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TABLE OF CONTENTS
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

Commission File No. 0-14147

QUESTAR PIPELINE COMPANY
(Exact name of registrant as specified in its charter)

SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
None

SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None

SECURITIES REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933:
Medium Term Notes, Series A, 5.85% to 7.55% due 2008 to 2018

        Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ý No o

        State the aggregate market value of the voting stock held by nonaffiliates of the registrant as of February 28, 2003. $0.

        Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of February 28, 2003: 6,550,843 shares of Common Stock, $1.00 par value. (All shares are owned by Questar Regulated Services Company.)

        Registrant meets the conditions set forth in General Instruction (I)(1)(a) and (b) of Form 10-K and is therefore filing this Form 10-K Report with the reduced disclosure format.

TABLE OF CONTENTS

FORM 10-K

ANNUAL REPORT, 2002

PART I

ITEMS 1 AND 2. BUSINESS AND PROPERTIES.

General

        Questar Pipeline Company ("Questar Pipeline" or the "Company") is an interstate pipeline company whose core pipeline systems are located in the Rocky Mountain states of Utah, Wyoming, and Colorado. It also provides storage services in Utah and Wyoming. The Company is an affiliate of Questar Corporation ("Questar"), an integrated natural gas company. As a "natural gas company," the Company is subject to regulation by the Federal Energy Regulatory Commission (the "FERC") pursuant to the Natural Gas Act of 1938, as amended.

        Questar Pipeline, as an open-access pipeline, transports gas for affiliated and unaffiliated customers. It also owns and operates the Clay Basin storage facility, which is a large underground storage project in northeastern Utah, and other underground storage operations in Utah and Wyoming. Through a subsidiary, the Company owns a pipeline system (Southern Trails) that extends from the San Juan Basin to Long Beach, California. The Company, through a subsidiary, also owns and operates a processing plant. The Company, through subsidiaries, owns Overthrust Pipeline Company ("Overthrust").

        Questar Pipeline is a wholly-owned subsidiary of Questar Regulated Services Company ("Regulated Services"), which is a wholly-owned subsidiary of Questar. Other entities within the Regulated Services group include Questar Gas Company ("Questar Gas"), a local distribution company, and Questar Energy Services, Inc. ("QES"), an entity created to market additional energy-related services and products. All Regulated Services companies are managed by a common group of officers, which increases administrative efficiency.

        The Company has significant business relationships with its affiliates, particularly Questar Gas. Questar Gas has reserved approximately 849,000 decatherms ("Dth") per day of firm transportation capacity on Questar Pipeline's transmission system to serve the needs of its 750,128 customers in Utah, southwestern Wyoming, and southeastern Idaho. (A Dth is the amount of heat energy equal to 10 therms or one million British thermal units ("Btu")). Questar Gas also contracts for additional capacity during the heating season and has an additional 50,000 Dth per day during December, January and February. Questar Gas has also contracted for firm storage capacity available at Clay Basin and has storage contracts at smaller peaking storage reservoirs. Through a subsidiary, Questar Pipeline has a processing plant that extracts carbon dioxide from gas volumes delivered to Questar Gas.

        Questar Pipeline transports natural gas owned by Questar Gas and produced from properties operated by Wexpro Company ("Wexpro"), another affiliate, as well as natural gas volumes purchased directly by Questar Gas from field producers and other suppliers. The Company also transports volumes that are produced by Questar Exploration and Production Company ("Questar E&P") and marketed by Questar Energy Trading Company ("Questar Energy Trading"), which are two affiliates in

Questar's Market Resources segment. The following diagram sets forth the corporate structure of the Company and certain affiliates:

        The major activities of Questar Pipeline are described in more detail below:

Transmission System

        The Company's core transmission system is strategically located in the Rocky Mountains near large reserves of natural gas. It is referred to as a "hub and spoke" system, rather than a "long-line" pipeline, because of its physical configuration, multiple interconnections to other interstate pipeline systems, and access to major producing areas. Questar Pipeline's transmission system has connections with the pipeline systems of Colorado Interstate Gas Company ("CIG"); the middle segment of the

Trailblazer Pipeline System ("Trailblazer") owned by Wyoming Interstate Company, Ltd. ("WIC"); The Williams Companies Inc. ("Williams"); Kern River Gas Transmission Company ("Kern River"), and the TransColorado pipeline owned by Kinder Morgan, Inc. These connections have opened markets outside Questar Gas's service area for the Company and allow it to transport gas for others.

