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Kinder Morgan to deliver natural gas to Japan

This is not blockbuster stop-the-presses current news. This is a 2013 press release in which Kinder Morgan crows about its new contract with Mitsubishi Corporation of Japan to ship 600,000 dekatherms of natural gas per day through Kinder Morgan’s Tennessee Gas Pipeline division. Since a dekatherm of natural gas is apparently enough to supply an average American home for about four days, the Tennessee Gas Pipeline division has in hand a binding contract to export enough natural gas for roughly 2.4 million Japanese homes for a 20-year period, tentatively scheduled to begin in 2017 (and probably more Japanese homes than that, since our correspondent who lived in Japan can attest to relatively low-powered appliances and less square footage to heat.)

HOUSTON–(BUSINESS WIRE)–May 16, 2013–Tennessee Gas Pipeline Company, L.L.C. (TGP), a unit of Kinder Morgan Energy Partners, L.P. (NYSE: KMP), has signed a binding, 20-year firm transportation precedent agreement with Mitsubishi Corporation (MC) of Japan (Tokyo Stock Exchange: 8058; London Stock Exchange: MBC) to ship 600,000 dekatherms per day of natural gas earmarked for the proposed Cameron LNG liquefaction facility in Hackberry, La., which is slated to begin LNG exports in the second half of 2017.

MC will serve as the foundation shipper for TGP’s Southwest Louisiana Supply Project, which is designed to provide transportation from various supply basins in Ohio, Pennsylvania, Texas and Louisiana to Cameron Interstate Pipeline, which connects directly to the Cameron LNG Terminal. Kinder Morgan does not own Cameron Interstate Pipeline or the Cameron LNG facility.

“TGP is pleased to partner with Mitsubishi Corporation, a world class organization and leader in the energy industry, on this strategic project,” said Kimberly Watson, TGP president. “TGP’s unique footprint, connecting key conventional and shale supply areas from the South Texas Eagle Ford to the Utica and Marcellus in Ohio and Pennsylvania, and access to the Haynesville shale supply area and the Perryville Hub in Louisiana, makes our Southwest Louisiana Supply Project an ideal fit to serve the future supply needs of Mitsubishi Corporation and the planned Cameron LNG complex. TGP’s diverse supply footprint continues to provide opportunities in the growing southwest Louisiana market.”

The Southwest Louisiana Supply Project is designed to provide transportation to the growing southwest Louisiana market. The project includes additional interconnections with shale supply, new pipeline laterals and enhancements to TGP’s existing pipeline system to allow for bi-directional flow to the region. TGP will hold a binding open season for additional interest in its project at a later date.

We don’t know for sure, but it seems like standards operating procedure that when the Southwest Louisiana Supply Project was initially pitched, company representatives would have gone around to explain the project to all the affected towns–much like Kinder Morgan reps came to Groton and other Massachusetts town affected by their proposed Northeast Energy Direct project.

We weren’t in the room for those meetings, but it’s reasonable to assume the good folks of Louisiana would have been told, as we were told, that the proposed pipeline would serve the desperate needs of their region for natural gas. It would be costly, it would degrade their environment, it would take their property, but it would only be in their own best interests.

Perhaps a few Louisiana residents may have asked whether any of the capacity was being set aside for exports, as some of us have asked in Massachusetts, and the company rep there probably would have answered much like the company rep did here: “The company is in negotiation with a number of potential customers, but we can’t identify them until long-term contracts are signed. As a common carrier, we’re not allowed to turn any legitimate customer away. But don’t worry about exports, because there are currently no facilities in your region that can convert your gas into exportable LNG anyway.”

That would have been just as true in Louisiana at the time as it is here in Massachusetts right now. Except that there are nearly 4.4 trillion dekatherms in that binding contract, and twenty years over which to build whatever export facilities are needed to deliver them, from wherever a pipeline brings natural gas close enough to coastal shipping.

The people of Japan need energy like everyone else, and we don’t begrudge them for purchasing LNG on the open market. Our main point is that company representatives going from town to town to promote their pipeline project may be selling us a bait-and-switch bill of goods. This press release shows how they can be absolutely honest on the subject of exports and still be hiding their true intent.

According to the laws of economics, taking a huge chunk of natural gas out of a region to ship oversees would reduce the supply and increase the cost. Starting in 2017 and for the next 20 years, the people of Louisiana will experience that firsthand, and they’ll sure be thankful that they weren’t gullible enough to incentivize Kinder Morgan’s project in their region with a tariff on electric ratepayers, expecting to recoup a public investment through future savings, like we’re being asked to do.