Kinder Morgan Energy Partners, L.P.
) filed an application with the National Energy Board (NEB) for
tolls and contract terms of the planned $4.1 billion expansion of
its 1,150 kilometer (715 mile) Trans Mountain oil pipeline.
The NEB is an independent federal organization that is in charge
of tolling, construction and operation of Canadian pipelines that
traverse international or interprovincial boundaries.
Following the completion of the project, the Trans Mountain
pipeline will extend from Alberta to Canada's West Coast. Kinder
Morgan emphasized that its application is designed to provide
regulatory and market assurance to the patrons that have signed up
for a 20-year term. The partnership seeks the consent of the NEB
for the commercial terms that highlight the economic feasibility of
Kinder Morgan intends to submit an application for the pipeline
construction in 2013. The pipeline expansion between Edmonton and
Vancouver will carry Canadian crude to the booming Asian markets
and is expected to augment the capacity to 750,000 barrels per day
from 300,000 barrels.
Kinder Morgan's project is being supported by
), Canadian Oil Sands Ltd,
Devon Energy Corporation
Cenovus Energy Inc
Husky Energy Inc
Imperial Oil Ltd
Kinder Morgan's pipeline expansion has been disapproved by
several environmentalists as well as British Columbian local
groups. They believe the expansion would raise the risks of oil
spills on land and in coastal waters. Vancouver city council has
also opposed this project because of increased tanker traffic at
the city's harbor to about 20-25 vessels per month from 4-5,
Kinder Morgan is an attractive investment opportunity, capable
of delivering high returns going forward, supported by new pipeline
expansions as well as its involvement in extensive studies and
commitment for increased returns to its shareholders. However, it
remains vulnerable to volatile crude oil and natural gas prices,
imbalance between supply and demand for its products and rising
interest rates. Such factors can hurt the partnership's volumes and
Kinder Morgan currently retains a Zacks #3 Rank (short-term Hold
rating). We are also maintaining our long-term Neutral
recommendation on the unit.
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