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Dominion to dump unprofitable Questar Southern Trails pipeline system

Dominion Energy Inc.'s Questar Southern Trails Pipeline Co. filed for federal authorization to abandon its entire 488-mile natural gas transportation system and sell a big part of it to its remaining customer because the revenue generated by the line is only a fraction of its expenses.

"QST [Questar Southern Trails] has experienced consistent and significant operational losses year after year, and there is insufficient current or reasonably expected demand for the transportation services it offers to warrant continued operation," Questar Southern Trails said in a Dec. 22 application to the Federal Energy Regulatory Commission.

In the application, Questar Southern Trails asked for authorization to abandon "all of its certificated facilities" and the services they provide under the company's Natural Gas Act certificate. Dominion took over the pipeline company in its acquisition of Questar Corp. in 2016. The pipeline company is now part of Dominion Energy Questar Pipeline LLC.

The facilities to be abandoned include 488 miles of 12-inch, 16-inch and 20-inch pipeline; four compressor stations; and receipt and delivery points. Questar Southern Trails would sell to the Navajo Tribal Utility Authority about 268 miles of this pipeline system and related facilities. Most of the rest of the system would be abandoned in place.

Questar Southern Trails went into operation in 2002 to provide gas transportation service from the Blanco Hub in New Mexico to Southern California. The market value of the transportation service is driven by the demand for gas in California, as reflected in the price basis differential between the San Juan Basin and Southern California.

The pipeline company said the basis differential used to justify the cost of transportation, and it originally contracted for 80,000 Dth/d of firm transportation to California. "In recent years, however, QST has been unable to contract its capacity except at significantly discounted rates," the company told FERC. The Navajo Tribal Utility Authority is the pipeline's sole maximum-rate firm shipper and contracts for only 1,000 Dth/d of transportation capacity. By the end of 2017, the utility authority will hold the only firm transportation service agreement on the line.

According to the filing, Questar Southern Trails' expenses have exceeded its revenues every year since 2012. The company calculated its annual cost of service based on 2016 data at about $18.5 million, while its total revenue for 2016 was less than $3.1 million and its projected revenue for 2017 is less than $3 million. The contract with the Navajo Tribal Utility Authority generates about $135,000 per year of revenue. (FERC docket CP18-39)