Kinder Morgan official says Palmetto Pipeline will get built

Increased hurdles
Kinder Morgan's Allen Fore presents $20,000 to Danny McConnell, the head of the Family YMCA of Greater Augusta. Kinder Morgan has pledged $178,250 to eight groups on the proposed Palmetto Pipeline path.



The Palmetto Pipeline is going to get done, regardless of whether the company planning it gets the state’s permission to take the needed land, say Kinder Morgan officials.

“We’re pursuing the project, and our plan is to file for the permits required on the project very likely this fall,” Allen Fore, the company’s vice president of public affairs, said recently. “That’s a likely schedule.”

The Houston-based company is moving forward despite a legal battle that’s left many Georgians believing the 360-mile petroleum project – with 210 miles planned to go through Georgia – was buried before a single pipe could be put into the ground.

Attorneys for the company appeared in Fulton County Superior Court on Friday to appeal a decision by the Georgia Department of Trans­por­tation to deny it the right to condemn property, a ruling made in May after Kinder Morgan failed to prove a public need for the pipeline to the satisfaction of Commis­sioner Russell
McMurry. Judge Kimberly Es­mond Adams said Friday that she won’t issue her decision until the new year.

Even if Kinder Morgan exhausts its appeals and can’t condemn property, Fore said North America’s largest energy infrastructure company plans to build its Palmetto Pipeline from South Carolina, through Georgia and on to Jacksonville, Fla.

The company hasn’t previously built an interstate pipeline without having eminent domain to fall back on, but Fore said that doesn’t matter: The Palmetto Pipeline will be built.

“Because we have a good project,” he said. “We have a project designed to meet the regulatory standards of the state. We have customer commitments, and we have great relationships with landowners. So we are confident the project will go forward.”

Increased hurdles

Georgia law governs petroleum pipelines – including this one – with a stringent set of rules that don’t apply to the more common natural gas pipelines. Initially written in the 1990s to protect wealthy and influential landowners whose quail plantations were threatened by an oil pipeline, the law erects extra hurdles for petroleum pipelines that natural gas pipelines don’t need to jump.

A pipeline carrying gasoline, diesel and ethanol, as this one proposes, must first get DOT approval and then another go-ahead from the state Environmental Protection Divi­sion before it can force the sale of easements from unwilling sellers.

This eminent domain hurdle doesn’t exist in most states, although South Carolina is among those looking into beefing up its eminent domain restrictions in the face of new pipeline projects.

Kinder Morgan officials say they prefer to avoid using eminent domain. They say they have completed other pipelines without invoking it and already have consent to survey – which they view as a willingness to cooperate – from a majority of those along the pipeline’s route.

Kinder Morgan has bought some of that cooperation. Over the summer it started offering some landowners cash to access their land for a look around.

But even if it’s never applied, having eminent domain to use as a last resort is a powerful bargaining chip. Landowners know a court can force their hand and they will end up with only the fair market value of their property minus legal fees.

Kinder Morgan spokeswoman Mel Ruiz said the company has completed five pipelines without eminent domain, but unlike Pal­metto, those were for individual customers in its terminals business and didn’t cross state lines.

“Interstate and common carrier pipeline projects will almost always have eminent domain available under either federal or state law,” Ruiz said.

Without eminent domain, the cost of the pipeline could become prohibitive, said Chris Paul, a professor of finance at Georgia Sou­thern University.

“It really disadvantages their leverage in terms of dealing with people in purchasing the easements,” he said.

Bruce Gamble, the managing director in Navigant Consulting’s Global Construction practice, agreed.

“The process of acquiring right of way through 600 private parcels is time-consuming and expensive,” Gamble said. “Not having the power of eminent domain available will most likely increase both the cost and length of time required to assemble the right of way.”

Late last month, Kinder Morgan issued $1.6 billion in preferred shares, a stock that offers fixed payments like a bond, in this case a 9.75 percent payment annually until they convert to common shares in three years.

The move says nothing about the pipeline’s viability except that the company can raise cash when needed, Paul said.

“They have the economic capability to raise the money, obviously. They just raised a billion something dollars to build the pipeline,” he said. “They have the financial resources. The question is do they have the legal rights.”

The $1 billion Palmetto Pipeline is just a small part of Kinder Mor­gan’s $21.3 billion project backlog.

“KM is big and proposing substantial new projects,” said Michelle Michot Foss, the chief energy economist and program manager at the Uni­ver­sity of Texas Bureau of Econo­mic Geology’s Center for Energy Eco­nomics. “Not all of them will go forward. Some of these will be postponed. Lots of sorting out is in the process of happening in these businesses.”

Getting ‘the message’ out

Kinder Morgan has indicated it is willing to spend more freely than in the past to ensure the opportunity to build Palmetto, but it won’t discuss how much it’s spent on its public relations effort.

