Kinder Morgan

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Kinder Morgan
Type Public
Traded as NYSEKMI
S&P 500 Component
Industry Oil and gas
Founded 1997
Founder(s) Richard Kinder
Headquarters Kinder Morgan Building
Houston, Texas, U.S.
Area served USA and Canada
Key people Richard Kinder
(Chairman and CEO)
Services Pipeline transport
Oil storage
Employees ~ 8,000 (2012)
Subsidiaries Kinder Morgan Energy Partners
Website www.kindermorgan.com

Kinder Morgan, Inc. is an American energy company. It is, through a subsidiary, the general partner and owner of many of the interests in Kinder Morgan Energy Partners, a publicly traded pipeline and terminal limited partnership.

Kinder Morgan Energy Partners, L.P. is a leading pipeline transportation and energy storage company in North America. Kinder Morgan owns or operates approximately 82,000 miles of pipelines transporting primarily natural gas, crude oil, and petroleum products. Kinder Morgan owns about 180 terminals that store and handle products such as gasoline, coal, and petroleum coke. Kinder Morgan's CO2 division provides carbon dioxide (CO
2
) for enhanced oil recovery projects in North America.[1] Kinder Morgan has been cited by the U.S. government in 24 incidents which led to five federal enforcement actions from 2006 to 2014. [2]

In Canada, Kinder Morgan operates the Trans Mountain oil pipeline which links Alberta with Vancouver, BC, as well as the Cochin natural gas pipeline between Western Canada and the US Mid West. In 2013, Kinder Morgan completed the filing of its application to the Canadian National Energy Board ("NEB") for building a second parallel pipeline to Trans Mountain, which would nearly triple the transportation capacity of Trans Mountain from 300,000 to 850,000 barrels per day, for an estimated investment of $5.4 billion. This expansion would enable the export of larger volumes of Alberta bituminous sands oil to the US and to Asian countries.

Kinder Morgan has indicated that it already has the support of several large customers for this expansion, i.e.: BP Canada Energy Trading Co., Canadian Natural Resources, Canadian Oil Sands Ltd., Cenovus Energy Inc., Devon Canada Corp., Husky Energy Marketing Inc., Imperial Oil Ltd., Nexen Marketing Inc., Statoil Canada Ltd., Suncor Energy Marketing Inc., Suncor Energy Products Partnership, Tesoro Refining & Marketing Co. and Total E&P Canada Ltd.

However, this project, like other new pipeline projects, will face opposition, especially from the Indian First Nations who have title to the lands crossed by the pipelines as well as from environmentally concerned citizens. (See below, "Challenges to Kinder Morgan Pipelines" and "Accidents").

On December 23rd 2013, Kinder Morgan announced that, through its Kinder Morgan Energy partner subsidiary (ticker KMP on NYSE), it has agreed to acquire the US oil tanker operator American Petroleum Tankers (APT) and its affiliated company SCT (State Class Tankers) from the US private equity investment firms Blackstone Group and Cerberus Capital management. APT operates a fleet of five US flagged MR 50,000 tons - 330,000 barrels - oil tankers and has four other similar other tankers on order from the General Dynamics shipbuilding company NASSCO in California. This acquisition appears to be the first case whereby a pipeline operator will also be able to offer marine transportation.[3]

In addition to its role in the energy transportation and storage industry, Kinder Morgan operates in two major oil fields in Texas: the Yates Oil Field and the SACROC Unit. Kinder Morgan produces approximately 55,000 barrels per day between the two areas, and claims to be the second-largest oil producer in Texas.[4]

Assertions[edit]

Chairman and CEO Richard Kinder, selected by Morningstar as its 2005 CEO of the Year, receives a salary of $1.00 a year, no bonuses, no option grants, and no restricted stock. Additionally, Kinder Morgan claims that it does not spend money on corporate jets, first-class airfare, sports tickets, or other expensive perquisites.[5]

Leveraged buyout[edit]

