KMP reports details of major pipeline expansions

March 8, 2006
Kinder Morgan Energy Partners LP (KMP), a subsidiary of Kinder Morgan Inc. (KMI), said major gas pipelines it proposes in the Rocky Mountains and Louisiana have received long-term binding capacity agreements from shippers and will proceed.

Judy R. Clark
Senior Associate Editor

HOUSTON, Mar. 8 -- Kinder Morgan Energy Partners LP (KMP), a subsidiary of Kinder Morgan Inc. (KMI), said major gas pipelines it proposes in the Rocky Mountains and Louisiana have received long-term binding capacity agreements from shippers and will proceed.

The pipelines are the $4 billion Rockies Express system and the $400 million Kinder Morgan Louisiana Pipelines LLC project.

The company also has begun an open season for a proposed 300-mile expansion of its TransColorado gas pipeline.

These are three of many expansions KMI plans on the 40,000-mile, US-Canada pipeline system that it owns in whole or in part (see map, OGJ, Aug. 8, 2005, p. 26). The network includes its purchase last fall of Terasen Inc. with its 710-mile Trans Mountain system, which carries production from the oil sands of Alberta to Canada's West Coast. KMP plans to expand capacity of the system to 300,000 b/d from 225,000 b/d in two phases by late 2008.

Rockies Express
The 1,323-mile, 42-in. Rockies Express system—to be one of the largest pipelines of its kind ever built in North America—will transport up to 1.8 bcfd of natural gas to eastern Ohio from Wyoming and Colorado.

KMP will operate the pipeline and owns two thirds of the project. Sempra Pipelines & Storage, San Diego, holds one third of it (OGJ Online, Oct. 18, 2005). In exchange for capacity commitments, some shippers may exercise options for equity in the project, which could give KMP a minimum of 50% and Sempra 25% after construction.

The entire pipeline, which KPM expects to be completed by June 2009, will be brought on line in three segments:

-- The first 710 miles, from the Cheyenne Hub in Colorado to an interconnection with Panhandle Eastern Pipeline Co.'s system in Audrain County, Mo., is scheduled to be in service by Jan. 1, 2008. It will include transportation of gas from a capacity lease on Questar Corp.'s Overthrust Pipeline and any necessary expansion of Entrega Pipeline LLC, which KPM and Sempra Pipelines & Storage purchased recently from EnCana Oil & Gas (USA) Inc. It has begun providing interim service from the Meeker Hub in Colorado to Wamsutter, Wyo. In addition to allowing Entrega to be integrated into Rockies Express, EnCana agreed to long-term transportation of 500 MMcfd of gas.

-- The second segment, to be in service in January 2009, will continue to the Lebanon Hub in Ohio.

-- The third segment, to the Clarington Hub in Ohio, is expected to be operational by June 2009.

RMP and Sempra have a binding firm transportation commitment from Questar Overthrust Pipeline Co. for a long-term lease of 625 MMcfd of capacity on the Overthrust system that will extend the reach of Rockies Express from Wamsutter to the Opal Hub in Wyoming. The lease potentially can be expanded to 1.5 bcfd, KMP said.

Another Sempra Energy unit has subscribed to 200 MMcfd of capacity on Rockies Express to serve markets in the east. In addition, the US Minerals Management Service (MMS) also agreed to subscribe for 50 MMcfd of long-haul, long-term capacity to service its royalty-in-kind gas program in Wyoming. Major and independent producers make up the remaining firm commitments, KMP said.

Discussions with shippers indicate an opportunity to extend the scope of the project even farther eastward, said KMP, adding that it plans to begin work shortly to secure commitments. The company said its next goal also is to develop storage along the pipeline system.

Rocky Mountain basins have a reserves base of more than 200 tcf of gas, and more than 200 rigs are drilling in the area, KPI said, making the area poised to become "the most significant" natural gas play in the US.

"With more than 25 interconnects to intrastate and interstate pipelines, the project will allow natural gas producers to effectively address the price disparity between Rocky Mountain basins and other parts of the country," said KPI Chairman and Chief Executive Richard D. Kinder. "By increasing the availability of reliable supplies, the project has the potential to reduce natural gas prices to consumers across the country."

KPM plans to apply in May to the Federal Energy Regulatory Commission for interstate construction permits. About 90% of the pipeline route is expected to parallel existing utility corridors, reducing the environmental impact, the company said.

Other system expansions
Plans are in progress for other expansions of the network:

-- Cheniere gas delivery line. Kinder Morgan Louisiana Pipeline LLC is planning a large-diameter gas pipeline designed to provide 3.2 bcfd of takeaway capacity from the Cheniere LNG facility in Cameron Parish, La. It will transport gas to delivery points in Cameron, Calcasieu, Jefferson Davis, Acadia, and Evangeline parishes, La., for local use and to Evangeline Parish, La., pipeline connections (OGJ Online, Sept. 26, 2005).

KPM expects the lateral connecting with KMI's Natural Gas Pipeline Co. of America to be in service by Oct. 1, 2008, and the entire Kinder Morgan Louisiana Pipeline to be completed by Apr. 1, 2009.

-- TransColorado expansion. KMP on Feb. 28 announced the start of a binding open season to solicit shipper support for firm transportation capacity on the proposed expansion of its TransColorado pipeline. The expansion would link TransColorado with major interstate and intrastate pipelines including the Entrega Pipeline, facilitating access to the Rockies Express pipeline.

The project is designed to increase TransColorado's northbound capacity by 250 MMcfd from the Blanco Hub area in San Juan County, NM, to the Meeker Hub in Rio Blanco County, Colo. A prearranged shipper has executed a binding precedent agreement for capacity on the project.

-- Trans Mountain capacity. KMI is planning pump station expansions on the Trans Mountain oil and gas system in western Canada to increase system capacity to 260,000 b/d in early 2007 from the current 225,000 b/d. In addition, its Anchor Loop phase will increase system capacity to 300,000 b/d by late 2008 (OGJ Online, Mar. 2, 2006).

Contact Judy R. Clark at [email protected].