By November 26, 2015 Read More →

Questar receives approval to add natural gas properties under Wexpro II agreement

“Wexpro’s ability to resume drilling in this low-gas-price environment is important in order for it to sustain and grow production…” – Jibson

gas properties

Ron Jibson Chairman, President & CEO, Questar Corporation

SALT LAKE CITY – Questar has received approval from the Utah and Wyoming public service commissions to include natural gas properties under the Wexpro II Agreement. Regulators also approved changes to the Wexpro cost-of-service model established by the Wexpro agreements.

In Dec. 2014, Wexpro paid $52.7 million to acquire an additional working interest in existing Wexpro-operated wells in the Canyon Creek Unit of southwestern Wyoming’s Vermillion Basin.

Wexpro already owned a 70-per cent working interest in the properties, and the acquisition increased Wexpro’s ownership interest to 100 per cent.

“Adding the Canyon Creek acquisition to Wexpro II increases our low-cost portfolio of Vermillion Basin assets, our most economical cost-of-service area,” said Ron Jibson, Questar chairman, president and CEO.

“We believe the addition of this competitively priced cost-of-service production and future investment opportunities will benefit both utility customers and shareholders.”

In Aug., Questar Gas petitioned regulators to include the acquired Canyon Creek interest as a cost-of-service property under the Wexpro II Agreement.

In connection with the application, Questar also proposed changes to its cost-of-service program designed to enable future cost-of-service gas production to be more competitive with current market prices and to potentially allow Wexpro to resume its gas properties development-drilling program.

gas properties

Gas drilling

In October, Questar Gas, Wexpro, the Utah Division of Public Utilities, the Utah Office of Consumer Services and the Wyoming Office of Consumer Advocate signed a settlement stipulation modifying the proposals contained in the August application.


The following changes were approved by Utah regulators on Nov. 17, and Wyoming regulators on Nov. 24:

  • Wexpro’s rate of return on post-2015 development-drilling expenditures under both Wexpro agreements will be lowered to the commission-allowed rate of return on investment as defined in the Wexpro II Agreement — currently 7.64%.
  • Wexpro’s pre-2016 investment base and associated returns will not be affected.
  • Post-2015 dry-hole and non-commercial well costs will be shared equally between utility customers and Wexpro, with the utility customers’ share limited to 4.5% of Wexpro’s annual development-drilling costs.
  • When the annual average price of cost-of-service gas from all Wexpro properties is less than the actual average market price, annual savings on post-2015 development will be shared equally between utility customers and Wexpro, but utility customers’ exposure will be limited. Wexpro will not earn a return exceeding that earned under the 1981 Wexpro Agreement.
  • By 2020, Wexpro will reduce the maximum combined production from its properties from 65% to 55% of Questar Gas’s annual forecasted demand.

“We believe the proposed changes are important to facilitate a potential resumption of Wexpro’s gas-development-drilling program,” said Jibson.

“Wexpro’s ability to resume drilling in this low-gas-price environment is important in order for it to sustain and grow production and its investment base, which is critical for customers and shareholders. These creative changes also provide a template for our Wexpro development team as they continue to negotiate potential cost-of-service arrangements with utilities in other regulatory jurisdictions.”

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