On August 28, 2006, Kinder Morgan announced that it would be taken private in a management-led leveraged buyout totaling approximately $22 billion. Outside participants in the transaction include Fayez Sarofim, Goldman Sachs Capital Partners and Highstar Capital (then owned by American International Group).[6]

On September 8, 2010, a notice of a class action settlement was filed in the District Court of Shawnee County Kansas. The proposed settlement is to resolve claims of breach of fiduciary duty owed to Kinder Morgan shareholders by persons involved with the buyout. The settlement payment is to be $200 million. A hearing on the settlement was scheduled for November 12, 2010.[citation needed]

In October 2011, Kinder Morgan Inc. agreed to buy El Paso Corp. (EP) for $21.1 billion and will make the combined company have 67,000 miles (107,000 kilometers) of gas lines and eclipse Enterprise Products Partners LP (EPD) as the biggest U.S. pipeline operator. The transaction paid with shares of Kinder Morgan, Kinder Morgan warrants, and all of cash portion $11.5 billion through Barclays Plc (BARC) borrowing.[7]

Companies[edit]

Kinder Morgan Brisbane Terminal in Brisbane, California. The 20 tanks here can hold up to 618,000 barrels of petroleum products.
  • Kinder Morgan Energy Partners, SFPP, Mission Valley, California
  • Kinder Morgan Energy Partners, L.P., Houston, Texas
  • Kinder Morgan CO
    2
    Company, Houston, Texas
  • Kinder Morgan Management, LLC, Houston, Texas
  • Kinder Morgan, Inc., Houston, Texas
  • Natural Gas Pipeline Company of America
  • Kinder Morgan Terminals, Houston, Texas
  • Kinder Morgan Power Company, Lakewood, Colorado
  • Kinder Morgan Louisiana Pipeline LLC (KMLP), Crowley, Louisiana

Historically, Kinder Morgan has also been involved with a number of other pipelines, including CalNev Pipeline, Mohave Pipeline, Tennessee Gas Pipeline, and El Paso Corp.[8]

Challenges to Kinder Morgan Pipelines[edit]

Kinder Morgan Trans Mountain existing pipeline for transporting diluted bitumen between Edmonton, Alberta and Burnaby, East of Vancouver, BC is proposed to be nearly tripled with a capacity of 850,000 barrels per day from 300,000, for a total investment of $5.4 billion. [1] [9][10]

This project is controversial, as are similar pipeline projects Northern Gateway from Alberta to Kitimat, BC, Keystone XL to the US south and Line 9 (Enbridge's project, from Sarnia to Montreal), all of which expand the transportation capacity of heavy crude to refineries or loading ports for export to the US or overseas, a potentially significant contributor to climate change and ocean acidification, and a threat to aquifer and watershed integrity where the lines run.

Members of the Squamish and Tsleil-Waututh First Nations of British Columbia, Canada paddled canoes on the waters of Burrard Inlet to the Kinder Morgan Burnaby Terminal for a ceremony to protest the $5 billion expansion of the Trans Mountain pipeline, in North Vancouver, B.C., on September 1, 2012. Tsleil-Waututh leaders made it clear on Friday their ultimate goal was to shut down the project altogether.[11]

The existing and proposed pipelines ship diluted bitumen through the Strait of Juan de Fuca, an extremely sensitive environmental region. The tankers have to pass through a very narrow channel of shallow water to reach the open sea, making the project controversial and strongly opposed by some Canadians [2] and Americans, for reasons similar to the opposition to Keystone XL, Line 9, and Northern Gateway and offshore deep ocean oil drilling.

