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Growth underway

TWO KINDER Morgan Liquid Terminals LLC (KMLT) facilities in the Chicago, Illinois, area offer storing, terminal, and transfer services for a variety of products, including gasoline, jet fuel, diesel fuel, vegetable oils, and chemicals.

KMLT is part of Houston-based Kinder Morgan Energy Partners LP one of the largest publicly traded pipeline master limited partnerships in the nation. Kinder Morgan, Inc owns the general partner of KMP and operates 35,000 miles of pipelines and approximately 135 terminals. Combined, KMI and KMP have an enterprise value of $27 billion. Storage capacity totals 36.7 million barrels or 1.5 billion gallons.

Customers include the world's largest chemical producers and petroleum refining companies. In addition, the mix of customers includes petroleum and chemical blenders, traders, marketers, and distributors. The company also stores vegetable oils for producers and marketers at select locations.

KMLT has liquid terminal facilities in Texas, Illinois, Ohio, Pennsylvania, Louisiana, New Jersey, and South Carolina. The company is contemplating further expansion outside the United States for additional storage sites.

Ranked by total shell barrel capacity the terminals from largest to smallest are: Pasadena, TX; Carteret, NJ; Galena Park, TX; Harvey, LA; Argo, IL; Perth Amboy, NJ; Philadelphia, PA; Chicago, IL; Queen City, OH; Charleston, SC; Cincinnati, OH; and Dravosburg, PA.

“The Chicago terminals are a major presence in the Midwest for us and have excellent growth potential,” says John Gallaher, chemical market vice-president for sales.

Two of the terminals, one in Chicago and the other in Argo, handle a steady stream of tank trucks, barges, ships, and railcars.

“We are very flexible,” says Scott Thompson, Midwest region commercial director. “That's the strength of our operation.”

That flexibility has enabled the company to offer a variety of customer services, which has been enhanced by several terminal acquisitions.

Leasing opportunities

As a result of the acquisitions, KMLT has developed a growing business that offers a national network of terminals to meet the industries bulk liquid storage needs. A variety of tank types and sizes are available to handle virtually any commodity. Tank types include carbon steel and stainless steel, which may be insulated, heated, and/or lined.

The Chicago 177-acre terminal operation includes 90 storage tanks with total storage capacity of 740,000 barrels (31 million gallons). Tanks range in size from about 380 barrels (16,000 gallons) to 55,000 barrels (2.3 million gallons). Utilization is growing at the facility with diverse development projects under study, but there are tanks available for lease to customers, says Timothy Berens, terminal director.

Customers who store their products with KMLT pay a fixed monthly warehousing charge. There also are variable charges, which are largely tied to how much product the customers put through the tanks over a specified period of time.

The ratio of fixed versus variable charges primarily depends on the customer's preference and requirements. The typical length of term for KMLT's contracts varies widely — anywhere from a short term spot deal to 20 years or more.

Customers choose to lease for a number of reasons. Terminals serve as an extension of manufacturing, allowing customers to maintain inventory in close proximity to their customer base. Most of the largest tanks are leased to customers who are bringing in marine parcels. The receipt of railcars accounts for a significant amount of inbound product as well. Once in storage, the commodities are then broken down into varying quantities for distribution, such as pipeline, barge, railcars, tank trucks, totes and drums.

The sister terminal at Argo has 215 storage tanks with 2.3-million-barrel (97-million-gallon) capacity, ranging in size from 50,000 gallons to 80,000 barrels (3.4 million gallons).

Michael Garthwaite, Argo terminal manager, points out that the 145-acre terminal has undergone renovations that, among other things, removed underground piping and constructed new lines above ground.

Responsibility for ensuring that the various products are within specifications lies with the shipper. However, Kinder Morgan provides an added measure of protection by reserving all lines to product-dedicated storage tanks in KMLT facilities for individual products.

“Because of these asset improvements, we also have been able to increase our product flow rates, which increases the terminal's efficiency,” Garthwaite says.

Expediting loading

Another effort at efficiency lies in the company's determination to expedite loading and unloading, no matter the transportation mode. This has become even more important for tank truck carriers as they contend with new hours-of-service rules that allow little leeway for long wait times.

Loading times vary by location and by product. Single compartment loads for easily-handled products that are driver loaded can be in and out of a terminal in less than an hour. Loads that have multiple products and require loading assistance may take more than two hours. Loading times are critical to KMLT and customers. The company tracks loading times for customers, and reviews with them during regularly scheduled business reviews.

