Kinder Morgan-Sempra Energy secure commitments for over $4 billion pipeline from Rockies to eastern U.S.
HOUSTON, Feb. 28, 2006 – Kinder Morgan Energy Partners, L.P. (NYSE: KMP) and Sempra Pipelines & Storage, a unit of Sempra Energy (NYSE: SRE), today announced that they have secured shipper commitments for the over $4 billion Rockies Express Pipeline project that will transport natural gas from the prolific producing basins in Wyoming and Colorado to eastern Ohio. The companies previously stated they would wait to ensure shipper interest before moving forward with the 1,323 mile pipeline. The project will be one of the largest of its kind ever constructed in North America and will have the capability to transport 1.8 billion cubic feet per day (Bcf/d) of natural gas. Binding firm commitments have been secured from shippers for all of the capacity, and additional agreements have been reached that will enable the Entrega and Overthurst pipelines to connect with and extend the reach of Rockies Express. The project will be brought on line in segments and is expected to be completed by June 2009, subject to regulatory approvals.
“We are absolutely thrilled that the Rockies Express Pipeline project has been brought to fruition,” said KMP Chairman and CEO Richard D. Kinder. “Rarely has a single pipeline had the potential to have such a transforming effect on the North American natural gas industry. The pipeline will provide much needed takeaway capacity for Rockies production and deliver it to growing markets in the Midwest and East. Rockies Express will also serve as a catalyst for additional energy infrastructure development along its significant geographic footprint, and our next goal is to develop storage along the pipeline to provide additional growth opportunities for our shippers and investors. Discussions with shippers also indicate there is an opportunity to extend the original scope of the project further eastward, and we will begin working shortly to secure such commitments. The project is expected to become accretive to KMP unitholders as each phase of the pipeline is brought into service.”
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. By increasing the availability of reliable supplies, the project has the potential to reduce natural gas prices to consumers across the country. With a potential recoverable reserve base of more than 200 trillion cubic feet of resources, and with more than 200 rigs actively drilling, the Rocky Mountain basins are poised to become the most significant natural gas play in the United States.
“The Rockies Express project has been a collaborative effort and a model for infrastructure development within the industry,” said George Liparidis, president of Sempra Pipelines & Storage. “Not only will the project provide benefits for producers and end users, but also for the communities along the pipeline route by generating property tax payments, employment opportunities and increased spending on local goods and services.”
KMP and Sempra Pipelines & Storage recently closed on the purchase of Entrega Pipeline LLC from an affiliate of EnCana Corporation (TSX, NYSE: ECA) and commenced providing interim service from the Meeker Hub in Colorado to Wamsutter in Wyoming. In addition, Rockies Express has executed binding definitive agreements with Questar Overthrust Pipeline Company, a wholly owned subsidiary of Questar Corporation (NYSE: STR), for a long-term lease of 625 million cubic feet per day (MMcf/d) of capacity on Overthrust that will extend the reach of Rockies Express from Wamsutter to the Opal Hub in Wyoming. The capacity lease on Overthrust can potentially be expanded up to 1.5 Bcf/d.
KMP and Sempra Pipelines & Storage said the project could not have happened without the leadership shown by EnCana through its 500 MMcf/d firm transportation commitment and its KMP/Sempra - Rockies Expwillingness to allow Entrega to be integrated into Rockies Express. In conjunction with the capacity lease from Overthrust and its agreement to extend its facilities to connect with Entrega at Wamsutter, the project will provide seamless service to shippers from the Opal and Meeker hubs to Clarington, Ohio, and perhaps beyond.
The project also owes a debt of gratitude to the Wyoming Natural Gas Pipeline Authority (WPA). The WPA has been an advocate of Rockies Express since the project’s inception, from its initial firm capacity commitment through its attendance at shipper meetings to support the project.
The federal Minerals Management Service (MMS) also provided support for the project through its decision to subscribe for 50 MMcf/d of long-haul capacity on a long-term basis to service its royalty in kind gas program in Wyoming. The MMS decision underscores the strong business case for Rockies Express. Creditworthy major and independent producers form the bulk of the remaining firm commitments, and their support reflects the importance of this project to the region and to the United States as a whole.
KMP and Sempra Pipelines & Storage intend to file an application in May 2006 with the Federal Energy Regulatory Commission (FERC) for regulatory approval for the first 710 mile pipeline segment of Rockies Express, from the Cheyenne Hub in Colorado to an interconnection with Panhandle Eastern Pipeline Company in Audrain County, Mo. The FERC granted the Rockies Express request to commence the FERC pre-filing process under the National Energy Policy Act in November 2005, and has announced its intent to prepare an Environmental Impact Statement for the first segment of the project for which public scoping meetings have already been completed. To help minimize the environmental impact of the project, Rockies Express has proposed that about 90 percent of the pipeline route parallel existing utility corridors. The FERC will make the final decision on the pipeline route.
