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Plantation Pipe Line Company Business Information, Profile, and History

1435 Windward Concourse
Alpharetta, Georgia 30005
U.S.A.

Company Perspectives:

We safely and profitably transport petroleum products throughout the Southeast, on-spec, on-time and on-volume because a reliable and economical supply of energy is vital to our society.

History of Plantation Pipe Line Company

Majority owned by Kinder Morgan Energy Partners, Plantation Pipe Line Company is an Alpharetta, Georgia-based company that operates a 3,100 mile pipeline system in the southeastern United States, stretching from Louisiana to Washington, D.C. Plantation's lines range in size from 6 to 30-inches in diameter. Each day, Plantation delivers over 20 million gallons of gasoline, diesel, heating fuels, kerosene, and commercial and military jet fuels originating from nine refineries in Mississippi and Louisiana, or fed into the network from other pipeline systems or Mississippi River Marine facilities. All told, the system includes 130 shipper terminals and 29 delivery points located in eight states. A minimum batch of one million gallons is required to use the system, and a typical 1,000-mile journey takes about 20 days. The cost of a typical delivery from Baton Rouge to Washington, D.C., is approximately two cents per gallon. Kinder Morgan owns 51 percent of Plantation and for years has made it known that it would like to buy the rest of the company, owned by Exxon Mobil.

Origins in a World War II Defense Initiative

Plantation was founded in 1940 and authorized by the United States Congress to build a national defense pipeline from Baton Rouge, Louisiana, to Greensboro, North Carolina, one of several pipelines to be constructed for the same purpose during this time. Although the United States was not yet involved, World War II had already begun in Europe and in the Pacific the Japanese Army had invaded China. The U.S. government, while officially taking a neutral position on the war, was rapidly preparing the country for war. A vital consideration was the protection of the petroleum products that a modern army depended on. Given the success of German submarines in the disruption of shipping during World War I, it was prudent to create a pipeline system to deliver fuels underground. The idea of establishing a pipeline system in the southeastern United States had been in the exploratory stages during the 1930s, but the prospect of war was the key factor in making the concept a reality. Plantation quickly laid eight-inch pipe and became operational in January 1942 at an important moment in the history of the country. Only a month earlier, the Japanese Navy conducted a surprise attack on the U.S. Naval base at Pearl Harbor. The United States declared war on Japan and Germany, Japan's ally, followed suit by declaring war on the United States. Over the course of the next year, German submarines had a field day sinking allied tankers and freighters. Moreover, the U.S. railways were overburdened moving troops and material. Therefore, the availability of the Plantation pipeline system was of strategic importance in America's war effort.

Major Upgrades in the 1960s

In the beginning Plantation delivered 48,000 barrels of petroleum products each day, serving just four customers. By the end of the war, however, delivery increased to 86,000 barrels per day and the number of customers grew to nine. Following the end of World War II in 1945, Plantation retained its military value, especially in light of the ideological conflict between the Soviet Union and the United States that would endure for the next half-century. However, the pipeline system now primarily served commercial interests in the postwar world. It also played an important role in the growth of the economy in the southeastern United States. To keep pace, Plantation expanded beyond its original Baton Rouge to Greensboro route. In 1964, a spur was built into Virginia. Then, in 1968, a major expansion program was launched. A larger mainline, 26 inches in diameter, was laid between Collins, Mississippi, and Greensboro. A 12-inch diameter loop was built between Pascagoula, Mississippi, and Collins; a ten-inch diameter spur was added in Alabama that ran from Helena to Birmingham, and an eight-inch diameter spur was laid in Georgia that ran from Bremen to Macon. In addition, the main line from Baton Rouge to Greensboro was supplemented with parallel pipelines, some smaller lines were replaced with larger pipes, and larger pumping stations were installed throughout the system.

Aside from the need to expand the pipeline system to meet the growing needs of the South, some of the work Plantation undertook during the 1960s was to correct hasty work done in laying pipeline before World War II, when the movement of fuel was of vital importance to the security of the nation. During the 1960s, a section of steel pipe began to leak gasoline under several farms in Marion County, Mississippi. It was discovered only when one farmer became suspicious after he was unable to grow cotton for a number of seasons. Plantation repaired the leak, conducted a cleanup, and made settlement payments to the landowners affected. However, tracking technology at the time was not very sophisticated, and Plantation had no firm idea how much gasoline had leaked. Moreover, it was a substance that could leach into the groundwater and years later become a problem for another community hundreds of miles away. As a result, the leak of the 1960s would return to trouble Plantation decades later.