Accidents[edit]

In 2009, the Pipeline and Hazardous Materials Safety Administration (PHMSA) cited Kinder Morgan for violating its own procedures for establishing the distance between a natural gas pipeline and a “high consequence area” such as a school or hospital, resulting in distances being too close.[12]

In 2011, PHMSA cited Kinder Morgan for these safety violations:

  • failing to maintain update maps showing pipeline locations,
  • failing to test pipeline safety devices,
  • failing to maintain proper firefighting equipment,
  • failing to inspect its pipelines as required, and
  • failing to adequately monitor pipes’ corrosion levels.[13]

In Texas alone from 2003 to 2014, Kinder Morgan experienced 36 "significant incidents" resulting in fatalities or hospitalization, fires, explosions, or spills of five or more barrels.[14]

The petroleum industry is not known for its safety record and accidents regularly make the evening news, and the same is true of Kinder Morgan, whose pipelines have been responsible for a number of spills, evacuations, and fatalities. For example:

  • 2004 On April 28, 2004, an underground Kinder Morgan 14” pipeline ruptured at Suisun Marsh in Solano County, California, spilling over 120,000 gallons of diesel fuel directly into the marsh. The cause was pipe corrosion. The company failed to notify authorities about the spill for 18 hours, another safety violation for which it was later cited. Kinder Morgan was fined $5.3 million for the spill, and agreed to enhance spill prevention, response and reporting practices. The company had 44 spills in a 31-month period, indicating "a widespread failure to adequately detect and address the effects of outside force damage and corrosion," according to an order issued in August 2005 by the U.S. Department of Transportation's Pipeline and Hazardous Materials Safety Administration (PHMSA).[15]
  • 2004 On November 9, 2004, a Kinder Morgan pipeline in Walnut Creek, California was struck by a backhoe, causing a gasoline spill that ignited in an explosive fireball that incinerated five workers, severely injuring four others. CalOSHA (California Occupational Safety and Health Administration) cited Kinder Morgan for failure to accurately mark or map the pipeline location.[16] In 2005, the California Fire Marshal fined Kinder Morgan $500,000 for its role in this “completely preventable” tragedy. Kinder Morgan agreed to upgrade its pipeline inspection methods and improve corrosion control.[17]
  • 2006 On November 11, 2006, a subcontractor on Kinder Morgan’s Rockies Express (REX) pipeline outside Cheyenne, Wyoming struck an existing pipeline, causing a rupture and explosion. Two months after this explosion, the Federal Energy Regulatory Commission threatened to shut the project down if REX didn’t improve its “poor compliance record” involving construction activity outside the approved work area.[18]
  • 2008 On September 23, 2008, a Kinder Morgan pipeline exploded and burned for more than ten hours at Pasadena, Texas. One person died; another was injured.[19] The cause of this “significant event” was corrosion. The Pasadena pipeline experienced at least 18 "significant incidents" 2004 to 2013.[20]
  • 2011 On August 17, 2011, Kinder Morgan’s Natural Gas Pipeline Co. of America had a flash fire and explosion at a plant operating the pipeline south of Herscher, Illinois. Five employees went to the hospital. Kinder Morgan was cited for pipeline and workplace safety violations.[22]

References[edit]