        The Company's core transmission system includes 1,978 miles of transmission lines that link various producers of natural gas with Questar Gas's distribution facilities in Utah and Wyoming and interconnect with other pipelines. (This total transmission mileage includes pipelines associated with the Company's storage fields and tap lines.) The system includes two major segments, often referred to as the northern and southern systems, which are linked together. The northern segment extends from northwestern Colorado through southwestern Wyoming into northern Utah; the southern segment of the transmission system extends from western Colorado to Payson, in central Utah. The two portions are linked together and have significant connections with other pipeline systems, making it a fully integrated system.

        Questar Pipeline's Main Line 104 was operational throughout 2002. This 24-inch line extends from Price, Utah, near the Ferron area of coalbed methane gas, to Questar Gas's system at Payson, Utah and to the Kern River pipeline near Elberta, Utah. Capacity on this line is fully subscribed.

        This mileage figure includes Overthrust Pipeline, which is 88 miles in length and begins in southwestern Wyoming. During late 2002, the Company acquired the remaining 10 percent interest in the partnership that was organized to construct, own, and operate this pipeline, which is the western-most segment in the Trailblazer pipeline system.

        The mileage figure, however, does not include the 488-mile eastern zone of Southern Trails system that became operational in 2002. This zone runs from the Blanco hub area in the San Juan Basin to multiple delivery points inside the California state line. Questar Pipeline, during 2002, also put the eastern segment of the Southern Trails pipeline system service. This segment runs from the Blanco hub area in San Juan Basin to multiple delivery points inside the California state line. Questar Pipeline completed the project of reconditioning the line, which was originally used as a liquids line, adding compressor stations, installing additional delivery and receipt points, and building a connection to the TransColorado pipeline. The segment's daily capacity of 80,000 Dth is fully subscribed under transportation contracts that will expire in 2007.

        Effective October 1, 2002, Questar Pipeline sold Questar TransColorado, Inc. ("QTC"), which was a wholly-owned subsidiary that had a 50 percent interest in the TransColorado pipeline project. The entity was sold to Kinder Morgan, Inc. and its affiliates (collectively "Kinder Morgan") for $105.5 million, after a lengthy and complex litigation with Kinder Morgan, its former partner. The parties negotiated the transaction after the trial court issued an order dated August 26, 2002, affirming QTC's contractual right to exercise its put to Kinder Morgan. The TransColorado pipeline is 292 miles in length, originates at a point on Questar Pipeline's system 25 miles east of Rangely in northwestern Colorado and ends at the Blanco hub in northwestern New Mexico.

        During 2002, the TransColorado pipeline had positive income for the first time in its four years of operation because the basis differentials for Rocky Mountain volumes were sufficient to motivate producers and marketing companies to incur additional transportation costs in order to move such volumes to pipeline connections in the San Juan Basin.

        The Kern River pipeline transports gas from Wyoming to the enhanced oil recovery projects in Kern County, California. A major expansion of Kern River is scheduled to be in service by mid-2003. The pipeline runs through Utah's Wasatch Front, making it possible for some large industrial customers to bypass both Questar Gas and Questar Pipeline by buying transportation service on Kern River. The connection between Main Line 104 and Kern River permits additional opportunities for producers and marketers to move gas to Kern River. The Kern River line has diverted some transportation volumes

from both Questar Pipeline and Overthrust. The Kern River line, on the other hand, has also provided Questar Pipeline with opportunities to make additional connections with outside markets.

        Questar Pipeline owns and operates a major compressor complex near Rock Springs, Wyoming, that compresses volumes of gas from the transmission system for delivery to WIC and to CIG. The complex has become a major delivery point on Questar Pipeline's system, with five of its major natural gas lines connected to the system at the complex. In addition, both of CIG's Wyoming pipelines and the WIC segment are connected to the complex.