In the meantime, Plantation continued to upgrade its network, making it less likely to have future containment problems. Starting in 1973, Plantation initiated a program to modernize and expand the pipeline system, an endeavor that would continue on an ongoing basis. Service was added to airports at Charlotte, North Carolina, and Atlanta, Georgia, as well as to Richmond, Virginia. As a result, the network grew to about 3,500 miles by the 1990s.

The problems that resulted from the gasoline leak of the 1960s returned to trouble Plantation in 1993. Close to the initial spill site, a homeowner attempted to dig a well only to find the water was contaminated with gasoline. Because there were no new leaks discovered in the pipeline, the conclusion was that the contamination was the result of the leak from some 30 years earlier. Plantation faced a new round of lawsuits and paid approximately $10 million in settlements, cleanup costs, and legal fees. It filed claims with the company's main insurer during the 1960s, Royal Indemnity Co., which management felt was still liable because the claims were the result of events that occurred during the time of coverage. When the insurer refused to pay for any of the new costs, Plantation sued. After some years of litigation, a Superior Court judge ruled in 1999 that Plantation had failed to notify Royal in a timely manner. A second insurance company, Continental Casualty Co., which covered Plantation with excess coverage from 1963 to 1969, also refused to pay the company's claims. Continental bided its time and after the 1999 Royal ruling took the position that Plantation's late notice also applied to it and freed the insurer from the obligation of paying any claims related to the leak. Plantation disagreed and in September 2003 filed suit in U.S. District Court in Atlanta alleging breach of contract. Another drawn-out legal battle was likely to follow.

Plantation was owned jointly by affiliates of four energy giants--Shell, Texaco, Chevron, and Exxon--but in 1998 the ownership composition changed. Equilon Enterprises LLC, a joint venture between Royal Dutch/Shell Group and Texaco, sold its 24.4 percent stake in Plantation to a new company, Kinder Morgan Energy Partners LP, for $110 million. Shell had been forced to sell because of a Federal Trade Commission order. In a short period of time, Kinder Morgan had emerged as the largest pipeline master limited partnership in the country, operating more than 5,000 miles of pipeline and maintaining more than 20 terminals.

Kinder Morgan was founded in February 1997 by Richard Kinder and William Morgan, friends from their law school days at the University of Missouri in the early 1960s. Later, they became colleagues at Enron Corporation, whose chairman, Kenneth Lay, they also knew from Missouri. Enron's roots were actually in the pipeline business. Lay was employed by Florida Gas Transmission and hired Morgan, who it turn hired Kinder. Houston Natural Gas acquired Florida Gas in 1984 and a year later merged with InterNorth to create Houston-based Enron. Both Kinder and Morgan stayed on to work for what would become one of the most notorious companies in American history. Morgan ran some of Enron's pipelines before leaving in 1987 to manage private energy investments, while Kinder took on increasing levels of responsibility at Enron. By the mid-1990s, it was widely assumed that Kinder was in line to succeed Lay as Enron's chairman, whose contract was about to expire, but in 1996 Lay agreed to a new five-year term. Kinder, now 52 years old, realized that it was highly unlikely that he would ever reach the top spot at Enron. He opted to resign, a fortuitous decision in light of what was to occur at Enron.

It was Morgan who convinced Kinder to forgo any thought of early retirement and to start a business together--Kinder Morgan, Inc.--devoted to the fee-based pipeline business. With backing from Charlotte, North Carolina-based First Union Capital Markets, they bought Enron Liquids Pipeline, L.P. for $40 million. They then took the partnership public as Kinder Morgan Energy Partners, employing the little-used Master Limited Partnership (MLP) structure, which was similar to the Real Estate Investment Trusts (REITs) that had become popular in the 1990s. Units in these entities could be bought and sold like stock, but 95 percent of taxable income had to be distributed to unit holders each year. Investors paid income taxes on the distribution, making the MLP exempt from corporate taxes. As a result of being an MLP, therefore, Kinder Morgan was able to acquire assets that traditional corporations, subject to both investor and corporate taxes, would not touch. During his days at Enron, Kinder rejected any properties that offered anything less than a 15 percent return after taxes. Now he was able to make acquisitions at a much lower threshold: an 8.5 percent pretax return on investment. Kinder Morgan's first major acquisition after the Enron deal was Santa Fe Pacific Pipeline Partner, L.P., a $1 billion transaction in October 1997 that brought with it 3,300 miles of pipeline and a major West Coast presence. This deal was followed by the purchase of a stake in Plantation Pipe Line. Kinder Morgan Inc. then refined its structure by engineering a reverse merger with publicly traded KN Energy, followed by a reverse initial public offering of stock. In this way, not only did Kinder Morgan add KN Energy's pipeline assets, it added what the partners called "the second barrel of the shotgun," a publicly traded corporation to own the MLP. In this way, Kinder Morgan was able to combine the tax benefits of an MLP with the ability of a corporation to use stock to buy assets. After completing the acquisition, Kinder Morgan sold off KN Energy's non-pipeline assets.

