Questar: "Open and honest communication"

by Jay Neese, Vice-President, Questar Exploration and Production Company

The extensive coverage concerning our proposal for limited, year-round operations on the Pinedale Anticline demonstrates a great step forward for the industry and the community. The discussion has taken place on the street corner and in living rooms, at open houses and public meetings. Over the past year, Questar representatives have met with more than 400 people throughout the county and state to answer questions, provide information and work together to find solutions.

We take pride in our corporate mission statement that requires us to act with honesty and integrity, and we have worked hard to present accurate and complete information to the public concerning our proposal. We have publicly indicated that we are willing to talk with anyone (and everyone) to address questions and concerns and we hereby reiterate that commitment.

In the spirit of a transparent presentation of accurate information, we would like to address and clarify some statements that were made in last week's newspaper by Kirby Hedrick's letter to the editor.

1. Role of the Pinedale Anticline Working Group: As stated by the Bureau of Land Management in PAWG's charter, "The Pinedale Anticline Working Group and Task Groups will develop recommendations and provide advice to the BLM on matters pertinent to the oil and gas development of the Pinedale Anticline Area, as described in the Pinedale Anticline environmental impact statement and record of decision."

Members of the PAWG play an important role in providing fair and balanced input to BLM, however they cannot alter its mission.

2. Extended Reach Drilling: Our proposal for only nine additional well pads to reach all of the currently identified bottom hole locations reflects our actual experience in Pinedale, where we have drilled and completed more than 76 wells. Our experience has taught us the practical and economic limits of drilling angles in this field. When we exceed a drilling angle limitation of 22 degrees, we can encounter difficult and expensive problems when we steer back to a vertical well bore at the end of the directional segment. We know that well bores at Pinedale must, at the end of their extended directional reach, be steered back to the vertical so they can intersect the hundreds of distinct gas-bearing reservoirs over a 5,000-foot vertical interval and be effectively stimulated. The 30,000-35,000 foot extended reach wells Mr. Hedrick referred to have single reservoir targets at true vertical depths of less than 6,000 feet.

3. ROD Assumptions: It is true that natural gas prices are high today. However, natural gas prices have been volatile in the past and will continue to remain so. Just two years ago, prices for Pinedale gas were less than $1.00/mcf - which is below our current development and production costs. As a retired senior officer of a large integrated oil company, Mr. Hedrick knows that drilling decisions represent long-term investments and that responsible oil and gas executives don't make such decisions based solely on today's record-high natural gas prices.

4. Reserve Calculations: As Mr. Hedrick knows, accurate reporting of a company's reserves is a critical and highly regulated activity. We take this issue very seriously and would like to take this opportunity to state that the discrepancy in reported reserves (gas economically recoverable from each well) simply does not exist. We would like to restate that Questar's average reserves of 8 bcfe/well (billion cubic feet equivalent per well) on 40-acre spacing, as reported publicly and in our filings to the U. S. Securities and Exchange Commission, is accurate. These calculations are the result of drilling and completing over 76 wells at Pinedale, subsequent production performance in those wells, and detailed evaluation by reputable third-party reserve engineering firms.

5. Sage Grouse Protection: Our winter proposal indicates that we will refrain from commencing drilling at any new pad where BLM locates sage grouse or their signs during the critical mating and nesting seasons. While we don't believe that the currently available scientific and commercial data justifies listing the sage grouse as a threatened and endangered species, we also pledge to comply with the rules that the BLM establishes for their protections. In that regard, the BLM is currently regulating oil and gas operations on the Pinedale Anticline under a state guideline that assumes the sage grouse has already been listed as threatened and endangered.

Further, it is also important to note that U.S. Fish and Wildlife Service and the Wyoming Game and Fish Department have both written letters of support to BLM for Questar's proposal for limited, year-round operations. (Please contact the Pinedale BLM Field Office for complete copies of these letters.)

6. Condensate Pipeline: Questar's proposed condensate pipeline, designed to eliminate year-round tanker truck traffic on the Mesa, is the subject of an Application for Certificate to construct and operate which has been filed with the Wyoming Public Service Commission. PSC requires, by statute, that the pipeline be operated as an open-access facility, without discrimination among customers, according to rates approved by the PSC. Questar's current effort to line up condensate transportation customers has been favorably received both on the Mesa and at other producing fields to the south. In short, there is no substance to the allegation that the pipeline will be used to gouge competitors or will be designed in a manner that will require construction of redundant facilities.

Our current proposal for sustained operations was developed based on: the knowledge and experience gained after four decades of operating on the Pinedale Anticline; the tangible and specific lessons we have learned in the field by applying directional drilling technology for the past four years; and, the input, suggestions and feedback we have gained from an open and transparent public involvement program.

Each of these comments provides compelling proof that establishing cooperative relationships between natural gas operators, governmental agencies and the general public leads to a more productive, sustainable and responsible form of development. Our proposal, and the supplemental comments received from the public and various state agencies, allows for the flexibility needed to continue evolving our approach to year-round operations in order to consistently apply and improve best practices.

As Mr. Hedrick stated, the issues related to our proposal are "within the knowledge and capability of the industry to address." We agree. But the success of our proposal, if implemented, requires that all involved continue to focus on productive, open and honest communication.