Kinder Morgan looking to expand its operations in Cochise County

Mar 16, 2018
Lee Allen, Special to Inside Tucson Business

Kinder Morgan, the largest energy infrastructure company in North America with some 84,000 miles of pipeline, is making its increased presence known in Southern Arizona—to the tune of pretty close to $100 million dollars in on-going and planned projects.

Already an economic asset to the state through its 5,800 operational miles of pipelines and two terminals in Arizona (one being the Tucson Terminal at 3841 E. Refinery Way), a KM fact sheet shows an annual payroll approaching $19 million, with about 10 percent of that figure paid to local and state taxing bodies. 

Paperwork was filed in December 2017 for the Sierrita Compressor Expansion Project near Ryan Field, west of town. This is a $55 million modification to the pipeline facility that runs from Tucson to Sasabe, built in 2014. Once approval is given by the Federal Energy Regulatory Commission, construction will get underway sometime in the early part of 2019, with completion anticipated a year later. It’s estimated as many as 50 local construction jobs will be involved with “a significant economic impact.” When complete, the new compressor station will generate up to an estimated $1.7 million in annual tax revenue to Pima County taxing bodies.

And that’s just what’s right here in our own backyard. The latest news to break involves plans for a nearby modification and expansion to portions of Kinder Morgan’s existing El Paso Natural Gas Company, LLC, pipeline system running through Arizona, New Mexico, and Texas. The intent of this project would be to increase natural gas transportation capacity along the system to meet increased demand from Arizona electric utility providers and for U.S.-produced natural gas exports to California and Mexico.

Modifications to the existing Willcox Compressor Station in Cochise County would also represent big business. 

“We’ve had a station in Cochise County on Arzberger Road since the 1960s,” said Allen Fore, Kinder Morgan Vice President of Public Affairs. “We’re in the process now of meeting different thresholds before we submit our official application that will identify our preferred location. That should happen within the next few weeks, before the end of [First Quarter, 2018].”

As currently envisioned, the Arizona portion of the tri-state project would mean another compressor (Dragoon Compressor Station) that will help increase natural gas capacity into Arizona and California by 186 million cubic feet per day. 

“To put that into perspective, Kinder Morgan already provides 2.9 billion cubic feet per day to Mexico,” Fore said. “Add the intended new 186 million cubic feet and that’s a significant amount going across the international border. If you look at it from an overall perspective, both consumption and export, it’s not huge—but it’s not insignificant either.”

What it is, to Cochise County, is an economic boon, an influx of $40 million or more for construction costs alone. 

“In a project of this size, there are a number of qualifying factors involving everything from the estimated 50 construction workers needed to do the work to where we can buy our supplies,” Fore said. “There may well be another million dollars of economic impact during the course of the project.”

Fore added that tax revenue to local and state entities could amount to another $2 million a year, with that pot divided up through various taxing bodies like the county—as well as school and fire protection districts.

KM has some 40 acres to consider in determining the exact location which will occupy about one quarter of those acres. 

“The footprint of the various buildings would be contained within those 10 acres,” Fore said. “Because we’re still dealing with conceptual design, the specific square footage will change, so I don’t have the ability to provide specific square footage at this point. No decisions yet, but many site discussions have been focused within the Willcox Bench, approximately a few thousand feet south of Arzberger Road.

He added that a lot of work goes into planning decisions.

“We’re still reviewing all our options including joining the existing site at the end of Arzberger Road, perhaps developing a parcel adjacent to a vineyard (Kief Manning of Kief-Joshua Vineyards owns 40 acres near Arzberger Road and Kansas Settlement), and a couple of others,” he said. “Our expressed preference for a site doesn’t mean that’s final. That decision involves the FERC federal agency that will spend up to a year reviewing our application submission that includes our preferred site and alternates. Whatever site is chosen, we’ll work with local folks to make sure it’s the most compatible.”

Fore doesn’t see the issue as a Hatfields versus McCoys standoff although compatibility is a concern to those who grow grapes and make wine in the area. KM representatives have met with regional wine producers to discuss proposals and potential problems because some of the land being considered is located very close to several vineyards. 

Fore, who travels throughout the country 52 weeks out of the year, troubleshooting planned expansions like this one, said Kinder Morgan is committed to being a good corporate citizen and conducting themselves in an ethical and responsible manner. He added that the company spends hundreds of millions of dollars each year on integrity management. 

“We look at these situations as opportunities, not challenges,” he said. “We need to complete our projects to facilitate energy availability, but we’re not insensitive to the needs of others that involve tangibles like sound or smell or environmental esthetics” 

He said that he doesn’t see a second facility in Cochise County producing any adverse impact to the area wine industry. 

“We’ve had a compressor station there for over half a century and the wine industry has grown up around it,” he said. “We think it can be compatible with the area.”

Although needs change as conditions change, Fore said the two completely separate compressor station projects, both of which should go on-line sometime in 2020, may represent a culmination of construction for the foreseeable future. 

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