Kinder Morgan breaks down its midstream business into five segments: oil products pipelines, natural gas pipelines, CO2, terminals and Kinder Morgan Canada.

Of all five business segments, only oil products pipelines performed worse in the fourth quarter than in the corresponding period in 2010.

“Looking ahead, we believe there are exceptional growth opportunities in our set of businesses related to the continuing emergence of the natural gas shale plays, growth in CO2 demand in the Permian Basin, increasing demand for export coal and further mandates to increase the use of renewable fuels,” said Richard Kinder, the company’s chairman and CEO.

“With our large footprint of assets in North America, KMP is well positioned for future growth,” he added.

The Products Pipelines business produced fourth-quarter segment earnings before Depletion, Depreciation and Amortization (DD&A) and certain items of $161.4 million versus $170.9 million for the comparable period in 2010.

For the year, segment earnings before DD&A and certain items were $694.4 million, up slightly from $687.5 million last year, but about 5% below its published annual budget of 6% growth.

Segment earnings before DD&A for 2011 would have been $31 million higher than the previous year except for the impact of lower revenues related to FERC rate case rulings and increased rental expense associated with an unfavorable trial court decision concerning annual rights-of-way lease payments for certain West Coast operations.

The company is seeking further review of the rate cases, as well as modifications to the rights-of-way decision and will pursue appellate review as necessary.

“The fourth quarter highlights included good results at our West Coast Terminals, reflecting higher rates and new tanks coming online at our Carson, Calif., facility, and higher revenues on the Plantation pipeline system, offset by lower transport volumes and revenues on Pacific,” Kinder said.

“For the year, growth versus 2010 was driven by increased volumes and revenues on the Cochin pipeline system and Plantation, and strong results from the West Coast Terminals, offset somewhat by lower volumes and revenues on the Pacific system and the Central Florida and CALNEV pipelines,” he added.

Sluggish Products

Total refined products volumes decreased 2.5% for the fourth quarter versus the same period last year, and were relatively flat for 2011 versus 2010.

Overall gasoline volumes (including transported ethanol on the Central Florida Pipeline) were down 3.2% for the fourth quarter and 1.4% for the full year.

Pacific and CALNEV continue to experience weak market demand for gasoline.

Diesel volumes declined 1.5% for the quarter and were up 0.4% for the year, reflecting an uptick in market demand on the West Coast, in particular, for mining operations in northern Nevada.

Jet fuel volumes were down 1.7% for the quarter, but up 4.1% for the year, with solid growth of commercial volumes on Plantation and CALNEV deliveries to McCarran Airport in Las Vegas, Nev., as well as improved military jet volumes on the Pacific system.

Central Florida’s gasoline and jet fuel volumes were affected by a competing terminal and weak market demand.

This segment handled 7.4 million barrels of ethanol in the fourth quarter (about flat with the same period last year) and 30.4 million barrels for the year, up 2%.

This segment also realized substantial growth in biodiesel barrels handled and continues to make various asset investments across the country to accommodate more ethanol and biodiesel.

NGL volumes were down 9% versus the fourth quarter last year as a result of weak propane demand for crop drying, but up 3.5% for the year attributable to Cochin.

Organic Growth

The terminals business produced fourth-quarter segment earnings before DD&A and certain items of $184.4 million, up 7% from $172.6 million for the comparable period in 2010.

For the year, segment earnings before DD&A and certain items were $701.1 million, up 8% from $646.5 million last year, but slightly below its published annual budget of 10% growth.

About two-thirds of the fourth-quarter growth in this segment compared to the same period last year was driven by organic sources, with the remainder coming from acquisitions.

“Internal growth was led by strong coal throughput at Pier IX in Virginia and at other coal-handling facilities across our network, as coal volumes increased by 33% compared to the fourth quarter of 2010,” Kinder said.

“KMP also realized higher results at the Carteret liquids terminal in New York Harbor due to higher rates and tank expansions,” he added.

Acquisitions that contributed to growth quarter over quarter included the Watco rail transaction, the purchase of the Port Arthur, Texas, terminal, which handles petcoke for the Total refinery, and the purchase of 50% of a crude oil terminal in Cushing, Okla.

For the year, about 70% of the growth compared to 2010 was attributable to organic sources, with acquisitions accounting for the rest.

In the fourth quarter, this segment handled 16.1 million barrels of ethanol, up 17% from 13.8 million barrels for the comparable period last year.

Combined, the terminals and products pipelines business segments handled about 23.5 million barrels of ethanol compared to 21.3 million barrels in the fourth quarter of 2010.

For the full year, this segment handled 61 million barrels of ethanol versus 57.9 million in 2010.

Combined, the terminals and products pipelines business segments handled about 91.4 million barrels of ethanol versus 87.8 million barrels in 2010.

KMP continues to handle approximately 30% of the ethanol used in the United States.