Kinder Morgan Nears $6.5 Billion in Kickoffs, Completions, but Wary of Trans Mountain Plans

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Kinder Morgan Incorporated (NYSE:KMI) (KMI) (Houston, Texas) enjoyed a strong start to 2018, with improving prices and demand for natural gas boding well for the year. The company expects to spend $2.3 billion in 2018 on capital projects, not including work from Kinder Morgan Canada Limited (TSX:KML) (Calgary, Alberta), but is facing a growing list of obstacles on one of its top priorities: Western Canada's Trans Mountain Pipeline Expansion. Industrial Info is tracking $23.25 billion in active projects involving Kinder Morgan, including more than $6.5 billion worth that are slated to begin or finish construction in the second quarter.

Click on the image at right for a graph detailing Kinder Morgan's top 10 states and provinces in North America for active projects.

Kinder Morgan's profits jumped 21% from first-quarter 2017 to $485 million, as natural gas transportation volumes increased 10%. Much of the gains could be attributed to the market environment: Unexpectedly cold weather drove up gas demand, while better prices fueled drilling activity. Kinder Morgan also wrapped up about $700 million worth of expansions and added $900 million worth of projects (largely natural gas) to the backlog in the first quarter.

Five of Kinder Morgan's projects under construction and set to wrap up before the end of this month are part of subsidiary Tennessee Gas Pipeline Company's (TGP) Broad Run Expansion Project, which is expected to be in service by June. The expansion will add natural gas capacity to the existing Tennessee Gas Pipeline system, which transports material from West Virginia to the Gulf Coast; specifically, the expansion will increase deliveries from the Appalachian region to states in the U.S. Southeast. The five compressor-station projects are:

• $60 million construction of Compressor Station 563 near Nashville, Tennessee; see project report
• $55 million construction of Compressor Station 875 near Richmond, Kentucky; see project report
• $50 million in addition and modifications to Winchester Compressor Station 106 in Clay City, Kentucky; see project report
• $45 million construction of Tyler Mountain Compressor Station 118 A near Charleston, West Virginia; see project report
• $40 million construction of Compressor Station 119 A near Charleston, West Virginia; see project report

Two other major TGP projects are seeing some of their phases begin construction during the quarter: the Utica Marcellus Texas Pipeline (UMTP) project, which will transport purity and mixed natural gas liquids (NGL) produced in the Utica and Marcellus shales to delivery points along the Texas Gulf Coast, and the TGP Lone Star Project, would improve the transportation of up to 300 million standard cubic feet of natural gas from an existing receipt point on TGP's existing mainline system to a new point on TGP's 100 Line in Jackson County, Texas.

The UTMP project will see construction begin on two of its phases: $170 million segment from Greenup County to Powell, Kentucky, which will run 77 of the project's 964 miles, and the $45 million Natural Gas Compressor Station 875 in Richmond, Kentucky. The TGP Lone Star Project will see both of its major segments kick off: the $45 million natural gas compressor station in Edna, Texas, and the $35 million natural gas compressor station in Stinton, Texas. The UTMP projects are expected to wrap up in the third quarter of 2020, and the TGP Lone Star stations in the first quarter of 2019. For more information, see Industrial Info's project reports on the UTMP pipeline segment and station, and the TGP Lone Star stations in Edna and Stinton.

Among the Canadian projects that are in their final stages is the $300 million Base Line Crude Oil Storage Terminal in Sherwood Park, Alberta, a 12-tank facility built with joint-venture partner Keyera Corporation (Calgary) that completed construction in March. A pipeline connects the facility with Kinder Morgan's existing storage terminal in Edmonton, Alberta, giving customers access to all crude oil streams handled by KML. All 12 tanks are to be brought into service through the end the year. For more information, see Industrial Info's project report.

Trans Mountain Expansion on the Brink
But trouble is brewing for one of the most widely anticipated projects involving Kinder Morgan: the Trans Mountain Pipeline Expansion, which was approved by Canada's federal government in 2016 and would nearly triple capacity on the line from Alberta to a Vancouver-area port to 890,000 barrels per day (BBL/d). Last week, KML suspended all non-essential spending on Trans Mountain, and KMI Chief Executive Officer Steven Kean announced in a recent quarterly earnings-related conference call that "it's become clear this particular investment may be untenable for a private party to undertake."

Canada's federal government is eager to see the expansion proceed, and Prime Minister Justin Trudeau has offered financial aid to keep it alive. But even if Ottawa effectively bails out Kinder Morgan, British Columbia's provincial government has pledged to file a legal challenge by the end of April to determine whether it has the jurisdiction to stop the entire project, according to Reuters. Most of the expansion is in the westernmost province, where residents have long been hostile to the project.

One positive sign: Contributions from the Trans Mountain Pipeline jumped 7% from first-quarter 2017, largely due to Kinder Morgan's cost capitalization for the expansion. Industrial Info is tracking all major aspects of the Trans Mountain Expansion, including a $3.5 billion segment in British Columbia and a shorter, $1.5 billion segment in Alberta, which would run from a point near Hargreaves, British Columbia, to a crude oil pump station in Hinton, Alberta. The project also includes $205 million in tank additions and $860 million in pump station expansions and refurbishments. For more information, see Industrial Info's project reports on the British Columbia and Alberta segments.

Kinder Morgan said it will decide by May 31 whether it will cancel the Trans Mountain Expansion altogether.

Industrial Info Resources (IIR), with global headquarters in Sugar Land, Texas, six offices in North America and 12 international offices, is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy markets. Industrial Info's quality-assurance philosophy, the Living Forward Reporting Principle™, provides up-to-the-minute intelligence on what's happening now, while constantly keeping track of future opportunities. Follow IIR on: Facebook - Twitter - LinkedIn. For more information on our coverage, send inquiries to info@industrialinfo.com or visit us online at http://www.industrialinfo.com/.