets and liabilities. These differences create taxable or tax-deductible amounts for future periods. Questar Gas and Questar Pipeline use the deferral method to account for investment tax credits as required by regulatory commissions. The Company records interest earned on income tax refunds in interest and other income and records penalties and interest charged on tax deficiencies in interest expense.

Accounting standards for income taxes specify the accounting for uncertainty in income taxes by prescribing a minimum recognition threshold for a tax position to be reflected in the financial statements. If recognized, the tax benefit is measured as the largest amount of tax benefit that is more-likely-than-not to be realized upon ultimate settlement. Management has considered the amounts and the probabilities of the outcomes that could be realized upon ultimate settlement and believes that it is more-likely-than-not that the Company's recorded income tax benefits will be fully realized. There were no unrecognized tax benefits at the beginning or at the end of the years ended December 31, 2012, 2011 and 2010. The federal income tax returns for 2009, 2010 and 2011 are under examination by the Internal Revenue Service (IRS). The 2012 federal income tax return has not been filed.

For tax years beginning in 2012, Questar has been accepted into the IRS's Compliance Assurance Process (CAP). The CAP employs real-time resolution to improve federal tax compliance by resolving all or most tax positions prior to filing the related tax return. Successful conclusion of the CAP allows the IRS to achieve an acceptable level of assurance regarding the accuracy of the Taxpayer's filed tax return and to eliminate or substantially reduce the need for a traditional examination.

Current federal tax statues allow taxpayers a deduction of bonus depreciation related to capital expenditures of 100% in 2011 and 50% in 2012. The effects of bonus depreciation and other significant book/tax timing differences resulted in a NOL for federal income tax purposes in 2011. The 2011 NOL was $124.8 million. Questar's estimated taxable income for 2012 is $69.7 million, resulting in an estimated NOL carryforward to future years of $55.1 million. The estimated NOL carryforward will expire in 2031. It is anticipated that Questar will be able to utilize the NOL by offsetting it against future taxable income. See Note 7 for further discussion on income taxes.

R. Earnings Per Share

Basic earnings per share (EPS) is computed by dividing net income attributable to Questar by the weighted-average number of common shares outstanding during the reporting period. Diluted EPS includes the potential increase in the number of outstanding shares that could result from the exercise of in-the-money stock options, the vesting of restricted stock units and the distribution of performance shares that are part of the Company's Long-Term Stock Incentive Plan (LTSIP), less shares repurchased under the treasury stock method. See Note 2 for further discussion on EPS.

S. Share-Based Compensation

Questar issues stock options, restricted shares, restricted stock units and performance shares to certain officers, employees and non-employee directors under its LTSIP. The Company uses the Black-Scholes-Merton mathematical model in estimating the fair value of stock options and the Monte Carlo simulation method in estimating the fair value of performance shares for accounting purposes. The granting of restricted shares and restricted stock units results in recognition of compensation cost measured at the grant-date market price. Questar uses an accelerated method in recognizing share-based compensation costs with graded vesting periods. See Note 11 for further discussion on share-based compensation.

T. Comprehensive Income

Beginning in 2012, the Company and its subsidiaries adopted accounting guidance issued in June 2011 that resulted in the addition of statements of comprehensive income to the primary financial statements.

Comprehensive income attributable to Questar, as reported in Questar's Consolidated Statements of Comprehensive Income, is the sum of net income as reported in the Questar Consolidated Statements of Income and other comprehensive income (loss) (OCI) as reported in the Questar Consolidated Statements of Equity. OCI includes recognition of the under-funded position of pension and other postretirement benefit plans, changes in the fair value of long-term investment, interest rate cash flow hedges and commodity-based derivative instruments, and income taxes. These transactions are not the culmination of the earnings process but result from periodically adjusting historical balances to fair value. Income or loss is recognized when the pension or other postretirement benefit costs are accrued, when the long-term investment is sold or otherwise realized, as the Company records interest expense for hedged interest payments and when gas, oil or NGL underlying the derivative instrument is sold. The components of consolidated AOCI, net of income taxes, as reported in Questar's Consolidated Balance Sheets, are shown below:

	December 31,
	2012			2011
	(in millions)
Pension liability	$	(203.5	)	$	(182.7	)
Postretirement benefits liability	(19.7		)	(20.1		)
Interest rate cash flow hedges	(23.2		)	(23.4		)
Long-term investment	0.1			0.1
Accumulated other comprehensive loss	$	(246.3	)	$	(226.1	)

Income taxes allocated to each component of Questar's consolidated OCI are shown in the table below. Expenses are in parentheses.

