Kinder Morgan Energy Partners LP (KMP) said last Wednesday it has entered into an agreement with various parties to expand its Kinder Morgan Interstate Gas Transmission (KMIGT) pipeline to serve five new plants, four of them ethanol-producing, near Grand Island, NE.

The $23 million capital project will increase capacity on KMIGT by 25,000 Dth/d. Current capacity on KMIGT is approximately 110,000 Dth/d. The additional capacity is already fully subscribed through long-term contracts.

"We have been aggressively pursuing expansion projects to serve the growing ethanol market, and we will continue to explore opportunities to bring additional infrastructure to help meet communities' needs along the KMIGT pipeline route," said Mark Kissel, president of KMP's West Region Gas Pipelines. KMP has connected 17 other ethanol plants -- 11 of them in Nebraska -- to the pipeline since 2000.

The KMIGT expansion will include nine miles of 16-inch diameter pipeline loop upstream of Grand Island and 17 miles of 12-inch diameter pipeline loop downstream. Subject to regulatory approval, KMP expects the Grand Island expansion to be fully operational by fall 2008.

KMIGT owns approximately 5,100 miles of transmission lines in Wyoming, Colorado, Kansas, Missouri and Nebraska, and the Huntsman natural gas storage facility in Cheyenne County, NE. The Huntsman facility has approximately 10 Bcf of firm capacity commitments and provides for withdrawal of up to 169 MMcf/d.

KMP owns an interest in or operates more than 24,000 miles of pipelines and 150 terminals across North America. The general partner of KMP is owned by Knight Inc., a private company formed through the $15 billion privatization of Kinder Morgan Inc. (KMI) earlier this year (see NGI, June 4).

During a conference call Wednesday, KMP officials announced an increase to the company's quarterly cash distribution to 88 cents/share from 85 cents/share. The 3Q2007 cash distribution is 9% above the 81 cents/share cash distribution in 3Q2006. KMP reported record quarterly distributable cash flow before certain items of $229.7 million, up 26% from $182.6 million for 3Q2006.

Third quarter results were driven by strong performance from the company's products pipelines and natural gas pipelines business segments, along with contributions from Trans Mountain Pipeline, which KMP acquired from KMI in the second quarter of this year.

"For the first three quarters of 2007, total segment earnings before DD&A [depreciation, depletion and amortization] were up 12% to $1.6 billion," CEO Rich Kinder said. "We are well on our way to generating north of $2.2 billion in segment earnings before DD&A in 2007.

"We also continued to make significant progress in the third quarter on new projects and expansions, which are expected to result in substantial future growth at KMP," Kinder said. "Including our share of joint venture projects like Rockies Express, we plan to invest approximately $3 billion in expansion projects this year alone."

In April KMI sold its U.S. natural gas retail distribution and related operations to GE Energy Financial Services and Alinda Investments LLC for $710 million plus working capital (see NGI, April 9). The operations served more than 260,000 residential, commercial, agricultural and industrial customers in Colorado, Nebraska, Wyoming and Hermosillo, Mexico through more than 11,900 miles of transmission and distribution pipelines, underground storage fields and related facilities. The sale did not include Terasen Gas, the British Columbia natural gas utility that KMI purchased in 2005 (see NGI, Aug. 8, 2005).

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