PART I FINANCIAL INFORMATION

Item 1. Financial Statements

QUESTAR PIPELINE COMPANY AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

3 Months Ended

9 Months Ended

12 Months Ended

September 30,

September 30,

September 30,

2002

2001

2002

2001

2002

2001

(In Thousands)

REVENUES

$   36,332

$   30,464

$  103,053

$   92,411

$  135,535

$  124,035

OPERATING EXPENSES

  Operating and maintenance

12,152

11,841

36,532

34,049

49,727

47,294

  Depreciation

5,841

3,861

15,497

12,085

18,819

16,076

  Other taxes

1,163

710

3,140

2,285

3,775

3,278

    TOTAL OPERATING EXPENSES

19,156

16,412

55,169

48,419

72,321

66,648

    OPERATING INCOME

17,176

14,052

47,884

43,992

63,214

57,387

INTEREST AND OTHER

INCOME (EXPENSE)

(1,923)

1,204

312

3,945

2,317

4,697

INCOME (LOSS) FROM OPERATIONS OF

  UNCONSOLIDATED AFFILIATES

5,108

(201)

7,769

(1,521)

8,184

(1,021)

DEBT EXPENSE

(6,160)

(3,509)

(17,791)

(11,824)

(22,875)

(16,022)

  INCOME BEFORE INCOME TAXES

14,201

11,546

38,174

34,592

50,840

45,041

INCOME TAXES

5,359

4,353

14,046

12,891

18,672

14,281

         NET INCOME

$   8,842

$   7,193

$  24,128

$  21,701

$   32,168

$  30,760

See notes to the consolidated financial statements

QUESTAR PIPELINE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

September 30,

December 31,

2002

2001

2001

(Unaudited)

(In Thousands)

ASSETS

Current assets

  Cash and cash equivalents

$    1,232

$      908

$      520

  Notes receivable from Questar Corporation

30,100

  Accounts receivable

8,781

7,315

10,105

  Inventories - materials and supplies, at

       lower of average cost or market

2,046

2,549

2,328

  Prepaid expenses and other

346

249

643

    Total current assets

12,405

41,121

13,596

Property, plant and equipment

953,747

815,323

881,248

Less accumulated depreciation

263,909

253,137

256,755

    Net property, plant and equipment

689,838

562,186

624,493

Investment in unconsolidated affiliates

122,744

22,267

121,099

Regulatory and other assets

18,107

18,271

19,109

$  843,094

$  643,845

$  778,297

LIABILITIES AND SHAREHOLDER'S EQUITY

Current liabilities

  Short-term loans

$  100,000

$  100,000

  Notes payable to Questar Corp.

72,700

18,300

  Accounts payable and accrued expenses

24,289

$   21,799

29,399

    Total current liabilities

196,989

21,799

147,699

Long-term debt

310,043

310,045

310,065

Other liabilities

5,923

2,908

4,434

Deferred income taxes

80,759

68,631

73,222

Common shareholder's equity

  Common stock

6,551

6,551

6,551

  Additional paid-in capital

142,034

142,034

142,034

  Retained earnings

100,795

91,877

94,292

    Total common shareholder's equity

249,380

240,462

242,877

$  843,094

$  643,845

$  778,297

See notes to the consolidated financial statements

QUESTAR PIPELINE COMPANY AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

9 Months Ended

September 30,

2002

2001

(In Thousands)

OPERATING ACTIVITIES

  Net income

$    24,128

$    21,701

  Depreciation

16,235

12,988

  Deferred income taxes

7,537

5,890

  Loss from unconsolidated affiliates, net of cash distributions

2,003

1,521

  (Gain) loss from sales of assets

105

(218)

50,008

41,882

  Change in operating assets and liabilities

(738)

9,862

        NET CASH PROVIDED FROM OPERATING

          ACTIVITIES

49,270

51,744

INVESTING ACTIVITIES

  Capital expenditures

    Purchase of property, plant and equipment

(77,549)

(86,127)

    Investment in unconsolidated affiliates

(3,648)

(4,700)

      Total capital expenditures

(81,197)

(90,827)

   Costs of disposition of property, plant and equipment

(4,136)

(589)

      NET CASH USED IN INVESTING ACTIVITIES

(85,333)

(91,416)

FINANCING ACTIVITIES

  Issuance of long-term debt

180,000

  Repayment of long-term debt

(115,000)

  Decrease in notes receivable from Questar Corporation

(9,400)

  Increase in notes payable to Questar Corporation

54,400

  Payment of dividends

(17,625)

(16,875)

      NET CASH PROVIDED BY

        FINANCING ACTIVITIES

36,775

38,725

Change in cash and cash equivalents

712

(947)

