Kinder Morgan (NYSE: KMI) Coal Exports

Brian Hicks

Written By Brian Hicks

Posted May 16, 2013

Kinder Morgan (NYSE: KMI) is bowing out of its plans to export coal from the terminal at the Port of St. Helens on Oregon’s Columbia River.

The announcement came Wednesday, as the company shut the doors on a project that was expected to send 30 million tons of coal from the Pacific Northwest terminal each year to Asian markets, most notably to China.

This endeavor is little more than a blip on Kinder Morgan’s radar, as the Houston-based company with a diverse portfolio vows to keep full steam ahead in its efforts to export coal from U.S. shores.

The midstream success of Kinder Morgan is unwavering; export volumes are still on the rise, and other terminals will be pursued.

But why would Kinder Morgan up and leave such a promising plan behind?

The answer is simple: it’s coal. The problem – the same problem any coal enterprise is likely to face in the states – is the overwhelming backlash from environmental groups and concerned citizens at the sound of that one simple word: coal.

While the company can claim “due diligence” and on-site issues, the fact of the matter is that people are more concerned with health standards than ever before. No quaint, small town in Oregon wants a dozen coal trains running through its town each day and a coal terminal to pollute its air.

And when Kinder Morgan called for a restructuring on the zoning of the project, opening up an additional 957 acres of land for industrial use, the people came out in droves to protest.

Also, Oregon is one tough cookie. There are strict land-use laws that require permits; air and water permits are also required.

The Pacific Northwest in general seems to be opposing any terminal that will support coal exports. Three of the six recently proposed coal export terminals have gotten the axe for one reason or another, and that includes Kinder Morgan’s.

The Show Must Go On

But never one to let a little failure get in its way, Kinder Morgan, who notoriously stays the course, announced just one day prior that it would be spending $400 million to expand its coal exports in different terminals.

This shows the company’s strong faith and its commitment to export coal from the U.S. to the high-demanding markets in China and other Asian nations.

For now, it looks like focus will be placed on three coal terminals on the Gulf Coast: the Deepwater and Houston Bulk in Houston, Texas and the International Marine Terminal in Myrtle Grove, Louisiana.

For these terminals, expansion efforts will take place, adding acreage and additional storage and constructing new docks for easy transport accessibility.

The $400 million will also be allocated in part to the company’s terminal at BP’s (NYSE: BP) Whiting, Indiana refinery on Lake Michigan.

Other efforts are soon likely to be announced for East Coast projects, which would ship coal to Europe.

Where U.S. Coal Stands

U.S. coal needs to go somewhere, particularly while the rest of the world gets hungrier for it every day.

Taking a look at coal being exported across the Atlantic, Bloomberg reports the U.S. shipped about 60.2 million metric tons to European countries in 2012, a 23 percent hike from 2011. That’s a huge leap in coal exports that doesn’t even begin to factor in the rush to get coal into China.

But it is clear that a concerted effort has been made for a push away from nuclear power and coal in the U.S. in favor of domestic oil and gas.

And if the U.S. opens its flood gates to exporting natural gas, this could have an adverse effect on the current status of coal exports. But while President Obama does seem to be leaning that way, almost all of those efforts are currently in limbo and will likely remain that way for some time.

And that’s exactly why there is such a strong push to export U.S. coal. The business is flourishing despite protests and heavy regulations.

Moving Forward

The Gulf Coast in particular is running rampant with activity, as both domestic oil and gas production increases and those refined products are exported more each day. This has Kinder Morgan positioned quite nicely not only for gas and oil, but also for coal.

Others too are reaping the same benefits, including Martin Midstream Partners LP (NASDAQ: MMLP), whose sulfur and marine transportation units are both flourishing. It has new deals in place that give it access to ten additional terminals, six petroleum gas barges, and a couple push boats that can easily handle the load of coal exports.

Enterprise Products Partners LP (NYSE: EPD) just increased its terminal capacity in Houston in a partnership with Oiltanking Partners LP (NYSE: OILT) for a brand new dock and improvements to its current terminals to allow more freely flowing traffic.

And Ambre Energy, who was partnered with Kinder Morgan for the Port of St. Helens project terminal, has no plans to leave the area. It still wants to export 8 million tons from St. Helens each year. And there is a 44 million ton proposal on the table across the river from St. Helens that sits idle. Right now, the company still lacks the necessary permits to move forward.

With Kinder Morgan out of the way, that leaves an enormous opportunity for anyone willing to pick up the pieces and try again.

Even if the Pacific Northwest stands firm against coal, companies positioned in the Gulf Coast, will find it hard to fail with the ever increasing production and export opportunities coming out of the Eagle Ford shale formation.

Kinder Morgan may have lost this one battle, but this sure didn’t faze the company in its ultimate quest – to export coal around the world.  


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