New Ownership in the Late 1990s

Kinder Morgan made no secret that it wanted to acquire the rest of Plantation Pipe Line and believed that the major oil companies that owned it and other pipelines would be open to selling, given that the ownership of a common carrier no longer offered a competitive advantage. In May 1999, one of Plantation's owners, Chevron Corp., agreed with that assessment and sold its 27 percent stake in the pipeline for $124 million in cash. As a result, Kinder Morgan held a controlling 51.2 percent stake, with Exxon Pipeline Co. owning the balance. While it continued to lobby Exxon to sell its share of the pipeline network, Kinder Morgan was at least free to cut costs, add capacity to both the mainline and lateral lines, and make other changes to grow Plantation's business.

By the start of 2000, Plantation launched a $40 million project to increase the system's gasoline capacity by approximately 10 percent. Under Kinder Morgan control, Plantation also initiated a two-year $116 million project in 2002 to upgrade the system, supported by contracts from major oil companies. The plan called for 190 miles of 1940s-era, eight-inch pipe stretching from Bremen, Georgia, to Knoxville, Tennessee, to be replaced by new 20-inch pipe. As a result, the pipeline would be able to double its capacity and better serve the high-growth areas of East Tennessee and Northwest Georgia.

In February 2004, Exxon Mobil agreed to sell to Kinder Morgan seven refined petroleum products terminals connected to the Plantation system. Exxon Mobil then signed a long-term agree to use the facilities. Whether Exxon Mobil would ever agree to sell its 48.6 percent stake in Plantation to Kinder Morgan, however, remained to be seen.

Principal Competitors: Colonial Pipeline Company.

Related information about Plantation

A system of agriculture generally found in the tropics and subtropics. Plantations were a product of colonialism - large, company-owned, and labour intensive. With the independence of former colonies many plantations were nationalized, and some divided into smaller units. Plantation farming is associated with the production of cash crops such as coffee, tea, rubber, and cotton, but the term is also applied to planted and managed forests in temperate regions.

For plantations of people, see article Plantation (settlement or colony) for that 17th Century meaning.
A plantation is an intentional planting of a crop, on a larger scale, usually for uses other than cereal production or pasture. In past times it has been associated with slavery, indentured labour, and other economic models of high inequity. A comparable economic structure in antiquity was the latifundia that produced commercial quantities of olive oil or wine, for export.

Forestry

Instead of abandoning land after logging, silviculture seeks to regrow the forest as soon as possible. These plantations are typically grown as an even-aged monoculture for timber production. Plantations are also sometimes known as "man-made forests" or "tree farms", though this latter term also refers to specialist tree nurseries which produce the seedling trees used to create plantations. More generally, a plantation is forest land where trees are grown for commercial use, most often in a planted forest, but may also be in a naturally regenerated forest. In the United States, the term "Tree Farm" is a trademark of the American Tree Farm System, a third party verification system for certifying sustainable forestry. That is, the same species of tree is planted in rows across a given area, whereas a conventional forest would contain far more diverse tree species.

  • Plantations may include introduced trees not native to the area, including (in a few cases) unconventional types such as hybrid trees and genetically modified trees. Since the primary interest in plantations is to produce wood or pulp, the types of trees found in plantations are those that are best-suited to industrial applications. For example, pine, spruce and eucalyptus are widely used because of their fast growth rate, and are good for paper and timber production.
  • Plantations are always young forests. This means that the forests produced by plantations do not contain the type of growth, soil or wildlife typical of old-growth natural forest ecosystems. Most conspicuous is the absence of decaying dead wood, a very important part of natural forest ecosystems.

Plantations are grown by state forestry authorities (for example, the Forestry Commission in Britain) and/or the paper and wood industries and other private landowners (such as Weyerhaeuser and International Paper in the United States). Christmas trees are often grown on plantations as well. In southern and southeastern Asia, rubber, oil palm, and more recently teak plantations have replaced the natural forest.