“We will spend what is necessary to get the message out,” Ruiz said.

For evidence, look no further than Georgia high school football fields.

When the McIntosh County Aca­demy Buccaneers score a touchdown, fans find themselves looking at a new billboard with a now-familiar thunderbolt and black letters that spell out Kinder Morgan. Same for the South Effingham Mustangs.

By early November, Kinder Mor­gan had pledged donations totaling $178,250 to eight groups along the path of the Palmetto Pipeline. At least one additional donation was rebuffed: the Augusta Commission declined an offer of $25,000 worth of emergency call boxes for Riverwalk Augusta.

Fore said this generosity is only partly new – the company hadn’t previously donated to high schools. But before the pipeline project it had donated $125,000 toward the purchase of an “all hazards” boat for Savannah Fire & Emergency Ser­vices and $50,000 to Savannah Tech for programs related to training workers for its Elba Island facility. Nine other donations dating back to May 2013 totaled about $80,000.

“Yes, this is project driven, no question about that,” Fore said. “But it’s also incredibly meaningful to the company and to me personally.”

Kinder Morgan Foundation – which is separate from the company – gives out additional grants to schools and arts and youth organizations of up to $5,000 apiece.

Pipeline project opponents such as the Ogeechee Riverkeeper attach a different meaning to the donations.

“Since its menacing project was put in limbo, Kinder Morgan has tried to give the impression of good community stewardship by donating over $50,000 to schools and litter-prevention efforts in Georgia,” the organization wrote in a news release in October. “However, the public should not be swayed by the company’s actions. After all, this is the same outfit whose three Palmet­to Pipeline surveyors were arrested and charged with criminal trespass after being denied access to a private farm in Screven County earlier this year.”

The farm is owned by the family of William S. Morris III, the chairman of Morris Communications Co., parent company of The Augusta Chronicle. Those surveyors requested a jury trial that probably will not be heard until March, said Janis Reddick, the clerk of Superior Court in Screven County.

As for the donations, they’re part of a multifaceted company campaign – including a barrage of warm and fuzzy ads, private listening sessions with local opinion leaders and the deployment of a small army of lobbyists.

Advertising campaign

Until recently, Kinder Morgan was hardly a household name in Georgia.

Founded in 1997 by a former Enron executive, Kinder Morgan owns a fuel importing terminal in Savannah – purchased three years ago – and pipelines that crisscross the state. But to buy those assets, the $100-billion company needed only cash, not the good will of local residents.

Kinder Morgan’s customers are big oil companies that store liquefied natural gas on Elba or pay to transport their oil and gas through pipelines. It had never tried to build a petroleum pipeline in Georgia.
When it did kick off that effort in the spring, the Georgia Department of Transportation handed the company its veto on eminent domain. Shortly after that, ads began to appear in newspapers and on TV featuring down-home landowners praising the company.

Advertising like this was new for the company, whose corporate literature as recently as May boasted that “we don’t spend money on executive perks or glitzy marketing initiatives.” The Palmetto Pipeline changed that position, said Fore, the company’s public face for the project.

“We haven’t ever advertised nationally before,” Fore said. “This advertising campaign we did here which you’re familiar with – we spent quite a bit of money in the Savannah Morning News – we haven’t done that before as a company, promoting or discussing either who we are or what we do.”

One ad featured Frank Flan­ders, whose property in an unidentified part of Georgia has a pipeline running through it.

“The people we’ve met are just like you and I,” the khaki-shirted Flanders says about Kinder Morgan agents. “They’re hunters, they’re fishermen; they’re someone in the field that knows the property and knows the area and knows what you as a property owner are trying to do with your property.”

However, in recent filings Kinder Morgan argues to exclude landowners from intervening in its appeal, saying “they have no legal interest in this appeal of GDOT’s denial of Palmetto’s application.”

At best, the landowners’ claims are “not ripe,” Kinder Morgan claims, noting that this particular decision is only the first of several that would be required to take their property under eminent domain.

“Any interest of the landowner movants could be asserted if and when they are named as parties to a proceeding where their property rights are sought,” Kinder Morgan attorneys write.

Landowners disagree. Seven are seeking to join the suit, including Millhaven Co. and Mills Tract, companies owned by the family of Morris, who also owns the Savannah Morning News and the Florida Times-Union.

In their court filing, the landowners say the pipeline’s impact on their property “cannot be overstated.”

Landowner Debo Boddiford, who did not file to be an intervenor, said she’s been frustrated by Kinder Morgan. Even though the company was rebuffed by the Department of Transportation, it continues to survey, even on state land. Land agents who were all smiles at first have stopped returning calls.

“We revoked our rights, as did many neighbors and relatives,” Boddiford said in August. “We asked for our original documents back. It’s been three months, and we haven’t gotten them.”

