SALT LAKE CITY — Questar Pipeline Co. today announced that it has secured a long-term gas-transportation contract for the entire initial capacity on the east zone of Questar's Southern Trails Pipeline project.

The 705-mile pipeline, which runs from Blanco, N.M., to Long Beach, Calif., is divided into two zones, east and west. The east zone has the capacity to transport 80,000 decatherms (Dth) per day from multiple receipt points in the prolific San Juan Basin near the Four Corners area (where Utah, Arizona, Colorado and New Mexico meet) to multiple delivery points at or near the California state line.

Questar Pipeline purchased Southern Trails Pipeline in 1998 from ARCO Pipe Line Co. (now BPAmoco). The pipeline originally transported crude oil; however, Questar Pipeline will convert the pipeline to transport natural gas.

"This contract moves us one very large step closer to making the Southern Trails Pipeline a reality," said D.N. Rose, president and CEO, Questar Pipeline. "We now expect to be in a position to start construction in the near future."

Questar Pipeline is also currently seeking customers for Southern Trails' west zone, which runs from the California state line to the Long Beach area. This west zone has a gas transport capacity of  up to 120,000 Dth per day — enough natural gas to generate electric power to meet the needs of about 1 million people. However, Questar Pipeline's efforts to place the west zone in service have been slowed by regulatory issues. Specifically, the Residual Load Service (RLS) penalty imposed by Southern California Gas, the dominant gas-transportation company in the region, deters existing customers from using alternate natural gas suppliers if they elect to switch part of their transportation to a competing pipeline in Southern California Gas's service area. Options that Southern California Gas has proposed to date in response to California Public Utilities Commission directives to eliminate the RLS would not improve the competitive gas- transportation environment in California.

"Southern California badly needs additional intrastate gas transportation capacity to supply proposed new electric power plants," Rose said. "We urge the regulatory authorities in California to act promptly to remove the barriers that are delaying our project."

Questar Pipeline is a wholly owned subsidiary of Questar Corp. (NYSE:STR). Questar is a Salt Lake City-based integrated energy resources and services company with $2.5 billion in assets.

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