  1. ^ Failure Investigation Report – Central Florida Pipeline 10-inch Jet Fuel Pipeline Failure, July 22, 2011, http://www.phmsa.dot.gov/pv_obj_cache/pv_obj_id_4DFEE9C3F71E6C9384A34BA182C1F157C5212A00/filename/cntrl_FL_red_appD.pdf.
  2. ^ Pipeline Operator Information, http://primis.phmsa.dot.gov/comm/reports/operator/Operatorlist.html?nocache=5346.
  3. ^ Kinder Morgan Tankers, http://www.kindermorgan.com/business/terminals/apt.cfm
  4. ^ Kinder Morgan CO
    2
    : description of CO
    2
    and oil operations
  5. ^ Company profile on KM web site
  6. ^ SEC Form 10-Q, March 31, 2009
  7. ^ "Kinder Morgan to Buy El Paso for $21 Billion in Cash, Stock". October 18, 2011. 
  8. ^ See accidents noted below.
  9. ^ Elisabeth Rosenthal (June 13, 2012). "Canada Seeks Alternatives to Transport Oil Reserves". The New York Times. Retrieved June 14, 2012. 
  10. ^ http://www.transmountain.com/project/project-overview/
  11. ^ "B.C. First Nation launches legal challenge over Kinder Morgan pipeline," http://www.ctvnews.ca/canada/b-c-first-nation-launches-legal-challenge-over-kinder-morgan-pipeline-1.1804190#ixzz350lGUDK4 and http://www.ctvnews.ca/canada/b-c-first-nation-launches-legal-challenge-over-kinder-morgan-pipeline-1.1804190#ixzz350kqw2ja, accessed June 18, 2018.
  12. ^ PHMSA letter to Richard Kinder, September 1, 2009, http://primis.phmsa.dot.gov/comm/reports/enforce/documents/520071008/520071008_FinalOrder_09012009_text.pdf, accessed June 18, 2014.
  13. ^ Pipeline and Hazardous Materials Safety Administration (PHMSA) letter to Hugh Harden, Kinder Morgan, Feb. 28, 2011, http://primis.phmsa.dot.gov/comm/reports/enforce/documents/520115005/520115005_NOPV%20PCO_02282011_text.pdf, accessed June 2014.
  14. ^ Building Safe Communities: Pipeline Risk and its Application to Local Development Decisions, (Washington D.C.: U.S. Department of Transportation Office of Pipeline Safety: 2010), p. 10, at http://primis.phmsa.dot.gov/comm/publications/PIPA/PIPA-PipelineRiskReport-Final-20101021.pdf, accessed June 18, 2014.
  15. ^ Scott Marshall, “Kinder-Morgan to pay $5.3 million for fuel spills,” Contra Costa Times, May 21, 2007, http://www.contracostatimes.com/search/ci_5950251, accessed June 16, 2014.
  16. ^ Officials Dole Out Fines In Fatal Pipeline Explosion, May 5, 2005, http://www.ktvu.com/news/news/officials-dole-out-fines-in-fatal-pipeline-explosi/nKYpc/.
  17. ^ "Cal/OSHA Issues Multi-Employer Citation," http://www.dir.ca.gov/dirnews/2005/ir2005-20.html; California Fire Investigation Report, http://osfm.fire.ca.gov/pipeline/pdf/WCFinalReport/PenaltyLetter.pdf; “Kinder Morgan reaches safety deal,” April 10, 2006, http://www.marketwatch.com/story/kinder-morgan-energy-us-reach-safety-deal, accessed June 2014.
  18. ^ Tom Beyerlein, “Fatal explosion puts Kinder Morgan’s past in spotlight,” Dayton Daily News [Ohio], September 14, 2008, in Tar Sands Free BC, September 15, 2008, http://tarsandsfreebc.org/?p=236, accessed June 16, 2014.
  19. ^ Eric James, “Pipeline at Pasadena plant explodes,” September 24, 2008, ABC Eyewitness News, Houston, Texas, http://abc13.com/archive/6408372/, accessed June 17, 2014.
  20. ^ “Texas Significant Incidents Listing,” 2003-2014, PHMSA Pipeline Safety Stakeholder Communication, U.S. DOT, http://primis.phmsa.dot.gov/comm/reports/safety/IncDetSt_st_TX_flt_sig.html?nocache=8751, accessed June 17, 2014.
  21. ^ "Pipeline explosion kills 1, injures 3 in Smith county". MS News. Retrieved 23 January 2014. 
  22. ^ “Kinder Morgan, Owner of Illinois Natural Gas Pipeline Co. Where Explosion Occurred, Has Lengthy Record of Pipeline, Workplace Safety Violations,” August 17, 2011, NaturalGasWatch.org, http://www.naturalgaswatch.org/?p=817; “Gas plant explosion injures five,” Hazardex, August 17, 2011, http://www.hazardexonthenet.net/article/44270/Gas-plant-explosion-injures-five.aspx?AreaID=2, accessed June 2014.

External links[edit]