Contingencies, Commitments and Leases

Contingencies

Questar and each of its subsidiaries are involved in various commercial, environmental, and regulatory claims. Litigation and other legal proceedings arise in the ordinary course of business. Except as stated below concerning the QEP lawsuit, management does not believe any litigation or other legal proceedings individually or in the aggregate will have a material adverse effect on Questar's, Questar Gas's or Questar Pipeline's financial position, results of operations or cash flows.

A liability is recorded for a loss contingency when its occurrence is probable and its amount can be reasonably estimated. If some amount within a range of possible outcomes appears to be a better estimate than any other amount within the range, that amount is recorded. Otherwise, the minimum amount in the range is recorded. Disclosures are provided for contingencies reasonably likely to occur, which would have a material adverse effect on Questar's, Questar Gas's or Questar Pipeline's financial position, results of operations or cash flows. Some of the claims involve highly complex issues relating to liability, damages and other matters subject to substantial uncertainties and, therefore, the probability of liability or an estimate of loss cannot be reasonably determined.

Litigation

On May 1, 2012, Questar Gas Company filed a legal action against QEP Field Services Company, a subsidiary of QEP Resources, Inc. The case, entitled Questar Gas Company v. QEP Field Services Company, was filed in the Third District Court in Salt Lake County, Utah. Questar Gas believes certain charges of QEP Field Services Company for gathering services exceed the amounts contemplated under a Gas Gathering Agreement, effective September 1, 1993, pertaining to certain gas produced by Wexpro Company under the Wexpro Agreement. Questar Gas is alleging breach of contract by QEP Field Services Company and is seeking an accounting, damages and a declaratory judgment relating to the services and charges under the Gas Gathering Agreement. The charges under the Gas Gathering Agreement are included in Questar Gas's rates as part of its purchased-gas costs. QEP Field Services Company filed an answer and counterclaim alleging that Questar Gas breached the Agreement by failing to allow QEP Field Services to gather and process gas from certain wells located in two fields in the state of Wyoming.

On August 13, 2013, QEP Field Services Company assigned its interest in the Gas Gathering Agreement to QEPM Gathering I, LLC, a subsidiary of the general partner of the master limited partnership QEP Midstream Partners. Plaintiffs have filed an amended complaint naming QEP Midstream Partners, LP; QEP Midstream Partners GP, LLC; QEP Midstream Partners Operating, LLC; and QEPM Gathering I, LLC (QEP MLP Entities). QEP Field Services and Tesoro Logistics LP (Tesoro) entered into a Membership Interest Purchase Agreement dated October 19, 2014, to transfer QEP Field Services’ interest in the QEP MLP Entities and related assets and liabilities of QEP Field Services to Tesoro, including control of this legal action. Tesoro closed on the transaction for QEP’s midstream business on December 2, 2014.

On December 2, 2014, the court issued a memorandum decision granting two motions for partial summary judgment for breach of contract filed by Questar Gas. The court found QEP Field Services Company breached the Gas Gathering Agreement by overcharging Questar Gas in its gathering rates. The court also denied two motions for partial summary judgment filed by QEP Field Services to reduce or limit contract damages. The court also denied cross-motions for partial summary judgment filed by both parties relating to another claim of breach of contract. The issues raised by the cross-motions, QEP Field Services’ counterclaim and damages on all claims are currently reserved for trial. Trial has been scheduled for April 2016.

While Questar Gas intends to vigorously pursue its legal rights, the claims and counterclaims involve complex legal issues and uncertainties that make it difficult to predict the outcome of the case and therefore management cannot determine at this time whether this litigation may have a material adverse effect on its financial position, results of operations or cash flows.

