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John G. Edwards

Expansion of Las Vegas pipeline announced

23 October 2006

LAS VEGAS, Nevada -- Kinder Morgan Energy Partners, the pipeline partnership controlled by billionaire Richard Kinder, on Thursday confirmed earlier reported plans to spend about $388 million to expand a gasoline pipeline to Las Vegas from California refineries.

The company announced its decision to proceed with the project the day before Clark County's Blue Ribbon Fuel Commission meets to approve final changes to a report on Southern Nevada's gasoline, diesel and jet fuel supply lines.

The commission was organized because of growing concern that the Calnev Pipeline, owned and operated by Kinder Morgan, would soon fail to satisfy the rapidly growing demand for fuel in the Las Vegas area. Commission members also were worried about depending on one pipeline for virtually all of the motor and jet fuel used in Southern Nevada.

Kinder Morgan's project does not totally resolve that second concern, because it expands the existing pipeline rather than giving Las Vegas a separate pipeline to another source of fuel.

A separate pipeline would provide Las Vegas with backup supplies in case a disaster or other event interrupted deliveries over the Calnev line.

The 550-mile system delivers gasoline, diesel and jet fuel to terminals in Barstow, Calif., and Las Vegas, Houston-based Kinder Morgan said Thursday in a statement.

The expansion, which is subject to regulatory approval, would increase capacity 28 percent to 200,000 barrels per day.

In a telephone interview earlier this week, Mike Owens, president of Phoenix-based Pacific Texas Pipeline Co. of Phoenix said his company was confident it could build a second pipeline to Las Vegas that would deliver relatively low cost gasoline from Texas refineries.

Owens said he is confident that Pacific Texas will get sufficient commitments from fuel shippers to build a 425-mile, 20-inch pipeline from El Paso to Phoenix and then a second 340-mile, 16-inch line from Phoenix to Las Vegas.

The blue ribbon fuel commission also heard proposals from WesPac Pipeline, which wants to build a line to Las Vegas from a proposed new refinery in Yuma, Ariz., and Holly Energy Partners of Dallas, which wants to lay a gasoline line to Salt Lake City.

The commission, which heard the presentations, was established in September 2005.

"We had nothing on the table (when the commission started)," said Rosemary Vassiliadis, deputy director of Clark County Aviation.

"Now, a year later, we have four proposals," Vassiliadis said. "It's a step in the right direction."

The Kinder Morgan expansion is the third announced this year for its Calnev system. The company previously disclosed plans to increase daily shipping capacity to 156,000 barrels from 140,000 barrels and expand gasoline and diesel storage at the Las Vegas terminal, spokeswoman Helen Wells said. The expansion announced Thursday would add a 16-inch pipeline.

An existing 14-inch line will be dedicated to commercial jet fuel at McCarran International Airport in Las Vegas and an 8-inch line now supplying the airport will be purged and reserved for future use.

Kinder Morgan said the enlarged system will be capable of shipping 300,000 barrels of fuel per day with the addition of more pumps.

Kinder Morgan Energy Partners is a publicly traded partnership controlled by Kinder Morgan, which is being acquired by a group led by co-founder Richard Kinder for $15 billion.

The partnership's units dropped 6 cents, or 0.13 percent, Thursday to close at $45.41 on the New York Stock Exchange.

Bloomberg News contributed to this report.

John G. Edwards
John G. Edwards