Growth cycle

  • In the first year, the ground is prepared (usually by some combination of buring, herbicide spraying, and/or ploughing) and then saplings are planted by human crew or by machine. When competition does become too intense (for pine trees, when the live crown is less than a third of the tree's total height), it is time to thin out the section. There are several methods for thinning, but were topography permits, the most popular is 'row-thinning', where every third or fourth or fifth row of trees is removed, usually with a harvester. Many trees are removed, leaving regular clear lanes through the section so that the remaining trees have room to expand again. The removed trees are delimbed, loaded onto trucks, and sent to a mill. A typical pole stage plantation tree is 7-30 cm in diameter at breast height DBH. Such trees are sometimes not suitable for lumber, but are used as pulp for paper and particleboard, and as chips for Oriented Strand Board OSB.
  • As the trees grow and become dense and crowded again, and the thinning process is repeated. Depending on the climate and species, trees at this age may be thick enough for lumber milling; Conversely, an afflicted plantation can in some cases be cleared of pest species cheaply through the use of a prescribed burn, which kills all lesser plants but does not significantly harm the mature trees.

    Industrial plantations

    These are actively managed for the commercial production of forest products. Worldwide, forest plantations now amount to less than 5% of total forested area, but account for 20% of current world wood production.

    In the 1970s, Brazil began to establish high-yield, intensively managed, short rotation plantations. The environmental and social impacts of this type of plantation has caused them to become controversial, In Indonesia for example large multi-national pulp companies have harvested large areas of natural forest without regard for regeneration. From 1980 to 2000, about 50% of the 1.4 million hectares of pulpwood plantations in Indonesia have been established on what was formerly natural forest land.

    The replacement of natural forest with tree plantations has also caused social problems. India has sought to limit this damage by limiting the amount of land owned by one entity and, as a result, smaller plantations are owned by local farmers who then sell the wood to larger companies. Some large environmental organizations are critical of these high-yield plantations and are running an anti-plantation campaign, notably the Rainforest Action Network and Greenpeace. Such plantations are established to foster native species and promote forest regeneration on degraded lands as a tool of environmental restoration. If natural forest is cleared for a planted forest then a reduction in biodiversity and loss of habitat will likely result. In some cases, their establishment may involve draining wetlands to replace mixed hardwoods that formerly predominated, with pine species. However, even non-native tree species may serve as corridors for wildlife and act as a buffer for native forest, reducing edge effect.

    Plantations and natural forest loss

    According to the FAO, about 7% of the natural closed forest being lost in the tropics is land being converted to plantation The remaining 93% of the loss is land being converted to agriculture and other uses. Worldwide, an estimated 15% of plantations in tropical countries are established on closed canopy natural forest.

    In the Kyoto Protocol, there are proposals encouraging the use of plantations to reduce carbon dioxide levels (though this idea is being challenged by some groups on the grounds that the sequestered CO2 is eventually released after harvest). In past times it has been associated with slavery, indentured labour, and other economic models of high inequity. A comparable economic structure in antiquity was the latifundia that produced commercial quantities of olive oil or wine, for export.

    High value food crops

    Plantings of a number of trees or shrubs grown for food or beverage, including tea, coffee, and cacao are generally called plantations. Some spice and high value crops grown from permanent perennial stock, such as black pepper may also be so called.

    Rubber

    Plantings of para rubber, the tree Hevea brasiliensis, are usually called plantations.

    Orchards

    Fruit orchards are sometimes considered to be plantations.

    Arable crops

    These include tobacco, sugarcane, pineapple, and cotton, especially in historical usage.

    Before the rise of cotton in the American South, indigo and rice were also sometimes called plantation crops.

    Slavery, para-slavery and plantations


    Slave labour was used extensively to work on early plantations (such as cotton plantations) in the southern states of the United States, and, in modern times, low wages paid to plantation workers are still a part of plantation profitability in some areas with minimal employee-protection legislation. Sugarcane plantations in the Caribbean and Brazil, worked by slave labour, are perhaps the best example of the plantation system at its height.

    In more recent times, overt slavery has been replaced by para-slavery or slavery-in-kind, including the sharecropping system.

    Related matters

    In the U.S. South, plantations were centered on a plantation house, the residence of the owner, where important business was conducted. Berkeley Plantation.

    In Brazil, a sugarcane plantation was termed an engenho ("engine") and a 17th-century English usage for organized colonial production was "factory". Such colonial social and economic structures are discussed at Plantation economy.

Chronology

  • Key Dates:
  • 1940: Plantation Pipe Line is founded.
  • 1942: Plantation becomes operational.
  • 1964: Pipeline is extended to Virginia.
  • 1973: Modernization program is launched.
  • 1999: Kinder Morgan become the company's majority owner.
  • 2002: A $116 million upgrade project is launched.

Additional topics

Company HistoryOil & Natural Gas - Support Industries

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