Service is on a first-come, first-served basis, but when traffic surges, KMLT calls in additional stand-by personnel. Terminal workers load all products except petroleum products, which are loaded by carrier drivers at automated loading racks. KMLT personnel are responsible for applying product seals and placards on the vehicles they handle.

In addition to bottom loading petroleum products, the terminals have bottom-loading and top-loading capability for chemical products.

The Argo terminal has two large separate and dedicated chemical terminaling areas especially designed for two major chemical manufacturers. All operations in that area are handled by Kinder Morgan personnel.

At the Chicago terminal, tank trailers may be loaded directly from storage tanks, or they may receive chemical product transloaded from railcar to tank trailer. The facility is served by Norfolk Southern Corp. Canadian National Railway serves the Argo terminal. Both Illinois terminals have several hundred railcar spots.

Many other terminals within KMLT's network offer transloading opportunities in addition to fixed storage.

“Transloading is an added benefit for us,” says Berens. “We have 19 spots within the Chicago terminal and over 70 locations in a nationwide network with our sister company, Kinder Morgan Material Services. We see our Chicago terminal as transitioning from a storage terminal to a logistics facility.”

The Chicago terminal has 4½ miles of trackage, and the company owns a switch engine which enables the facility to move the railcars as needed. About 3,000 railcars are handled annually.

Marine system

The Argo terminal has three barge docks to serve traffic from the Chicago Sanitary and Ship Canal. Argo also receives petroleum product via pipeline. The Chicago terminal has four barge docks and two ship docks that accept vessels from the St Lawrence Seaway and the Calumet River.

Other terminal services include laboratory testing, truck scales, nitrogen blanketing, drum/tote filling, and product blending, drying and heating. Tank truck carriers also may lease space for use as truck terminals at some KMLT locations.

With all this activity, and the increased emphasis on security since the United States was attacked by terrorists in 2001, all terminals have added new security measures. This includes 24/7 access control to the fenced and guarded-entry terminals. Surveillance cameras were installed throughout the yards, and roads were built around the fence perimeters for regular guard patrols.

In addition, drivers are subject to multiple security checks as they make their way through the terminal. Proper identification must be provided to Kinder Morgan security personnel which verify the authenticity of the information.

“The security measures are part of our commitment to service,” says Thompson.

Another jewel in the terminal group's crown is its association with the American Chemistry Council's Responsible Care program, says Gallaher. Site security is a major part of the program. KMLT also met the Responsible Care program requirements, demonstrating commitment to the health and safety of employees, communities, and the environment.

Security measures are discussed with customers and carriers so that they understand the KMLT requirements for operating within the facility.

Security awareness is just one of KMLT's mandates for drivers entering the property. To expedite terminal entry, carriers are asked to fax a request-for-loading form to the terminal several hours in advance of arrival.

Driver responsibilities

In addition to general information, such as the shipper and consignee names and truck/tank trailer and product information, the application form lists driver responsibilities.

Drivers are required to:

  • sign the bill of lading, indicating that the tank trailer is the proper container for transporting the product it contains.

  • furnish correct tank compartment calibrations and verify all products by compartments.

  • ensure an MSDS for each product is in the truck, or the latest edition of the emergency response guidebook.

  • shut off engine and all electronic equipment, including cellular telephones during loading.

  • exit cab and monitor trailer for leaks during loading.

  • stay with the vehicle while parked near or at the loading rack.

  • wear mandatory protective equipment at all times.

  • wear OSHA-approved respirator when required by signage posted in the facility.

  • ensure trailer is properly placarded as required by the Department of Transportation.

  • attach any required product identification tags and seals to proper outlets and manways/domelids.

  • ensure all outlets, manways, domes, plugs, andcaps are secure and leak free before leaving terminal.

Employee training

Emphasizing training for its own personnel, KMLT provides a 90-day program for training operating employees under the direction of a facility safety director.

Employees study topics on safety, operating procedures, and hazardous materials. The training utilizes computer software, classroom instruction, and hands-on team training. Instruction also covers use of OPW Engineered Systems loading equipment and Smith meters from FMC Technologies Inc. A variety of other equipment used in product handling includes Willcox hoses from US Hose Corp and Civacon overfill protection sensors. Goulds pumps from ITT Industries typically are standard for the facilities, as are Cleaver-Brooks boilers.

The Illinois terminals, like others in the KMLT network, continue to upgrade assets and expand services. Plans for the future include storage and the transloading of dry bulk pneumatic trailers at the facilities, a service that is under study for possible startup this year.

With its assets firmly in place, KMP, the parent of the terminals division, is predicting a nine percent growth for 2005. The Chicago area terminals appear well-suited to participate in that growth.

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