Beginning cash and cash equivalents

520

1,855

Ending cash and cash equivalents

$     1,232

$      908

See notes to the consolidated financial statements

QUESTAR PIPELINE COMPANY AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2002

(Unaudited)

Note 1 - Basis of Presentation

The interim financial statements reflect all adjustments which are, in the opinion of management, necessary for a fair presentation of the results of operations for the interim periods presented. All such adjustments are of a normal recurring nature. While the transportation and storage operations are influenced by weather conditions, the straight fixed-variable rate design, which allows for recovery of substantially all fixed costs in the demand or reservation charge, reduces the earnings impact of weather conditions. The results of operations for the three-, nine- and twelve-month periods ended September 30, 2002, are not necessarily indicative of the results that may be expected for the year ending December 31, 2002. For further information refer to the financial statements and footnotes thereto included in the Company's annual report on Form 10-K for the year ended December 31, 2001.

Note 2 - Sale of TransColorado

On October 20, 2002 Questar Pipeline sold Questar TransColorado, Inc., the holding company holding Questar's interest in the TransColorado pipeline to Kinder Morgan, Inc. and affiliates for $105.5 million. The sale was effective October 1, 2002, subject to normal review by the Federal Trade Commission (FTC) under the Hart-Scott-Rodino Antitrust legislation. Affiliates of Questar and Kinder Morgan were co-owners of the TransColorado Pipeline that extended from northwestern Colorado to northern New Mexico. Questar Pipeline exercised a contractual right (put) in 2001 to sell its 50% interest to an affiliate of Kinder Morgan. Following lengthy legal proceedings, a Colorado court issued a judgment upholding Questar Pipeline's right to exercise the put. The proceeds from the sale are being held in escrow pending the outcome of the FTC review and when released will be used to retire debt at Questar Pipeline.

Note 3 - Partnership Interest Acquisition

On October 30, 2002, Questar Overthrust Pipeline Co., an affiliate of Questar Pipeline, acquired the final 10% partnership interest in the Overthrust Pipeline Company from El Paso affiliate, CIG Overthrust Inc. The $1.8 million transaction gives Questar, through two affiliates, 100% interest in the 88-mile line, which runs from Evanston, Wyoming to Rock Springs, Wyoming. The Overthrust Pipeline was initially constructed as the westernmost leg of the 800-mile Trailblazer Pipeline that continues to Beatrice, Nebraska. In the first quarter of 2002, Questar Pipeline had acquired an additional 18% interest in the Overthrust pipeline from Natural Gas Pipeline, an affiliate of Kinder Morgan.

Note 4 - Investment in Unconsolidated Affiliates

As of September 30, 2002, Questar Pipeline, directly or indirectly through subsidiaries, had interests in partnerships accounted for on an equity basis. As previously discussed in Notes 2 and 3, beginning with the fourth quarter of 2002 those relationships will cease. Historically, Questar TransColorado, Inc. (a subsidiary of Questar Pipeline) owned 50% of TransColorado pipeline (a general partnership) and as of September 30, 2002, Questar Pipeline owned 90% of Overthrust Pipeline Company (a general partnership). Questar Pipeline did not consolidate the financial results of Overthrust Pipeline because it did not have a controlling interest. The partnership agreement required approval of each partner in any significant partnership decisions. Transportation of natural gas was the primary business activity of these partnerships. Summarized gross operating results of the partnerships are listed below.

9 Months Ended

September 30,

2002

2001

(In Thousands)

Revenues

$       24,992

$     11,850

Operating income (loss)

14,732

(1,049)

Income (loss) before income taxes

14,791

(9,546)

Note 5 - New Accounting Standard

The Company adopted Statement of Financial Accounting Standards 144 "Accounting for the Impairment or Disposal of Long-Lived Assets" as of January 1, 2002 without an impact in the balance sheet, income statement or statement of cash flows.

Note 6 - Reclassifications

Certain reclassifications were made to the 2001 financial statements to conform to the 2002 presentation.

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations and

Item 3. Quantitative and Qualitative Disclosure of Market Risk

QUESTAR PIPELINE COMPANY AND SUBSIDIARIES

September 30, 2002

(Unaudited)

Operating Results

Following is a summary of financial and operating information for the Company:

3 Months Ended

9 Months Ended

12 Months Ended

September 30,

September 30,

September 30,

2002

2001

2002

2001

2002

2001

FINANCIAL RESULTS - (in thousands)

Revenues

  From unaffiliated customers

$    18,015

$    12,754

$    44,855

$    35,848

$    58,409

$   47,993

  From affiliates

18,317

17,710

58,198

56,563

77,126

76,042

    Total revenues

$    36,332

$    30,464

$   103,053

$    92,411

$   135,535

$   124,035

Operating income

$    17,176

$    14,052

$    47,884

$    43,992

$    63,214

$    57,387

Net income

8,842

7,193

24,128

21,701

32,168

30,760

OPERATING STATISTICS

Natural gas transportation volumes (in

  Thousands of decatherms)

