Note 12 - Share-Based Compensation

Questar may issue stock options, restricted shares, RSUs and performance shares to certain officers, employees and non-employee directors under its LTSIP. Questar recognizes expense over time as the stock options, restricted shares, RSUs and performance shares vest. Total share-based compensation expense amounted to $10.2 million in 2013 compared to $9.9 million in 2012 and $10.1 million in 2011. Deferred share-based compensation, representing the unvested value of restricted share awards and RSU awards, amounted to $4.8 million at December 31, 2013, and $5.1 million at December 31, 2012. Cash flow from income tax benefits in excess of recognized compensation expense amounted to $14.0 million in 2013 and $9.2 million in 2011. There were no cash flows from income tax benefits in excess of recognized compensation expense in 2012. At December 31, 2013, there were 5,568,160 shares available for future grant.

There were no unvested stock options at December 31, 2013, reflecting a decrease of 29,398 since December 31, 2012. No stock options have been granted since 2010 and no stock options were forfeited in 2013.

Stock option transactions under the terms of the LTSIP are summarized for the year ended December 31, 2013, below:



	Options Outstanding		Exercise Price Range					Weighted-Average Exercise Price
Balance at December 31, 2012	770,923		$	4.37	-	$	17.35	$	11.35
Exercised	(53,083	)	4.37		-	13.10		4.75
Balance at December 31, 2013	717,840		$	7.84	-	$	17.35	$	11.84



Options Outstanding									Options Exercisable
Range of exercise prices					Number outstanding at Dec. 31, 2013	Weighted-average remaining term in years	Weighted-average exercise price		Number exercisable at Dec. 31, 2013	Weighted-average exercise price
$	7.84	-	$	11.40	404,174	1.9	$	10.52	404,174	$	10.52
13.10		-	17.35		313,666	2.5	13.54		313,666	13.54
					717,840	2.2	$	11.84	717,840	$	11.84

As of December 31, 2013, the aggregate intrinsic value of outstanding and exercisable options was $8.0 million.

Restricted shares are valued at the grant-date market price and amortized to expense over the vesting period. Most restricted share grants vest in equal installments over a three-year period from the grant date. The weighted-average remaining vesting period of unvested restricted shares at December 31, 2013, was 7 months. Transactions involving restricted shares under the terms of the LTSIP for the year ended December 31, 2013, are summarized below:



	Restricted Shares Outstanding		Price Range					Weighted- Average Price
Balance at December 31, 2012	810,342		$	13.10	-	$	20.90	$	17.74
Granted	658		21.53		-	21.53		21.53
Vested	(417,882	)	13.10		-	20.90		17.24
Forfeited	(791	)	19.39		-	19.39		19.39
Balance at December 31, 2013	392,327		$	13.10	-	$	21.53	$	18.28

Starting in the first quarter of 2013, Questar granted RSUs to certain officers, employees and non-employee directors under its LTSIP. One share of Questar common stock will be distributed for each RSU at the time of vesting. RSUs are valued at the grant-date market price and amortized to expense over the vesting period. RSU grants typically vest in equal installments over a three-year period from the grant date. Several grants vest in a single installment after a specified period. The weighted-average remaining vesting period of unvested RSUs at December 31, 2013, was 14 months. Transactions involving RSUs under the terms of the LTSIP are summarized below:



	RSUs Outstanding		Price Range					Weighted-Average Price
Granted	330,061		$	22.17	-	$	25.44	$	23.62
Vested	(12,522	)	23.62		-	23.62		23.62
Forfeited	(1,271	)	23.62		-	23.62		23.62
Balance at December 31, 2013	316,268		$	22.17	-	$	25.44	$	23.62

Grants of RSUs with deferred share distributions (deferred RSUs) typically vest in equal installments over a three-year period from the grant date. At December 31, 2013, Questar's outstanding deferred RSUs totaled 73,646 with a weighted-average price of $15.73 per share. The deferred RSUs were fully vested as of July 1, 2013. One share of Questar common stock will be distributed for each vested deferred RSU (including accrued reinvested dividend equivalents) at the time of the grantee's separation from service.

Questar grants performance shares to Company officers under the terms of the LTSIP. The awards are designed to motivate and reward these officers for long-term Company performance and provide an incentive for them to remain with the Company. The target number of performance shares for each officer is subject to adjustment upward or downward based on the Company's total shareholder return relative to a specified peer group of companies over a three-year performance period. Each three-year performance period commences at the beginning of the year of grant. Distributions of performance shares, if any, take place in the quarter following the conclusion of the performance period so long as such officer was employed by the Company or its affiliates as of the last day of the performance period.