        The Company's pipelines, compressor stations, regulator stations, and other transmission-related facilities are constructed on properties held under long-term easements, rights of way, or fee interests sufficient for the conduct of its business activities.

Transportation Service

        Questar Pipeline's largest single transportation customer is its affiliate, Questar Gas. During 2002, the Company transported 111.7 million decatherms ("MMdth") for Questar Gas, compared to 110.2 MMdth in 2001. These transportation volumes include Questar Gas's cost-of-service gas produced by Wexpro and volumes purchased by Questar Gas directly from field producers and other suppliers.

        The Company's primary transportation agreement with Questar Gas expires June 30, 2017. Questar Gas paid an annual reservation charge of approximately $52.4 million to the Company in 2002, which includes reservation charges attributable to firm and "no-notice" transportation. Questar Gas only needs its total reserved capacity during peak-demand situations. When it is not fully utilizing its capacity, Questar Gas releases the capacity to others, primarily industrial transportation customers and marketing entities.

        The Company recovers approximately 96 percent of its transmission cost of service through reservation charges from firm transportation customers. In other words, these customers pay primarily for access to transportation capacity. Consequently, the Company's throughput volumes do not have a significant effect on its short-term operating results. Questar Pipeline's transportation revenues are not significantly affected by fluctuating demand based on the vagaries of weather or gas prices. The Company's revenues would vary with throughput if the FERC changes its basic regulatory scheme of "straight fixed-variable" rates.

        The Company's total system throughput increased from 312.8 MMdth in 2001 to 362.9 MMdth in 2002. This throughput figure includes volumes transported for nonaffiliated customers, which increased from 195.6 MMdth in 2001 to 245.1 MMdth in 2002.

        Questar Pipeline's transmission system is an open-access system. The Company's tariff provisions require it to transport gas on a nondiscriminatory basis when it has available transportation capacity. The Company does have opportunities for interruptible transportation services.

Storage/Processing

        Questar Pipeline's Clay Basin storage facility in northeastern Utah is the largest underground storage reservoir in the Rocky Mountains. The facility has a total capacity of 117.5 billion cubic feet ("Bcf") and a working gas capacity of 51.4 Bcf. Clay Basin has been operational since 1977 and has been successfully expanded several times.

        Clay Basin's firm storage capacity is fully subscribed by customers under long-term agreements. Questar Gas currently has 13.4 MMdth of working gas capacity at Clay Basin. Other large customers include Williams; Puget Sound Energy Company, which is a distribution utility in the state of Washington; and Duke Energy Trading and Marketing L.L.C. Storage service is important to distribution companies that need to match annual gas purchases with fluctuating customer demand,

improve service reliability, and avoid imbalance penalties. Questar Pipeline offers interruptible storage service at Clay Basin and also allows firm storage service customers the right to release their injection and withdrawal rights to other parties.

        The Company, during 2002, began offering a specified hub service known as "parking" and "loaning" at Clay Basin. Questar Pipeline's central location, connections to multiple lines and the accessibility of storage capacity enabled it to increase its revenues by offering this service.

        During 2002, Questar Pipeline did not proceed with developing a salt-cavern storage project located near Evanston, Wyoming, when it did not obtain sufficient market support in a low-price environment. The Company continued to evaluate the technical feasibility of the project.

        The Company also owns and operates three smaller storage reservoirs. These projects were developed specifically to serve Questar Gas's needs, and Questar Gas contracts 100 percent of their currently available working gas capacity. These small reservoirs are used primarily to supplement Questar Gas's gas supply needs on peak-demand days.

        Questar Pipeline's storage facilities are certificated by the FERC, and its rates for storage service (based on operating costs and investment in plant plus an allowed rate of return) are subject to approval by the FERC.

        Through its subsidiary—Questar Transportation Services Company—Questar Pipeline also owns gathering lines and a processing plant near Price, Utah that removes carbon dioxide from coalbed methane gas in order to raise the Btu content enough to be safely and efficiently used in appliances in Questar Gas's service area.

