Shares of Kinder Morgan Inc. (KMI) closed up more than 4% Wednesday following a pre-market conference call during which CEO Rich Kinder went through a point-by-point explanation of how the company and its Kinder Morgan Energy Partners (KMP) account for spending to maintain pipelines and other assets.

“Some questions have been raised recently about Kinder Morgan’s sustaining capex [capital expenditure] policy, and we thought we would take this opportunity to address that issue,” Kinder said. He then went through an explanation of the difference in sustaining capex by El Paso Corp. on its assets in 2011 and what KMI has spent this year on the same assets after its El Paso acquisition (see Daily GPI, May 25, 2012).

KMI shares and KMP have fallen after an email, Tweets and then a report by an analyst at Hedgeye Risk Management who claims that the company “…starve[s] its pipelines and related infrastructure of routine maintenance spending in order to maximize distributable cash flow (DCF), IDR [incentive distribution rights] payments to the GP [general partner], and acquisition accretion” (see Daily GPI, Sept. 12).

On Sept. 3, KMI closed at $37.57 and then $35.22 on Sept. 6 following email and Tweets about the Hedgeye report. On Sept. 10, KMI closed at $37.05, but then in the days following the release of the report, shares trended downward to close at $34.72 on Tuesday, a decline of more than 6%.

After Wednesday’s nearly hour-long conference call, trading in KMI was heavy, and the shares closed up 4.44% for the day at $36.26.

Wednesday Kinder told financial analysts following the company that the KMI “philosophy” is to maintain assets in the “best possible condition” on a “cost-effective basis” with “a bottoms-up approach.” Most costs to maintain the integrity of pipelines are not in sustaining capex but are in the “expense” category. “Sustaining capex is in some respects a misleading indicator of how well you’re maintaining your system.”

And Kinder said KMI and KMP are doing a good job, beating peers on benchmarks that measure environmental, health and safety performance.

“We believe we’re applying more conservative repair and remediation criteria to the El Paso assets than were done before the merger, and we’re already seeing some positive indications in the number of incidents and the severity of the incidents since the merger was completed,” Kinder said. “We also believe we have a more rigorous damage-prevention program that encompasses all the people out in the field who make certain that third parties do not strike the lines…”

During the call, Kinder was careful to not criticize how El Paso management maintained the assets, but he suggested that the new owner is able to run things more efficiently. He also pointed out his 33 years in the pipeline industry and the “hundreds of years” of combined experience of Kinder management.

“…[T]oday, unlike 33 years ago, this is a very competitive world, and if we don’t do our best to minimize costs in a consistent way, we’re shortchanging ourselves and our customers…”