KMP will operate Rockies Express and owns two-thirds of the equity in the project, while Sempra Pipelines & Storage has a one-third ownership interest and another Sempra Energy unit has subscribed to 200 MMcf/d of capacity on the new pipeline. However, in exchange for shipper commitments to the project, KMP and Sempra Pipelines & Storage have contracted for outstanding options to acquire equity in the project, which, if exercised, could result in KMP owning a minimum of 50 percent and Sempra Pipelines & Storage owning a minimum of 25 percent after the completion date of the project.
Service on the first segment of the project, including transportation of gas from the capacity lease on Overthrust and any necessary expansion of Entrega, is expected to commence on Jan. 1, 2008, subject to regulatory approvals. The second segment of the Rockies Express project, which is planned to be in service in January 2009, will continue to the Lebanon Hub in Ohio. The third segment to the Clarington Hub is expected to be in operation no later than June of 2009.
For more information on the project, contact Jeff Rawls at Kinder Morgan (303) 914-4903 or Ryan O’Neal at Sempra Pipelines & Storage (619) 696-4585.
Kinder Morgan Energy Partners, L.P. is one of the largest publicly traded pipeline limited partnerships in America. KMP owns or operates more than 25,000 miles of pipelines and approximately 145 terminals. Its pipelines transport more than 2 million barrels per day of gasoline and other petroleum products and up to 8.4 billion cubic feet per day of natural gas. Its terminals handle over 80 million tons of coal and other dry-bulk materials annually and have a liquids storage capacity of approximately 65 million barrels for petroleum products and chemicals. KMP is also the leading provider of CO2 for enhanced oil recovery projects in the United States.
The general partner of KMP is owned by Kinder Morgan, Inc. (NYSE: KMI), one of the largest energy transportation and storage companies in North America. Combined, the two companies have an enterprise value of over $35 billion.
Sempra Pipelines & Storage acquires, builds and operates natural gas pipelines and storage facilities in Mexico and the United States. Sempra Energy, based in San Diego, is a Fortune 500 energy-services holding company with 2005 revenues of $11.7 billion. The Sempra Energy companies’ 14,000 employees serve more than 29 million consumers in the United States, Europe, Canada, Mexico, South America and Asia.
Overthrust Pipeline Company is a wholly owned subsidiary of Questar Corp. (NYSE:STR). Questar Corp. is a natural gas-focused energy company with an enterprise value of approximately $8 billion. Headquartered in Salt Lake City, Questar finds, develops, produces, gathers, processes, transports, stores and distributes natural gas, primarily in the Rocky Mountain Region of the United States.
This news release includes forward-looking statements. Although Kinder Morgan believes that its expectations are based on reasonable assumptions, it can give no assurance that such assumptions will materialize. Important factors that could cause actual results to differ materially from those in the forward-looking statements herein are enumerated in Kinder Morgan’s Forms 10-K and 10-Q as filed with the Securities and Exchange Commission.
This press release contains statements that are not historical fact and constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. When Sempra Energy uses words like “believes,” “expects,” “anticipates,” “intends,” “plans,” “estimates,” “may,” “would,” “should” or similar expressions, or when Sempra Energy discusses its strategy or plans, the company is making forward-looking statements. Forward-looking statements are not guarantees of performance. They involve risks, uncertainties and assumptions. Future results may differ materially from those expressed in the forward-looking statements. Forward-looking statements are necessarily based upon various assumptions involving judgments with respect to the future and other risks, including, among others: local, regional, national and international economic, competitive, political, legislative and regulatory conditions and developments; actions by the California Public Utilities Commission, the California State Legislature, the California Department of Water Resources, the Federal Energy Regulatory Commission and other regulatory bodies in the United States and other countries; capital markets conditions, inflation rates, interest rates and exchange rates; energy and trading markets, including the timing and extent of changes in commodity prices; the availability of natural gas; weather conditions and conservation efforts; war and terrorist attacks; business, regulatory, environmental, and legal decisions and requirements; the status of deregulation of retail natural gas and electricity delivery; the timing and success of business development efforts; the resolution of litigation; and other uncertainties, all of which are difficult to predict and many of which are beyond the control of the company. These risks and uncertainties are further discussed in the company’s reports filed with the Securities and Exchange Commission that are available through the EDGAR system without charge at its Web site, www.sec.gov and on the company’s Web site, www.sempra.com.
Sempra Pipelines & Storage is not the same company as the utilities, SDG&E or SoCalGas, and Sempra Pipelines & Storage is not regulated by the California Public Utilities Commission.
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