New Projects

        Questar Pipeline has announced plans to build a 16-mile, 24-inch line that extends west from the Overthrust line to interconnect with the Company's system in 2003. The line will enhance the reliability of Questar Pipeline's northern system and will provide additional flexibility to move volumes on Overthrust. Questar Pipeline also plans to provide additional delivery capacity to the Kern River line through new and expanded connections in southwestern Wyoming.

        Marketing constraints and California regulators have prevented the Company from developing the 210-mile western segment of Southern Trails that runs from the California border to Long Beach. While redoubling efforts to pursue natural gas markets on the California portion of Southern Trails, Questar Pipeline is exploring other options, including sale or alternative uses, for the western segment.

Regulation

        The Company is a natural gas company under the Natural Gas Act and is subject to the jurisdiction of the FERC as to rates and charges for storage and transportation of gas in interstate commerce, construction of new storage and transmission facilities, extensions or abandonments of service and facilities, accounts and records, and depreciation and amortization policies. Questar Pipeline holds certificates of public convenience and necessity granted by the FERC for the transportation and underground storage of natural gas in interstate commerce and for the facilities required to perform such operations.

        Questar Pipeline does not currently plan to file a general rate case in 2003. It, however, will continue to review its revenues and costs as it adds new facilities that are not included in its rate base and makes expenditures to comply with regulatory mandates.

        Some of Questar Pipeline's customers have experienced credit problems as their debt ratings have been downgraded. Questar Pipeline has required these customers to provide additional security consistent with the terms of existing tariff provisions.

        Questar Pipeline and its affiliates in the Regulated Services group have actively opposed certain portions of the FERC's efforts to broaden the scope of its regulations that are currently limited to "marketing affiliates." The FERC issued a Notice of Proposed Rulemaking in September of 2001, in which it proposed rules that would require pipelines to comply with certain "nondiscriminatory" standards when dealing with "energy company affiliates," a term that was more broadly defined to include local distribution companies such as Questar Gas. At the current time, local distribution company affiliates, such as Questar Gas, that do not engage in unregulated gas sales are exempt from the FERC's standards. The Company believes that the current exemption should be continued. If adopted, the FERC's proposed rules would diminish the Company's operational efficiencies and increase its costs because QRS provides gas control, administrative, engineering, technical, accounting, legal, and regulatory services to both Questar Pipeline and Questar Gas.

        Questar Energy Trading and Questar Gas Management Company are marketing affiliates of Questar Pipeline. These entities do not share any officers or directors with Questar Pipeline. The Company requires its employees to deal with these entities as marketing affiliates.

        Under the Natural Gas Pipeline Safety Act of 1968, as amended, the Company is subject to the jurisdiction of the Department of Transportation ("DOT") with respect to safety requirements in the design, construction, operation and maintenance of its transmission and storage facilities. The new Pipeline Safety Improvement Act of 2002 imposes new requirements on Questar Pipeline. It tightens federal inspections and safety requirements and increases civil penalties that may be assessed by the Department of Transportation. The new safety requirements include integrity assessments of all interstate and intrastate pipelines located in high-density population areas. The Company also complies with the DOT's drug and alcohol testing regulations.

        In addition to the regulations discussed above, Questar Pipeline's activities in connection with the operation and construction of pipelines and other facilities for transporting or storing natural gas are subject to extensive environmental regulation by state and federal authorities, including state air quality control boards, the Bureau of Land Management, the Forest Service, the Corps of Engineers, and the Environmental Protection Agency. These compliance activities increase the cost of planning, designing, installing and operating facilities.

Competition

        Questar Pipeline intends to continue a strategy of concentrating on projects within its core area of operations in the Rocky Mountains. The Rocky Mountain area produces more gas volumes that it can use and lacks sufficient pipeline capacity to move such volumes outside the area. The Kern River expansion provides opportunities for Questar Pipeline to build additional lines and install additional delivery points for gas volumes to move to Kern River. Questar Pipeline has faced significant market risks, partner disputes, and regulatory complications when it has tried to extend its footprint to other areas, as illustrated with its involvement in the TransColorado pipeline project and the Southern Trails pipeline into California.

