Steve Kean, the President and COO of Kinder Morgan, joins the Fool's Taylor Muckerman to discuss the energy industry and his company's contribution to it as the largest midstream energy company in North America. The Kinder Morgan family includes Kinder Morgan, (KMI 0.27%), Kinder Morgan Energy Partners, L.P. (NYSE: KMP), Kinder Morgan Management, LLC (NYSE: KMR), and El Paso Pipeline Partners (EPB).
In this video segment Mr. Kean looks back at the history of fossil fuels and other energy sources in the U.S. and how it has evolved. He sees a role for Kinder Morgan as alternative fuels gain ground, and points out that gas has a role to play as a complement to wind and solar. The full version of the interview can be seen here.
A full transcript follows the video.
Record oil and natural gas production is revolutionizing the United States' energy position. Finding the right plays while historic amounts of capital expenditures are flooding the industry will pad your investment nest egg. For this reason, the Motley Fool is offering a comprehensive look at three energy companies set to soar during this transformation in the energy industry. To find out which three companies are spreading their wings, check out the special free report, "3 Stocks for the American Energy Bonanza." Don't miss out on this timely opportunity; click here to access your report -- it's absolutely free.
Taylor Muckerman: Just to touch on potential, maybe, headwinds for not just you but the energy industry as a whole -- or the fossil fuel energy industry -- you look at solar and wind power becoming more and more affordable for consumers, and electric vehicles with Tesla (TSLA 12.06%) slowly starting to take off.
As you look really far down the road, is Kinder Morgan doing anything in particular to prepare for this, addressing some of the issues that might come up?
Steve Kean: Our participation in renewable fuels has been like our participation, if you will, in other commodities, which is that we will store and handle it for the people who make it. We handle, by our estimate, about 30% of the biofuels in the U.S.
Muckerman: I wasn't aware of that.
Kean: When I say that, I mean we're not producing it. Again, we're handling it, so we're blending it, we're storing it for people, and we getting paid to do that.
We saw that trend emerging and our customers -- as is usually the case -- saw it first. We got to them to try to get our share of it, if you will, by building the storage, building the blending facilities to handle it. We even converted one of our pipelines to be able to batch ethanol, so we participate that way.
Overall I think the story on renewables is, if you look at the rate of growth, the rate of growth is certainly increasing, but it's coming on a very small base and there are other big moving parts in that base.
If you look at, really over multiple decades -- probably a 60 to 70 year period -- fossil fuels have provided between 85-95% of the energy that we use in North America, and with very few bumps in that, or very few divots in that; the two biggest ones being hydro power, which took a share -- but we're not building a lot of new dams.
Muckerman: No, we're certainly not.
Kean: In fact, we tend to decommission them.
The other one that took a bite, or left a mark if you will, is nuclear. A similar kind of issue there, which is that big question about whether those licenses will be renewed, ultimately, and about what the true cost of nuclear is; questions that have been around for a long time, and people have been struggling with or coming to terms with.
But I think when you put something like wind and solar in the mix with those bigger pieces, I don't know that we're going to see much of a decline in the relative share of fossil energy. So long as we're continuing to grow as an economy and grow as a country, you'd expect there to be a little bit of growth in what we need, in terms of fossil energy as well.
We look at renewables as an opportunity where it presents itself as an opportunity, but we keep our focus on the fossil energy sector and believe that's a pretty good and productive place for us to focus for the coming decades.
Muckerman: Agreed. Yeah, it seems like natural gas might be one of the last power options to go in light of coal and nuclear and geothermal, maybe even like you mentioned, and the hydro power as well. It seems like natural gas might have the longest lifespan.
Kean: And gas also has a role to play a backup for renewable power.
Muckerman: Sure.
Kean: Renewables, in the sense that most people think of them -- solar and wind -- are intermittent. You need 100% or near 100% reliability on the electric grid, and natural gas can sometimes provide the capacity component to the renewable energy, to help make that viable as well.
