Kinder Morgan reaches safety deal

Transportation Dept. deal could cover $90 million in work

By: August Cole; Source: Market Watch; Originally Published: 4.10.06.

SAN FRANCISCO (MarketWatch) — Following a government-ordered pipeline safety review last summer, Kinder Morgan Energy Partners is set to begin $90 million in safety work after reaching a deal with the Transportation Department.

The Houston-based company KMP, -0.39% will have to “improve its methods for inspecting the interior of pipelines, including the use of improved technology to better locate damage caused by outside forces,” according to the Pipeline and Hazardous Materials Safety Administration.
Other measures will involve improving corrosion control and stopping damage to pipelines from digging work.

The 3,900 miles of pipeline in the Kinder Morgan Pacific Operations division, which covers Arizona, New Mexico, Nevada, California, Oregon and Texas, are included by the agreement.

Penalties could reach up to $10,000 a day, according to a Transportation Department statement, if the company doesn’t comply.

In August 2005, the agency ordered the company to review problems in its pipeline system, prompted by 44 accidents tallied since Jan. 1, 2003.

In July 2005, the California State Fire Marshal fined Kinder Morgan Energy Partners $500,000 after a gasoline pipeline spill and explosion that killed five people and injured four others in Walnut Creek, Calif. in November, 2004. In its pipeline failure investigation report, the state found Kinder Morgan failed to properly mark the pipeline as required by the company’s own damage prevention program as well as state law, and the company’s own staff and agents didn’t know the procedures for locating the line.

The company said in a statement Monday regarding the agreement with the Transportation Department that of the $90 million, $26 million is tied to the consent agreement with the government and that the company’s 2006 budget and financial outlook have already factored in the expenditures.

Kinder Morgan Inc. KMI, -1.01% owns the general partner of Kinder Morgan Energy Partners.