Bloomberg News

Kinder Morgan Increases Planned Trans Mountain Expansion

April 12, 2012

Kinder Morgan Energy Partners LP (KMP:US), the second-biggest U.S. pipeline partnership, is increasing the planned expansion of its Trans Mountain pipeline in response to customer demand to move oil across Canada.

Kinder Morgan will spend $5 billion to bring the pipeline’s capacity to 850,000 barrels a day by 2017, according to a statement today. That’s $2.2 billion more than the company said it was planning to spend on a smaller expansion in January.

The 1,150-kilometer (714-mile) pipeline system stretches from Alberta to Vancouver, providing the only access for Canadian oil to reach the West Coast, Houston-based Kinder Morgan said. The system is currently capable of carrying 300,000 barrels a day and Kinder Morgan announced plans to double that to 600,000 barrels a day in January.

Kinder Morgan hopes it can expand an existing pipeline to open an outlet for Canada’s oil-sands production more quickly than competitors seeking to build new pipelines, Kinder Morgan Canada President Ian Anderson said.

TransCanada Corp. (TRP)’s proposed Keystone XL line, which would bring Canadian oil sands to the U.S. Gulf Coast, was rejected by President Barack Obama earlier this year because of environmental concerns. Enbridge Inc. (ENB)’s proposed Northern Gateway pipeline, which would extend from the oil-sands region to Kitimat, British Columbia, is facing more than a year of regulatory hearings amid opposition from aboriginal groups.

20-Year Commitments

Kinder Morgan already has 20-year commitments from producers, refiners and other shippers for 660,000 barrels a day on the line, Anderson said in a telephone interview. Between 400,000 and 450,000 barrels a day may be exported, he said.

Environmental groups have raised concerns about the size of Kinder Morgan’s expansion and the amount of tanker traffic that the increased exports will create in Vancouver.

The company plans to spend 18 months to 24 months writing detailed plans and building support among local communities, First Nations and aboriginal groups before applying for permission to build the line from Canada’s National Energy Board, Anderson said.

“We’re going to do our darnedest to hear them and consider them,” Anderson said of the regional groups.

The Trans Mountain expansion will follow the pipeline’s existing right of way, except in places where urban encroachment or environmental concerns make that too difficult, Anderson said.

“Wherever we do divert, it will be because the local circumstances benefit from that diversion,” Anderson said.

Enterprise Products Partners LP (EPD:US) is the biggest U.S. pipeline partnership by market value.

To contact the reporter on this story: Mike Lee in Dallas at mlee326@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net


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