Activity at This Midstream Giant Highlights Important Trends

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Kinder Morgan (NYSE: KMI  ) and Kinder Morgan Energy Partners (UNKNOWN: KMP.DL  ) have made headlines in the past because of large acquisitions. Today I'm going to look at two much smaller stories that highlight trends in the American energy game that investors should be aware of.

Passing on coal, for now
Earlier this month, Kinder Morgan made news when it decided not to pursue the development of a coal export terminal on the Columbia River in Oregon. This would have been a huge project, exporting 30 million tons of coal a year.

Though the partnership's coal export volumes are on the rise, management ultimately decided to pursue other options. Coal terminals in the Pacific Northwest are facing increasing opposition from local citizenry over the environmental impact of both the terminals themselves and the actual combustion of coal. According The Oregonian, three of six recent coal export terminals in the Pacific Northwest have been dropped, including Kinder Morgan's. The combined export capacity of the three projects was about 50 million tons of coal originating in Montana and Wyoming.

Gulf Coast focus
One project that is getting the green light, is an expansion of Kinder Morgan's facilities on the Houston Ship Channel. The partnership will spend $106 million adding acreage, upgrading storage, and constructing a new barge dock at its Pasadena and Galena Park terminals in Texas.

There is an awful lot of activity not just at the Houston Ship Channel, but on the Gulf Coast in general, as domestic oil and gas production rises, and refined products exports increase. Kinder Morgan looks to be positioned nicely, as does Enterprise Products Partners (NYSE: EPD  ) and Martin Midstream Partners (NASDAQ: MMLP  ) .

Enterprise's marine transportation business grew in the first quarter of this year, and the partnership recently struck a deal to increase capacity at one of its terminals on the Houston Ship Channel. It will team up with Oiltanking Partners (UNKNOWN: OILT.DL  ) to build a new dock and improve the existing docks so that more vessels may access the terminal.

Meanwhile, Martin Midstream signed two big deals to increase its maritime business, spending $47.4 million to pick up 10 marine terminals from Talen's Marine and Fuel, and $50.8 million on six liquefied petroleum gas barges and two commercial push boats.

As a result, both of these partnerships, along with Kinder Morgan, will soon reap the windfall of increased production and export opportunity coming out of the nearby Eagle Ford Shale.

Foolish takeaway
Kinder Morgan has suffered from the decline of domestic coal consumption, but its terminals business was able to mitigate that because coal exports have been on the upswing. If both segments suddenly began to suffer, Kinder Morgan would definitely feel some pain. Investors should keep an eye on increasing backlash against coal terminals.

On the flip side, Gulf Coast maritime activity will likely continue to ramp up, given the U.S. production trends and the upcoming expansion of the Panama Canal. Investors should keep an eye out for other midstream companies making the most of their maritime opportunities.

More on the Kinder Morgan story
In The Motley Fool's premium research report on Kinder Morgan, we break down the company's growing opportunity – as well as the risks to watch out for – in order to uncover whether it's a buy or a sell. To determine whether this dividend giant is right for your portfolio, simply click here now to claim your copy of this invaluable investor's resource.

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Related Tickers

9/29/2016 4:00 PM
KMI $22.76 Up +0.02 +0.09%
Kinder Morgan CAPS Rating: *****
KMP.DL $0.00 Down +0.00 +0.00%
Kinder Morgan Ener… CAPS Rating: *****
EPD $27.42 Down -0.08 -0.29%
Enterprise Product… CAPS Rating: ****
MMLP $20.00 Down -0.03 -0.12%
Martin Midstream P… CAPS Rating: ****
OILT.DL $0.00 Down +0.00 +0.00%
Oiltanking Partner… CAPS Rating: *****