Kinder Morgan Needs a Strong Climate Change Plan

KMI should publish an assessment of the long-term portfolio impacts of scenarios consistent with the internationally recognized goal of limiting the global increase in temperature to 2 degrees Celsius.

As long-term shareholders in Kinder Morgan Inc (KMI), we would like to understand how our company is planning for the risks and opportunities presented by global efforts to keep temperatures within the below-2-degrees Celsius goals of the Paris Agreement. KMI acknowledged in its 2016 10-K filing with the U.S. Securities and Exchange Commission that “greenhouse gas regulations could have material adverse effects on our business, financial position, results of operations or cash flows.” A brief statement paper on climate change was also issued, but the disclosure did not provide investors with any analysis regarding how KMI’s portfolio of assets or planned capital expenditures perform under potential regulations and other carbon constraints inherent in a 2-degree scenario. KMI, as one of the largest energy infrastructure companies in North America, has extensive and expanding interests in the transport of energy sources including coal, oil, and natural gas. KMI intends to make significant infrastructure investments in the highest carbon fuels, including oil sands.

KMI intends to invest over $5 billion to expand its Canadian oil sands export capacity to the West Coast and Asia. This investment is of concern due to strong community and First Nations opposition, particularly in British Columbia. In addition, persistently low prices challenge the breakeven price of new oil sands production that would feed this pipeline, raising questions about the project’s long-term viability. Canada has already begun to implement policies and develop new regulations, including a price on carbon, geared towards meeting its obligations under the Paris Agreement.

Investors are increasingly focused on the need for robust climate disclosure, including scenario analysis. In June 2017, the Financial Stability Board’s Task Force on Climate-related Financial Disclosures finalized its guidelines for reporting on climate risk, recommending that companies in the energy sector evaluate the potential impact of different scenarios, including a 2-degree scenario, on the organization’s businesses, strategy, and financial planning. Investors representing over $25 trillion in assets publicly endorsed the Task Force recommendations.

A 2-degree scenario analysis of KMI’s future plans will generate a more complete picture of present and future risks and opportunities. Currently, our company only provides business-as-usual planning and risk analysis, which is not sufficient to prepare for a set of risks as large and complex as climate change. The requested report will reassure investors that KMI is poised to manage and take advantage of future regulatory, technological, and market changes.