        The Company actively competes with other interstate pipelines for transportation volumes throughout the Rocky Mountain region. Questar Pipeline has two key assets that contribute to its continued success. It has a strategically located and integrated, low-cost transmission system with interconnections to major pipeline systems and with access to major producing areas and markets. Questar Pipeline also has the Clay Basin storage facility, a storage reservoir that has been successfully operated since 1977, which has been expanded in response to interest from customers and is fully subscribed by firm-service customers under contracts that are generally long-term in nature.

Employees

        As of December 31, 2002, the Company and a wholly-owned subsidiary had 144 employees, compared to 145 employees as of year-end 2001. Regulated Services, the Company's parent, had 369 employees at year-end 2002, compared to 361 at year-end 2001, who perform specified services for Questar Pipeline and other members of the group. None of these employees is represented under collective bargaining agreements. The Company participates in the comprehensive benefit plans of Questar and pays the share of costs attributable to its employees covered by such plans. Questar Pipeline's employee relations are generally deemed to be satisfactory.

Relationships with Affiliates

        There are significant business relationships between the Company and its affiliates, particularly Questar Gas. Some of these relationships are described above. See Note 8 of the Consolidated Financial Statements included under Item 8 of this report for additional information concerning transactions between the Company and its affiliates.

        The Company obtains data processing and communication services from an affiliate, Questar InfoComm Inc. Regulated Services, the Company's parent, has employees who perform administrative, engineering, accounting, marketing, budget, tax, and legal services for all entities within it, including Questar Pipeline. Questar also provides certain administrative services—governmental affairs, financial, and audit—to the Company and other members of the consolidated group. A proportionate share of the costs associated with such services is directly billed or allocated to Questar Pipeline.

ITEM 3. LEGAL PROCEEDINGS.

        There are various legal proceedings pending against the Company. Although it is too early to estimate the outcome of the various cases filed against Questar Pipeline and its affiliates, management believes that the outcome of these cases will not have a material adverse effect on the Company's financial position, operating results or liquidity. Significant cases are discussed below.

        Grynberg.    Questar Pipeline is involved in three separate lawsuits filed by Jack Grynberg, an independent producer. One case, United States ex rel. Grynberg v. Questar Corp., involves claims filed by Grynberg under the Federal False Claims Act and is substantially similar to other cases filed against pipelines and their affiliates that have all been consolidated for discovery and pre-trial motions in Wyoming's federal district court. The cases involve allegations of industry-wide mismeasurement of natural gas volumes on which royalty payments are due the federal government. Grynberg has filed an appeal from the order issued by the trial judge dismissing his valuation claims from the lawsuits. To sustain claims under the False Claims Act, Grynberg must demonstrate that he is the original source of information concerning the allegations and that he has "direct and independent knowledge" of the claimed mismeasurement practices. The Company and its affiliates participate in a joint defense group that is attacking Grynberg's eligibility to bring such claims.

        On March 21, 2003, the Utah Supreme Court substantially upheld the trial court's order granting summary judgment to the Questar defendants in Grynberg v. Questar Pipeline. This cased involved claims that several Questar defendants mismeasured the heating content of gas volumes attributable to Gynberg's working interest in specified wells located in southwestern Wyoming, committed fraud, and breached fiduciary responsibilities. Specifically, the Court ruled Grynberg's contract claims were time-barred, the economic loss doctrine precludes him from bringing tort claims based on contractual responsibilities, he is not a third party beneficiary of his operator's contracts, Questar defendants do not owe him fiduciary responsibilities, and there was no equitable tolling of the applicable statutes of limitations. The Utah Supreme Court did rule that Grynberg was not collaterally estopped from presenting a contract termination issue that had previously been ruled on by a Wyoming federal district

court judge and remanded the case to the trial court to determine whether any contractual claims remain.

