May 1, 2013 [OPIS] - Kinder Morgan and the Port of Los Angeles have agreed to a five-year lease extension for Berths 118-119 at the Southern California Port (Kinder Morgan Carson) ahead of expiration of the previous 25-year term for Permit 708 in mid-April, officials from Kinder Morgan and Port told OPIS on Tuesday.
Both parties have been negotiating for a lease extension since last year, creating some anxiety among traders in the event of a non-renewal. The port had given notice in 2009 that the lease for that oil dock would not be renewed.
According to the Los Angeles Harbor Commission, Kinder Morgan will continue to import and export product at Berths 118-119 until April 2017. One storage tank, with sufficient capacity to fill the pipeline connection to Kinder Morgan’s Carson tank farm, will be needed for continued operations.
Demolition of most of the storage tanks and dike walls would begin in 2013.The last year of the five-year lease will be for cleaning up purposes.
Berths 118-119 site is under a clean-up and abatement order by the Regional Water Quality Control Board in 1997. Kinder Morgan will undertake a dig-and-haul remediation that meets the City’s and Water Board’s standards.
The rent is reset to $32 per square foot per year for the five-year term of the extension, up from the current rate of $29 per square foot per year. The 75% discount for subsurface rights-of-ways is continued.
The Port of Los Angeles will collect about $1.8 million a year in rent plus undetermined wharfage fees for the first two and half years, and about $800,000 per year in rent plus undetermined wharfage for the last two and half years.
A fixed deadline of Dec. 31, 2015 is established for surrender of the eastern portion of the tank farm.
Kinder Morgan’s operations will be limited to loading and offloading of ships, and will not expand that operation beyond existing conditions. Overall, the operations of the leasehold will decrease, as portion of the site will cease operation upon the expiration of the original Permit term in April 2013.
OPIS reported earlier this year that Kinder Morgan has already made contingency plans for an eventual move away from Los Angeles Port.
Kinder Morgan will move some of its marine dock operations across the harbor to the Port of Long Beach once a new pipeline project at Long Beach is completed by the end of this year.
Kinder Morgan signed a long-term contract with Chemoil to use its marine dock at the Port of Long Beach. The agreement includes multi-million-dollar investment by Kinder Morgan to install a new 20-inch pipeline for oil products transportation to and from its Carson storage facility.
The 20-inch pipeline will replace an existing 10-inch pipeline that runs between the Chemoil dock and Chemoil’s inland Carson terminal, which is across the street from the Kinder Morgan terminal.
Kinder Morgan is expected to use the new 20-inch pipeline exclusively for delivery from the Chemoil dock to the Kinder Morgan terminal when the pipeline is ready by the end of 2013. The new pipeline will deliver products to both Chemoil and Kinder Morgan terminals at Carson.
Due to the limited operations at Port of Los Angeles, Kinder Morgan is likely to rely more on the Chemoil dock once the new Long Beach pipeline is up and running. Traders note that there is not enough volume for both docks.
Traders said that they did not anticipate any delivery interruption for Kinder Morgan customers who are utilizing the storage capacity at its Carson terminal.
