Kinder Morgan's foray into renewable natural gas to lift US energy transition efforts

Kinder Morgan is buying Kinetrex Energy for $310 million to leverage the clean energy platform the small-scale provider of LNG and renewable natural gas in the US Midwest has built.

As an operator of pipelines and LNG infrastructure in North America, Kinder Morgan is among a wave of energy companies that have launched initiatives over the last year to reduce their carbon footprints.

Most of the efforts aren't designed to eliminate fossil fuel emissions entirely from the supply chain. Instead, producers and midstream companies hope to preserve existing business relationships and build new ones with climate-conscious customers amid the global energy transition.

With Kinetrex, whose customers span the transportation, industrial, agricultural, utility, and power sectors, Kinder Morgan will be able to boost its energy transition ventures business. Kinder Morgan, which moves more than a third of the gas consumed in the US, has long viewed natural gas as a bridge to enable increased renewables market penetration.

The purchase announced July 16 from an affiliate of investment firm Parallel49 Equity , which is subject to regulatory approval, includes two small-scale, domestic LNG production and fueling facilities, a 50% interest in a landfill RNG facility in Indiana, and three additional RNG facilities with signed commercial arrangements. The transaction is expected to close later in the third quarter, which ends Sept. 30.

Once the additional sites are operational next year, the total annual production of RNG — which is derived from renewable sources including organic waste in landfills, wastewater treatment plants, and agricultural operations — is estimated to be more than 4 Bcf, Kinder Morgan said in a statement. Kinder Morgan sees landfills, in particular, as a way to boost returns, as they provide low-cost feedstock.

Kinder Morgan already has a US market position in LNG as operator of the Elba Liquefaction facility in Georgia — the smallest of the six major LNG export terminals currently in operation in the US.

Kinder Morgan is scheduled to release its financial results for the April-June quarter July 21.