        The third case, Grynberg and L & R Exploration Venture v. Questar Pipeline Co., is pending in a Wyoming federal district court against Questar Gas, as the successor to the named Questar Pipeline's interest in gas purchase contracts. This case involves some of the same allegations that were heard in an earlier case, e.g., breach of contract, intentional interference with a contract, but Grynberg added claims of antitrust and fraud. In June of 2001, the judge entered an order granting the motion for partial summary judgment filed by the Questar defendants dismissing the antitrust claims from the case, but has not ruled on other motions for summary judgment dealing with ratable take and fraud.

        Gas Pipelines.    Questar Pipeline and several affiliates are among the numerous defendants in this case, which is currently named as Price v. Gas Pipelines, that has been filed against the pipeline industry. Pending in a Kansas state district court, this case is similar to the cases filed by Grynberg, but the allegations of a conspiracy by the pipeline industry to set standards that result in the systematic mismeasurement of natural gas volumes and resulting underpayment of royalties are made on behalf of private and state lessors, rather than on behalf of the federal government. The defendants are opposing class certification and requesting dismissal for lack of personal jurisdiction against any defendants, including most of the named Questar parties, that do not conduct business activities in Kansas.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

        The Company did not submit any matters to a vote of its stockholder during the last quarter of 2002.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

        The Company's outstanding shares of common stock, $1.00 par value, are currently owned by Regulated Services. Information concerning the dividends paid on such stock and the Company's ability to pay dividends is reported in the Statements of Shareholder's Equity and Notes to Financial Statements included in Item 8.

ITEM 6. SELECTED FINANCIAL DATA.

        The Company, as the wholly-owned subsidiary of a reporting person under the Securities and Exchange Act of 1934 (the "Act"), is entitled to omit the information requested in this Item.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINALCIAL CONDITION AND RESULTS OF OPERATION.

RESULTS OF OPERATIONS

        Questar Pipeline and its subsidiaries conduct interstate natural gas-transmission, storage, processing and gathering operations. Following is a summary of financial results and operating information:

Revenues

        Questar Pipeline reported higher revenues in 2002 when compared with 2001 due to increased transportation activities, a new park-and-loan storage service, and higher natural gas-gathering volumes. Questar Pipeline has expanded its transportation system in response to a growing regional energy-transportation demand. In November 2001, the company placed Main Line 104 into service. Main Line 104 has a capacity of 322,000 dth per day. In June 2002, the company placed into service the eastern zone of the Southern Trails Pipeline with a daily capacity of 80,000 dth. Service for both pipelines is fully subscribed. Transportation volumes increased 16% in 2002 over 2001, and approximately 94% of the volumes transported were under firm contracts. Questar Pipeline initiated a park-and-loan service at its Clay Basin storage facility in July 2002 that added revenues of $1.2 million. Gas-gathering revenues from Questar Transportation Services (QTS), a subsidiary of Questar Pipeline, increased $1.5 million. In June 2002, QTS placed the Huntington lateral into service. The Huntington lateral is a nonFERC jurisdictional gathering line in central Utah.

        As of December 31, 2002, approximately 84% of Questar Pipeline's transportation system was reserved by firm-transportation customers under contracts with varying terms and lengths. Questar Gas continues to be Questar Pipeline's single largest transportation customer, accounting for 65% of the reservation charges in 2002. Questar Gas has reserved transportation capacity of 899,000 dth per day, including 50,000 dth per day winter peaking service. This represents 58% of the total reserved daily-transportation capacity as of December 31, 2002. A majority of Questar Gas's transportation contracts extend to 2017.

        Questar Pipeline's primary storage facility at Clay Basin is 100% subscribed under long-term contracts. A majority of the storage contracts have terms in excess of eight years. Questar Gas has contracted for 26% of firm-storage capacity for terms extending from 2008 to 2019.

        A QTS-owned processing plant removes carbon dioxide from a portion of the Questar Pipeline gas stream, including coal-seam gas produced in the Ferron area of central Utah. The plant is located on Questar Pipeline's southern system near Price, Utah. Questar Gas accounts for 95% of the plant's revenues.