In February 2015, a trial was held in the case of Rocky Mountain Resources and Robert N. Floyd v. QEP Energy Company and Wexpro Company, Ninth Judicial District, County of Sublette, State of Wyoming, Case No. 2011-7816. Plaintiffs allege they are entitled to a 4% overriding royalty interest (ORRI) in a so-called replacement state oil and gas lease ultimately assigned to Wexpro and QEP Energy Company (QEP) in the Pinedale Field. Wexpro and QEP believe the former state leases subject to the ORRI expired and a new lease was issued by the State of Wyoming unburdened by the 4% ORRI. A jury decision was reached on February 13, 2015, that awarded the Plaintiffs $14.1 million from Wexpro and $16.2 million from QEP. Wexpro and QEP have filed an appeal of the case to the Wyoming Supreme Court. Wexpro has accrued its estimate of additional royalties in the case. Any additional royalties will be recovered from Questar Gas’s customers.

On February 8, 2016, Plaintiffs filed the following class action in the Third District Court in Salt Lake City, Utah, Teamsters Local 456 Pension Fund and Teamsters Local 456 Annuity Fund v. Questar Board of Directors, Questar Corporation and Dominion Corporation. Another class action, Eric Senatori v. Dominion Resources, Questar Board of Directors and Questar Corporation was filed in the Third District Court in Salt Lake City, Utah on February 17, 2016. In these cases the Plaintiffs claim that the defendants breached their fiduciary duty of loyalty and due cause owed to the Plaintiffs thereby failing to maximize the value of Questar to its public stockholders. Plaintiffs demand injunction and monetary relief by enjoining Defendants from proceeding with the Proposed Merger and awarding monetary damages.

Environmental Liabilities

Questar incurs environmental remediation costs related to both owned and previously-owned facilities, including transmission and production facilities and manufactured gas plant sites.

In 2014, Questar increased its environmental liability by $5.0 million to $5.4 million. This liability relates to a previously-owned chemical company and was increased due to changes in the costs of estimated future monitoring activities. The liability is based on undiscounted cash flows and is reported as a component of other noncurrent liabilities on the Consolidated Balance Sheets. The Company does not expect to incur significant additional losses related to this site.

Commitments

Questar Gas

Currently, the majority of Questar Gas's natural gas supply is provided by cost-of-service reserves developed and produced by Wexpro. In 2015, 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 $22.5 million in 2016, $13.6 million in 2017, $15.9 million in 2018, 2019 and 2020 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 $82.4 million in 2015, $135.8 million in 2014 and $186.5 million in 2013.

In addition, Questar Gas stores gas during off-peak periods (typically during the summer) and withdraws gas from storage to meet peak gas demand (typically in the winter). The company has contracted for transportation and underground storage services with Questar Pipeline. Annual payments for these services amount to $70.5 million in 2016, $43.2 million in 2017, $13.4 million in 2018, $5.2 million in 2019, and $2.4 million in 2020. Questar Gas has third-party transportation and gathering commitments requiring yearly payments of $31.0 million in 2016 and 2017, $29.1 million in 2018, and $26.8 million in 2019 and 2020.

Leases

In June 2010, Questar entered into a lease agreement for a new headquarters building. The lease term is 17 years and commenced on May 1, 2012. Rental payments under the lease escalate at a rate of 3% per year during the lease term. The lease agreement does not include bargain renewal periods or material rent holidays and is not subject to contingent rent or other unusual provisions. Questar accounts for this lease as a capital lease. Other property, plant and equipment on the Consolidated Balance Sheets includes $40.8 million under the capital lease as of December 31, 2015 and 2014. Other accumulated depreciation and amortization on the Consolidated Balance Sheets includes $9.1 million and $6.7 million under the capital lease as of December 31, 2015 and 2014, respectively. Amortization of the asset under the capital lease is included with depreciation, depletion and amortization on the Consolidated Statements of Income.

Future minimum lease payments for the five years following 2015 and the years thereafter are shown in the table below. Also shown is the present value of minimum lease payments at December 31, 2015, which is reflected on the Consolidated Balance Sheets as current and noncurrent capital lease obligations of $1.2 million and $36.0 million, respectively.



	Years Ending December 31,
	(in millions)
2016	$	3.2
2017	3.6
2018	3.7
2019	3.8
2020	3.9
After 2020	37.2
Total minimum lease payments	55.4
Less: amount representing interest	(18.2		)
Present value of minimum lease payments at December 31, 2015	$	37.2