    For unaffiliated customers

65,453

53,516

173,699

143,522

225,787

193,000

    For Questar Gas

14,704

14,303

91,971

78,735

123,495

113,200

    For other affiliated customers

1,228

1,981

2,525

3,986

5,43

6,919

    Total transportation

81,385

69,800

268,195

226,243

354,713

313,119

   Transportation revenue (per decatherm)

$       0.30

$       0.27

$      0.25

$      0.25

$      0.25

$      0.24

Revenues

Questar Pipeline reported higher revenues in the 2002 periods presented when compared with the 2001 periods due to increased transportation activities, adding a new park and loan service and increased gathering of natural gas. Questar Pipeline has expanded its transportation system in response to a growing regional energy transportation demand. Main Line 104 began service in November of 2001 and the eastern segment of the Southern Trails Pipeline initiated service in June of 2002. Main Line 104 has a capacity of 272,000 decatherms per day and the eastern segment of the Southern Trails Pipeline has a daily capacity of 80,000 decatherms per day. Service for both pipelines is fully subscribed. Transportation volumes increased 19% in the nine-month period of 2002 with approximately 97% of the volumes transported under firm contracts. Daily firm-demand volumes increased to 1,389,000 decatherms in the first nine months of 2002 from 1,191,000 decatherms in the prior year period. Questar Pipeline initiated a park and loan service at its Clay Basin storage facility in July of 2002. Revenues from gathering gas increased by Questar Transportation Services (QTS), a subsidiary of Questar Pipeline, as a result of operating the non-jurisdictional Huntington lateral

Expenses

Operating and maintenance expenses were higher in the 2002 periods primarily because of legal fees, the start-up of operation of the eastern segment of the Southern Trails Pipeline and higher labor-related costs. Operating expenses of the Southern Trails Pipeline were responsible for approximately a $2.3 million increase in the comparison of the year to date periods presented. Legal expenses were $1 million higher in the first nine months of 2002 when compared with the 2001 period primarily due to litigation surrounding the TransColorado pipeline. The TransColorado litigation was resolved with the sale of Questar Pipeline's share of TransColorado in October of 2002. Pension and medical expenses have increased approximately $.5 million in 2002. The return earned on pension assets is lower in 2002 causing an increase in pension expenses. As a result of lower commodity prices, gas purchased and used in the QTS processing plant was approximately $.8 million less in the first nine months of 2 002 compared with the 2001 period, partially offsetting the increases discussed.

Depreciation expense was higher in the 2002 periods compared with the 2001 periods as a result of capital investment in new pipeline projects.

Interest and other income (expense)

On October 20, 2002, the complex legal issues between the partners of TransColorado Gas Transmission Company were resolved with the sale of Questar TransColorado, Inc.'s 50% interest in the TransColorado Pipeline for $105.5 million. The parties arranged the sale after a Colorado judge declared that Questar TransColorado's right to put (sell) its 50% interest in the pipeline to an affiliate of Kinder Morgan was valid and enforceable. As a result of the sale, the Company reduced the carrying value of its investment in TransColorado by $3 million in the third quarter of 2002 to reflect the net realized value of the sale.

Income (loss) from operations of unconsolidated affiliates

The Company's share of the TransColorado partnership was a pretax profit of $4.8 million for the third quarter and $6.9 million for the first nine months of 2002. The pipeline has operated near capacity in the second and third quarters of 2002 as a result of the wide basis differentials between gas prices in the Rockies and the San Juan Basin. TransColorado reported a $1.5 million pretax loss for the year earlier nine-month period.

Debt Expense

Increased levels of borrowing more than offset lower interest rates resulting in higher debt expense in the 2002 periods presented. In 2001, the Company refinanced $115 million of long-term debt carrying a weighted-average rate of 9.5% with debt having a weighted-average interest rate of 6.9%. An additional $65 million was borrowed on a long-term basis to finance capital projects. In October 2001, Questar Pipeline borrowed $100 million of floating-rate debt for a 12-month period to repay, through a wholly owned subsidiary Questar TransColorado, Inc., one-half of the outstanding and then maturing debt owed by the TransColorado Gas Transmission Company.

Liquidity and Capital Resources

Operating Activities

Net cash provided from operating activities of $49.3 million in the nine months of 2002 was $2.5 million less than the amount reported for the same period of 2001 due to changes in operating assets and liabilities. The decline resulted primarily from a timing difference caused by a reduction of accounts payable.