Operating expenses

        Operating and maintenance expenses and depreciation expenses increased in 2002 compared with 2001 primarily because of the 12 months of operations of Main Line 104 and the startup of the eastern zone of the Southern Trails Pipeline. Higher operating and maintenance expenses included legal costs for defense in the TransColorado case, which also represented a significant increase in expenses in 2001 compared with 2000.

TransColorado litigation

        On October 20, 2002, the complex legal issues between the partners of TransColorado Gas Transmission Company were resolved with the sale of Questar TransColorado and its 50% interest in the TransColorado Pipeline to Kinder Morgan. The sale was negotiated 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. Questar TransColorado was a wholly owned subsidiary of Questar Pipeline.

Interest and other income

        Interest and other income was lower in 2002 when compared with 2001 because of an asset impairment and lower AFUDC (capitalized financing costs on construction projections). Questar Pipeline's interest in the TransColorado Pipeline was written down by $3 million in anticipation of the sale. AFUDC was $1.7 million lower in 2002 compared to 2001 and $2.5 million higher in 2001 compared to 2000.

Operations of unconsolidated affiliates

        The company's share of the TransColorado partnership's earnings was a pretax profit of $6.9 million in 2002 compared with a $2.2 million loss in 2001. The pipeline 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. Earnings from the Overthrust Pipeline partnership were $860,000 in 2002, $1.1 million in 2001 and $1.2 million in 2000. In 2002, Questar Pipeline sold its interest in the TransColorado Pipeline and acquired the remaining interest in Overthrust Pipeline.

Debt expense

        Debt expense increased 42% in 2002 compared to 2001 because of higher short-term debt. In October 2002, Questar Pipeline used the $105.5 million proceeds from the sale of TransColorado to reduce short-term debt. Debt expense was 4% lower in 2001 compared to 2000 mainly from replacing higher rate debt with lower rate debt.

Income taxes

        The effective combined federal and state income tax rate was 35.4% in 2002, 37.1% in 2001 and 31.5% in 2000. The income tax rate in 2000 was below the federal statutory rate of 35% primarily due to a Colorado state income tax credit amounting to $3.2 million, derived from conducting business in a designated enterprise zone.

LIQUIDITY AND CAPITAL RESOURCES
Operating Activities

        Net cash provided from operating activities decreased 22% in 2002 compared with 2001 as a result of timing differences associated with payments to vendors. Net cash provided from operating activities increased 11% in 2001 compared with 2000 primarily due to the timing of payments associated with capital expenditures in 2001, partially offset by lower collections from customer accounts.

Investing Activities

        Following is a summary of capital expenditures for 2002, 2001 and a forecast for 2003 expenditures:

        In 2002, a Questar Pipeline subsidiary completed construction on the eastern zone of the Southern Trails Pipeline, which extends 488 miles west from the Four Corners region to the California border for a total cost of $110 million.

Financing Activities

        In 2002, net cash provided from operating activities and borrowings from Questar funded capital expenditures. Questar Pipeline used the proceeds from asset sales to repay $100 million of floating rate debt borrowed for a 12-month period. Net cash provided from operating activities and a net increase in debt, enabled Questar Pipeline to fund record 2001 capital expenditures and pay dividends. Forecasted 2003 capital expenditures are expected to be financed from net cash flow provided from operations and borrowing from Questar.

        In 2001, Questar Pipeline issued 10-year medium-term notes for $100 million with a coupon rate of 7.09% and $80 million with a coupon rate of 6.57%. The funds were used to refinance debentures of $30 million at 9⁷/8% and $85 million at 9³/8% and to finance a portion of capital expenditures and partnership investments.

        Questar makes loans to Questar Pipeline under a short-term borrowing arrangement. At December 31, Questar Pipeline owed Questar $74.8 million with an interest rate of 1.64% in 2002 and $18.3 million with an interest rate of 2.31% at 2001.

        At December 31, 2002, the company reported negative working capital of $65.7 million primarily as a result of short-term debt used to fund capital expenditures.