	Year Ended December 31,
	2012			2011			2010
	(in millions)
Change in unrecognized actuarial loss	$	13.6		$	62.3		$	(6.8	)
Change in unrecognized prior-service costs	(1.0		)	(1.1		)	(1.4		)
Interest rate cash flow hedges	(0.2		)	13.8			—
Change in fair value of long-term investment	(0.1		)	—			—
Discontinued operations, change in unrealized fair value of derivatives	—			—			51.6
Income taxes	$	12.3		$	75.0		$	43.4

Comprehensive income, as reported in Questar Pipeline's Consolidated Statements of Comprehensive Income, is the sum of net income as reported in the Questar Pipeline Consolidated Statements of Income and OCI as reported in the Questar Pipeline Consolidated Statements of Common Shareholder's Equity. OCI includes interest rate cash flow hedges and income taxes. These transactions are not the culmination of the earnings process but result from periodically adjusting historical balances to fair value. Income or loss is recognized as the company records interest expense for hedged interest payments. The component of consolidated AOCI, net of income taxes, as reported in Questar Pipeline's Consolidated Balance Sheets, is shown below:

	December 31,
	2012			2011
	(in millions)
Interest rate cash flow hedges	$	(23.2	)	$	(23.4	)
Accumulated other comprehensive loss	$	(23.2	)	$	(23.4	)

A reconciliation of the Company's beginning and ending after-tax AOCI balances related to interest rate cash flow hedging activities (see Note 5) is shown below. All cash flow hedging activity is attributable to Questar Pipeline.

	Year Ended December 31,
	2012			2011
	(in millions)
Accumulated other comprehensive loss at beginning of year	$	(23.4	)	$	—
Net change associated with current period hedging transactions	—			(23.5		)
Net amount reclassified into earnings	0.2			0.1
Accumulated other comprehensive loss at end of year	$	(23.2	)	$	(23.4	)

U. Business Segments

Line of business information is presented according to senior management's basis for evaluating performance considering differences in the nature of products, services and regulation, among other factors. Certain intersegment sales include intercompany profit.

V. Recent Accounting Developments

In February 2013, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2013-02, Comprehensive Income (Topic 220): Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income to enhance disclosure of the effects of reclassifications out of AOCI on income statement line items. The amendments in this ASU are effective for interim and annual periods beginning after December 15, 2012 and are applied prospectively. Because the guidance contained in this ASU only affects disclosure, the Company does not expect adoption will have an impact on the Company's financial position, results of operations or cash flows.

W. Reclassifications

Certain reclassifications were made to prior-year financial statements and notes to conform to the 2012 presentation.

All dollar amounts in this Annual Report on Form 10-K are in millions, except per-share information and where otherwise noted.

Note 2 - Earnings Per Share

Earnings Per Share

Basic EPS is computed by dividing net income attributable to Questar by the weighted-average number of common shares outstanding during the reporting period, which include vested restricted stock units. Diluted EPS includes the potential increase in the number of outstanding shares that could result from the exercise of in-the-money stock options, the vesting of restricted stock units and the distribution of performance shares that are part of the Company's LTSIP, less shares repurchased under the treasury stock method. Restricted shares are participating securities for the computation of basic earnings per share. Unvested restricted stock units are not participating securities because their dividend equivalents are forfeitable under certain circumstances. The application of the two-class method had an insignificant impact on the calculation of both basic and diluted EPS. A reconciliation of the components of basic and diluted shares used in the EPS calculation follows:

	Year Ended December 31,
	2012	2011	2010
	(in millions)
Weighted-average basic common shares outstanding	176.5	177.4	175.4
Potential number of shares issuable under the Company's LTSIP	1.0	1.4	2.6
Weighted-average diluted common shares outstanding	177.5	178.8	178.0

In the past three years, Questar had the ability to issue shares under the terms of the Dividend Reinvestment and Stock Purchase Plan, Employee Investment Plan and Long-Term Stock Incentive Plan.

Dividend Reinvestment and Stock Purchase Plan

The Dividend Reinvestment and Stock Purchase Plan allows shareholders to reinvest dividends or invest additional funds in Questar common stock. The Company can issue new shares or buy shares in the open market to meet shareholders' purchase requests. The Company bought shares in the open market to satisfy shareholders' purchases in 2012 and no shares were issued. The Company issued 4,400 shares in 2011 and 162,157 shares in 2010 and relied on open market purchases to supplement Company-issued shares in both years. At December 31, 2012, 20,531,255 shares were reserved and authorized for future issuance.

Long-Term Stock Incentive Plan

Questar issues stock options, restricted shares and restricted stock units to certain officers, directors and employees under its LTSIP. Stock options for participants have terms ranging from five to ten years with a majority issued with a seven to ten-year term. Options held by employees generally vest in three or four equal, annual installments. Options granted to non-employee directors generally vest in one installment six months after grant. Restricted shares and restricted stock units vest in equal installments over a specified number of years after the grant date with the majority vesting in three or four years. Unvested restricted shares have voting and dividend rights; however, sale or transfer is restricted. Restricted stock units do not have voting rights until shares are distributed. Restricted stock units also accrue dividend equivalents, which are subject to the same vesting, distribution and voting conditions of the underlying award.

Beginning in 2011, Questar grants performance shares to certain Company executive officers under the terms of the LTSIP. The awards are designed to motivate and reward these executives for long-term Company performance and provide an incentive for them to remain with the Company. The target number of performance shares for each executive officer is subject to adjustment upward or downward based on the Company's performance relative to a specified peer group of companies over a three-year performance period with respect to defined performance criteria. Each three-year performance period commences at the beginning of the year of grant. The actual performance shares awarded, if any, are distributed in the quarter following the conclusion of the performance period so long as such executive officer was employed by the Company or its affiliates as of the last day of the performance period. Half of any award will be distributed in shares of Questar common stock and half in cash. For a summary of LTSIP transactions, see Note 11.

Note 3 - Asset Retirement Obligations

Questar records AROs when there are legal obligations associated with the retirement of tangible, long-lived assets. At Questar, AROs apply primarily to abandonment costs associated with gas and oil wells, production facilities and certain other properties. The Company has not capitalized future abandonment costs on a majority of its long-lived transportation and distribution assets because the Company does not have a legal obligation to restore the area surrounding abandoned assets. The fair value of retirement costs is estimated by Company personnel based on abandonment costs of similar properties available to field operations and depreciated over the life of the related assets. Revisions to estimates result from material changes in the expected timing or amount of cash flows associated with AROs. Income or expense resulting from the settlement of ARO liabilities is included in net gain (loss) from asset sales on the Consolidated Statements of Income. The ARO liability is adjusted to present value each period through an accretion calculation using a credit-adjusted risk-free interest rate. Changes in Questar's AROs from the Consolidated Balance Sheets were as follows:

	Year Ended December 31,
	2012			2011
	(in millions)
AROs at beginning of year	$	63.8		$	60.9
Accretion	3.4			3.0
Liabilities incurred	3.1			1.5
Revisions in estimated cash flows	(1.7		)	0.8
Liabilities settled	(1.4		)	(2.4		)
AROs at end of year	$	67.2		$	63.8

Questar's consolidated AROs by line of business are summarized in the table below:

	December 31,
	2012		2011
	(in millions)
Questar Gas	$	0.5	$	0.7
Wexpro	64.6		60.3
Questar Pipeline	2.1		2.8
Total	$	67.2	$	63.8

Wexpro collects from Questar Gas and deposits in trust certain funds related to estimated ARO costs. The funds are recorded as other noncurrent assets and used to satisfy retirement obligations as the properties are abandoned. The accounting treatment of reclamation activities associated with AROs for properties administered under the Wexpro Agreement is defined in a guideline letter between Wexpro and the Utah Division of Public Utilities and the staff of the PSCW.

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