Investing Activities

Capital expenditures were $81.2 million in the first nine months of 2002. Capital expenditures for calendar year 2002 and 2003 are forecast to be $101.4 million and $72.1 million, respectively. In 2002, the Company completed work on the eastern segment of the Southern Trials pipeline and purchased an additional 28% interest in Overthrust Pipeline.

Financing Activities

In 2002, Questar Pipeline used net cash flow provided from operating activities and borrowed $54.4 million from Questar Corp. to finance capital expenditures and pay dividends. Forecasted capital expenditures for 2002 are expected to be financed from net cash provided from operating activities and the issuance of long-term debt and common equity. The Company loans excess funds to Questar Corp. or borrows from Questar Corp. for short-term needs. Such notes receivable and notes payable bear market interest rates. The Company issues long-term debt to third parties or sells equity to Questar Corp. to meet long-term capital requirements.

Business with Energy Merchants

The Company has significant transportation and storage business with some energy merchants that have recently had their debt ratings downgraded. The Company requests credit support from those companies that pose unfavorable credit risks. All companies with such concerns were current on their accounts as of the date of this report. The Company's largest contracts, other than those with its affiliate Questar Gas, are with Williams Energy Marketing and Trading with an annual reservation fee of $6.3 million for transportation and storage services and El Paso Resources with an annual reservation fee of $4.4 million for transportation services.

Moody's Downgrades Debt Rating

Moody's downgraded debt ratings of Questar and subsidiaries one level completing a review that began May 2, 2002. Also, Moody's established a stable outlook for each Questar entity. Moody's downgraded the rating of Questar Pipeline's senior unsecured debt from A1 to A2. A lower debt rating may increase Questar Pipeline's cost of debt. However, Moody's revised rating is investment grade. The downgrade will not materially affect Questar Pipeline's growth strategy.

On July 1, 2002, Questar Corporation filed a shelf registration statement with the Securities and Exchange Commission to issue common equity or mandatory convertible securities if necessary to achieve debt-reduction goals. Currently, there are no plans for Questar to issue securities because over $200 million of cash has been raised through the sale of assets by its subsidiaries.

TransColorado Case

On October 20, 2002, the complex legal issues between the partners of TransColorado Gas Transmission Company were resolved with the sale of Questar TransColorado 90% interest in the TransColorado Pipeline to Kinder Morgan. The sale was arranged after a Colorado judge declared that Questar TransColorado's right to put (sell) its 50% interest in the pipeline to an affiliate of Kinder Morgan was valid and enforceable.

Western Segment of Southern Trails Pipeline

The Company has put in place a project team, including a consulting firm, to market the transportation capacity of the western segment of the Southern Trails pipeline. In addition, the FERC approved an order for Questar Southern Trails Pipeline Company that lowered the annual depreciation rate from 4% to 3%.

Forward-Looking Statements

This report includes "forward-looking statements" within the meaning of Section 27(A) of the Securities Act of 1933, as amended, and Section 21(E) of the Securities Exchange Act of 1934, as amended. All statements other than statements of historical facts included or incorporated by reference in this report, including, without limitation, statements regarding the Company's future financial position, business strategy, budgets, projected costs and plans and objectives of management for future operations, are forward-looking statements. In addition, forward-looking statements generally can be identified by the use of forward-looking terminology such as "may", "will", "could", "expect", "intend", "project", "estimate", "anticipate", "believe", "forecast", or "continue" or the negative thereof or variations thereon or similar terminology. Although these statements are made in good faith and are reasonable representations of the Company's expected performance at the time, actual results may var y from management's stated expectations and projections due to a variety of factors.

Important assumptions and other significant factors that could cause actual results to differ materially from those expressed or implied in forward-looking statements include:

Changes in general economic conditions;

Changes in gas prices and supplies;

Changes in customers' credit ratings, including energy merchants;

Competition from other pipelines and storage facilities;

The effects of environmental regulations;

Changes in the rate of inflation, interest rates and regulation of income and other taxes;

The effect of natural phenomena;

The effect of accounting policies issued periodically by accounting standard-setting bodies;

Adverse changes in the business or financial condition of the Company, and;

A lower credit rating.

Item 4. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures. The Company's Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the Company's disclosure controls and procedures (as such term is defined in Rules 13a-14(c) and 15d-14(c) under the Securities Exchange Act of 1934, as amended (the "Exchange Act")) as of a date within 90 days prior to the filing date of this quarterly report (the "Evaluation Date"). Based on such evaluation, such officers have concluded that, as of the Evaluation Date, the Company's disclosure controls and procedures are effective in alerting them on a timely basis to material information relating to the Company, including consolidated subsidiaries, required to be included in the Company's reports filed or submitted under the Exchange Act.

(b) Changes in Internal Controls. Since the Evaluation Date, there have not been any significant changes in the Company's internal controls or in other factors that could significantly affect such controls.