        In November 2002, Moody's downgraded debt ratings of Questar and subsidiaries one level after completing a review that began May 2, 2002. Moody's established an A2 senior unsecured debt rating for Questar Pipeline. Also, Moody's established a stable outlook for each Questar entity. A lower debt rating may increase the company's cost of debt; however, Moody's revised ratings are solidly investment grade. Standard & Poor's has assigned an A+ to the long-term debt issued by Questar Pipeline. Standard & Poor's has a negative outlook.

        Questar Pipeline's capital structure at year-end 2002 consisted of 55% long-term debt and 45% common shareholder's equity.

Critical Accounting Policies

        The company's consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States. The preparation of consolidated financial statements requires management to make assumptions and estimates that affect the reported results of operations and financial position. Management believes that the following accounting policies may involve a higher degree of complexity and judgment on the part of management.

Rate Regulation

        Regulatory agencies establish rates for the storage and transportation of natural gas. The regulatory agencies also regulate, among other things, the extension and enlargement or abandonment of jurisdictional natural gas facilities. Regulation is intended to permit the recovery, through rates, of the cost of service, including a return on investment. Questar Pipeline follows Statement of Financial Accounting Standard (SFAS) 71, "Accounting for the Effects of Certain Types of Regulation" that requires the recording of regulatory assets and liabilities by companies subject to cost-based regulation. The Federal Energy Regulatory Commission (FERC) has approved the recording of regulatory assets and liabilities.

Group Depreciation

        Questar Pipeline uses group depreciation for the majority of their fixed assets. Under this policy, assets are depreciated in groups of similar assets rather than on an individual-asset basis. When an

asset is retired, the original cost and a like amount of accumulated depreciation are removed from the books. The method has the typical impact of increasing depreciation expense from what would be recognized under the individual-asset method, and eliminating gains and losses when a group-depreciated asset is retired. Assets that can be separately identified, such as buildings, vehicles and computers, are depreciated on an individual-asset basis. The FERC has approved the use of group depreciation.

New Accounting Standard

        SFAS 143, "Accounting for Asset Retirement Obligations," was issued in June of 2001. SFAS 143 addresses the financial accounting and reporting of the fair value of legal obligations associated with the retirement of tangible long-lived assets. The new standard requires that plant abandonment costs be estimated at fair value, capitalized and depreciated over the life of the related assets. Recognition of abandonment costs for a majority of the gas transportation and storage properties will be postponed indefinitely due to the nature of the assets as defined by SFAS 143. The company has not completed its evaluation of the impact of SFAS 143. SFAS 143 is effective beginning January 1, 2003.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

        All of the company's long-term debt is borrowed at fixed rates. As the need arises, the company borrows funds on a short-term basis with variable-interest rates.

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 vary 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 rate-regulatory policies;

        Rate of inflation and interest rates;

        Assumptions used in business combinations;

        Weather and other natural phenomena;

        The effect of environmental regulation;

        Changes in customers' credit ratings, including energy merchants;

        Competition from other forms of energy, other pipelines and storage facilities;

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

        Adverse repercussion from terrorist attacks or acts of war;

        Adverse changes in the business or financial condition of the company; and

        Lower credit ratings.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Financial Statements:

Financial Statement Schedules:

        For the three years ended December 31, 2002

        All other schedules are omitted because they are not applicable or the required information is shown in the Financial Statements or Notes thereto.

Report of Independent Auditors

Board of Directors
Questar Pipeline Company

        We have audited the accompanying consolidated balance sheets of Questar Pipeline Company and subsidiaries as of December 31, 2002 and 2001, and the related consolidated statements of income, shareholder's equity, and cash flows for each of the three years in the period ended December 31, 2002. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

        We conducted our audits in accordance with the auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

        In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Questar Pipeline Company and subsidiaries at December 31, 2002 and 2001, and the consolidated results of their operations and their cash flows for each of the three years in the period ended December 31, 2002, in conformity with accounting principles generally accepted in the United States.

QUESTAR PIPELINE COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME

See notes to consolidated financial statements.

QUESTAR PIPELINE COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS