Kinder Morgan adjusts pipeline expansion strategy

OREANDA-NEWS. October 21, 2016. Kinder Morgan will focus on smaller infrastructure projects in New England amid local opposition,executives said.

Regional pipeline expansions have faced headwinds from local regulators even after approval from the US Federal Energy Regulatory Commission (FERC). Earlier this year the New York Department of Energy Conservation denied the Constitution pipeline a key water quality permit after FERC approved it, resulting in lawsuits and delays for the proposed 124-mile (200km), 628mn cf/d (17mn m?/d) line. And earlier this year Kinder Morgan cancelled its plans to build a 211.4-mile greenfield natural gas pipeline from Appalachia to New England because of a lack of commitments.

Kinder Morgan executives said that regulatory rulings and utilities' reluctance to commit to pipeline capacity has made large-scale projects difficult.

"Barring some improvement in that overall permitting environment I think it is difficult to do those, but we will keep looking for the smaller projects to do," chief executive Steve Kean said on an earnings call yesterday. "It does tend to make the existing network more valuable."

Kean said Kinder Morgan's Tennessee Gas pipeline has created new ways to get gas from the Marcellus and Utica shales in Appalachia to the Gulf coast either for LNG exports or to flow into Mexico.

"We are building on our existing footprint," Kean said, by adding compression, laying some parallel pipe or other similar projects that are easier to get approval for.

"While the protesters tend to get the headlines, it is still possible to build out new infrastructure," executive chairman Rich Kinder said.

Kinder Morgan has begun to adjust for a lengthier regulatory process.

The company has a \\$13bn project backlog, down by 3pc from the second quarter. Kean said Kinder Morgan is still cutting projects from the backlog to focus on those it can fund entirely from cash flow.