Listening sessions

Land agents might not be listening to property owners, but over the summer, Kinder Morgan invited Savannah-area community leaders to private listening sessions in which Fore, among others, pitched the pipeline giant’s merits and solicited feedback.

Bill Kelso, the vice president for advancement at Armstrong State Uni­versity, attended one of these get-togethers in August. He went because he was invited, he said, and was curious, though he was not “up to speed” on pipeline issues.

“For me it was loud and clear that it was an effort for officials with Kinder Morgan to try to understand the community better,” Kelso said. “What do you value? What’s important? The meeting was not about the pipeline. It was about how Kinder Morgan can be more effective in being a community partner.”

Fore spends four to five days a week on the road, traveling to this project and others around the country.

“That’s one of many things we’ve been doing and will continue to do to get feedback from the communities,” he said. “Feedback from some of these events has led to community donations and all that. It’s a very productive way to fully understand the community.”

The listening sessions have provided a way for Kinder Morgan to pitch directly to these hand-picked leaders its message about what it’s already doing in Georgia.

Kinder Morgan owns the massive LNG import facility at Elba Island on the Savannah River, whose five blue tanks are visible miles away. It plans to convert Elba to an export facility, a pricey prospect that’s awaiting federal approvals.

“They’re doing some significant infrastructure upgrades,” Kelso said. “When you talk about ultimately a $4 billion investment, well, that’s a lot of money.”

Ruel Joyner, the president of the Savannah Downtown Business Asso­­cia­tion, attended one session. The numbers he heard discussed were $5 billion in infrastructure, about 50 jobs and a recent $20,000 contribution to an anti-litter campaign.

That set of figures, the owner of 24e Design Co. said, reminded him of the cartoon The Simpsons with its famously greedy and out-of-touch Mr. Burns, who owns the nuclear power plant.

“I told him to get his checkbook out and triple whatever they were going to give,” Joyner recalled in a telephone interview. “When they invest, it’s not going to buy them love, but people will have to listen. They still may not want what you’re doing, but they’ll have to listen. They have $5 billion in infrastructure and put $20,000 back and they’re wondering why they have a PR issue.”

Experienced lobbyists

Kinder Morgan advertised heavily in the Peach State over the summer, but it hasn’t abandoned old-fashioned lobbying.

The Georgia Government Trans­par­ency and Campaign Finance Com­mis­sion lists 12 lobbyists working for Kinder Morgan or the Palmetto Products Pipe Line, each of them making at least $10,000.

“They spend the bulk of their time doing, I really call it education,” Fore said. “Education focused on elected officials and making sure they understand who we are, what we do, why we’re doing what we’re doing and being a resource for them because as elected officials they get questions, and we want to make sure those questions are answered.”

Among those dozen lobbyists are at least five who have previously worked in state government, some in high positions.

In April, the Palmetto Products Pipe Line engaged the services of Joe Tanner and Associates, an Atlanta lobbying firm full of former top environmental regulators, including former Environmental Protection Di­vi­sion director Harold Reheis and two former assistant EPD directors.

If the pipeline gets its Depart­ment of Transportation certificate, its next and final stop is the Depart­ment of Natural Resources before it can exercise eminent domain.

Tanner and Associates might be particularly helpful on a petroleum pipeline. Company founder Joe Tanner helped write the current petroleum pipeline law.

Kinder Morgan in August hired a former Georgia Department of Trans­portation staffer, Stephanie Carter Kindregan, to work for the company directly. Most recently a lobbyist for Delta, Kindregan was a “special advisor to the DOT commissioner” in 2011.

She wrote on LinkedIn that at the department she “lobbied for the successful passage and signage of the Department’s legislative agenda; wrote and prepared legislation improving the daily operations of the Department; and developed the Depart­ment’s legislative agenda for approval by the State Trans­por­tation Board.”

Also lobbying for the pipeline’s interest is Atlanta firm Troutman Sanders Strategies, a firm where former state government workers abound. Among those registered to lobby for Kinder Morgan are Robb Willis, who served the state Senate as chief of staff for the president pro tem and the Senate Appro­pria­tions Committee. He also briefly served in the lieutenant governor’s office.

Lasting presence

Win or lose in court, pipeline or not, Georgians are likely to be reminded about Kinder Morgan for years to come.

That $30,000 donation to the McIntosh school came with the requirement that the Buccaneers advertise their new sponsor. The football field sign was $2,500 and the basketball court will be another $500.

Sponsorship in South Effingham likewise came with conditions. A contract for Kinder Morgan’s $45,000-a-year “platinum sponsorship” of the Mustangs spells out where 13 banners, signs and painted logos will appear.

And the school’s fans will hear about Kinder Morgan:

“An announcement on the PA system each quarter for football and basketball games. Three announcements during baseball and softball games. The announcement will state ‘We want to thank our Double Platinum level Sponsors (Kinder Morgan being one of those), we thank you for supporting Mustang Athletics.’

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