The Company uses the Monte Carlo simulation method in estimating the fair value of performance shares. Fair value estimates rely upon subjective assumptions used in the mathematical model and may not be representative of future results. The estimated fair value of performance shares granted and major assumptions used in the simulation at the date of grant are listed below:



	2013			2012			2011
	Performance Share Input Variables
Fair value of performance shares at grant date	$	39.62		$	25.42		$	18.23
Risk-free interest rate	0.40		%	0.35		%	1.32		%
Expected price volatility	19.0		%	22.0		%	31.3		%
Expected dividend yield	2.88		%	3.35		%	3.39		%
Expected life in years	2.9			2.9			2.9

The grant-date fair value of performance shares is amortized to expense over the vesting period. Half of any award will be distributed in shares of Questar common stock and half in cash. Equity- and liability-based performance share compensation expense amounted to $2.0 million in 2013, $1.8 million in 2012 and $0.6 million in 2011. The weighted-average remaining vesting period of unvested performance shares at December 31, 2013, was 18 months. Transactions involving performance shares under the terms of the LTSIP for the year ended December 31, 2013, are summarized below:



	Target Number of Performance Shares Outstanding		Grant-Date Fair Value Range					Weighted- Average Grant-Date Fair Value
Balance at December 31, 2012	264,867		$	18.23	-	$	25.42	$	21.94
Granted	126,606		39.62			39.62		39.62
Forfeited	(3,594	)	18.23		-	39.62		33.09
Balance at December 31, 2013	387,879		$	18.23	-	$	39.62	$	27.61

The above December 31, 2013 balance includes 130,221 vested target performance shares with a weighted-average grant-date fair value of $18.44. The substantial majority of these shares represent the 2011 grant, whose performance and vesting periods ended on December 31, 2013. Distribution of the 2011 award, adjusted based on Questar's relative total shareholder return, will take place in the first quarter of 2014.

As of December 31, 2013, the total unrecognized compensation cost related to outstanding stock options, restricted shares, RSUs and performance shares was $7.9 million, which the Company expects to recognize over a weighted-average period of 12 months.

Certain officers, employees and non-employee directors of former subsidiary QEP Resources held 298,098 Questar stock options with a weighted-average exercise price of $11.41 per share and a weighted-average remaining life of 2.4 years at December 31, 2013.

Questar may issue stock options, restricted shares, RSUs and performance shares to certain officers and employees of Questar Gas and Questar Pipeline under its LTSIP and recognizes expense over time as the stock options, restricted shares, RSUs and performance shares vest. Questar Gas share-based compensation expense amounted to $1.4 million in 2013 compared with $1.2 million in 2012 and $1.1 million in 2011. Questar Pipeline share-based compensation expense amounted to $2.0 million in 2013 compared with $2.0 million in 2012 and $1.8 million in 2011.

The following table summarizes the stock options held under the LTSIP by Questar Gas and Questar Pipeline officers and employees at December 31, 2013:



Options Outstanding									Options Exercisable
Range of exercise prices					Number outstanding at Dec. 31, 2013	Weighted-average remaining term in years	Weighted-average exercise price		Number exercisable at Dec. 31, 2013	Weighted-average exercise price
Questar Gas
$	11.40	-	$	13.10	17,000	2.6	$	12.10	17,000	$	12.10
Questar Pipeline
$	7.84	-	$	13.10	158,933	1.6	$	9.36	158,933	$	9.36

The following table summarizes the restricted shares held under the LTSIP by Questar Gas and Questar Pipeline officers and employees at December 31, 2013. The weighted-average remaining vesting periods of unvested restricted shares at December 31, 2013, for Questar Gas and Questar Pipeline were 6 months and 7 months, respectively.



	Restricted Shares Outstanding	Price Range					Weighted-Average Price
Questar Gas	58,837	$	13.10	-	$	19.39	$	18.60
Questar Pipeline	70,758	$	13.10	-	$	19.56	$	18.78

The following table summarizes the RSUs held under the LTSIP by Questar Gas and Questar Pipeline officers and employees at December 31, 2013. The weighted-average remaining vesting period of unvested RSUs at December 31, 2013, for Questar Gas and Questar Pipeline was 14 months.



	RSUs Outstanding	Price Range					Weighted-Average Price
Questar Gas	55,631	$	22.17	-	$	23.62	$	23.54
Questar Pipeline	50,230	$	23.62	-	$	23.62	$	23.62

The following table summarizes the target number of performance shares held under the LTSIP by Questar Gas and Questar Pipeline officers at December 31, 2013. The weighted-average remaining vesting period of unvested performance shares at December 31, 2013, for Questar Gas and Questar Pipeline was 18 months.



	Target Number of Performance Shares Outstanding	Grant-Date Fair Value Range					Weighted- Average Grant-Date Fair Value
Questar Gas	34,326	$	18.23	-	$	39.62	$	27.91
Questar Pipeline	65,283	$	18.23	-	$	39.62	$	26.85