Kinder Morgan Energy Partners said in an update on fourth quarter 2008 operations that its products pipeline segment earned $153.2 million before factoring in depletion, depreciation and amortization, an 11 percent increase on the yearly period. For the year, this segment generated $571.5 million in earnings before DD&A, which was below its projected budget of $612.7 million or 5 percent growth.

“The shortfall was driven by lower volumes as a result of extremely high products prices and a recessionary environment,” said Chairman and CEO Richard D. Kinder.

The partnership, which owns an interest in or operates more than 25,000 miles of pipelines and 170 terminals in North America, said the products pipelines segment in the fourth quarter “benefited from improved financial performances at the Southeast and West Coast terminals, along with the Cochin and Central Florida pipelines, compared to 2007.”

Excluding the Plantation Pipeline, total refined products revenues in 2008 were up 0.8 percent and volumes were down 7.1 percent, with the Plantation system generating a 1.5 percent hike in revenues against the prior year despite a 5.9 percent drop in the pipeline’s volume.

On its products pipelines in 2008, gasoline volumes were down 8.5 percent, diesel volumes were down 3.8 percent and jet volumes were down 6.2 percent for the year.

KMP’s terminal business posted a 13 percent increase in pre-DD&G earnings of $140.3 million in the fourth quarter 2008. For all of 2008, segment earnings were $538.9 million before DD&A, up 22 percent from 2007, but short its published annual budget of 24 percent growth or $550.2 million.

“The Terminals business would have almost met its annual budget if not for lost business associated with the hurricanes, and actually would have exceeded its budget had it not also incurred higher operational costs for much of the year due to higher diesel prices,” Kinder said.

The partnership, which has an enterprise value of over $20 billion, said it completed construction of a new terminal with four new fuel storage tanks and a capacity of 320,000 bbl to serve two military bases in California during the fourth quarter 2008. The roughly $25 million project, which went into service in December, provides uninterrupted fuel service to the Marine Corps Air Station in Miramar, and the Naval Air Station in Point Loma.

KMP also acquired “a strategically located liquids storage terminal in Phoenix.” The partnership purchased the liquids terminal from ConocoPhillips for approximately $29 million in December 2008. The facility has tank capacity of approximately 200,000 bbl for gasoline, diesel and ethanol. The terminal is located near the company’s existing terminal in Phoenix and will increase the company’s storage capacity in this market by almost 13 percent.

Kinder said the partnership also invested approximately $46 million in 2008 “to further upgrade and modify existing facilities which enabled us to generate additional revenues by handling more ethanol.” Additionally, the partnership “successfully commenced commercial ethanol transportation service on the Central Florida Pipeline.”

KMP began transporting commercial batches of denatured ethanol along with gasoline shipments in its 16-inch Central Florida Pipeline from Tampa to Orlando in December 2008.

“In total, the company has approved over $90 million in ethanol and biofuel projects including modifications to tanks, truck racks and related infrastructure for new or expanded ethanol and biodiesel service at various terminals in the Southeast and Pacific Northwest,” said KMP.

The partnership said it offers offloading, storage and blending of ethanol at its terminals in Florida, Georgia, South Carolina, North Carolina, Virginia, Pennsylvania, New York, Illinois, Tennessee, Mississippi, Louisiana, Texas, Calif., Nevada, Arizona, Washington, and Oregon.

In the fourth quarter 2008, KMP said it successfully conducted a test movement of 20,000 bbl of blended biodiesel, which had a 5 percent biodiesel to 95 percent diesel ratio, in a segment of the Plantation Pipeline system that transports gasoline and diesel from Collins, Miss., to Spartanburg, S.C. KMP said it now anticipates having the capability to move blended B5 along the Plantation system this year to markets in Birmingham and Oxford, Ala.; Bremen, Atlanta, Athens and Hartwell, Ga.; Belton and Spartanburg, S.C.; Charlotte and Greensboro, N.C.; and Roanoke, Va.

The partnership currently stores, blends and loads trucks of biodiesel blends at its terminals in Portland, Ore., and Seattle, Wash., and receives waterborne biodiesel imports for storage and breakout for local retail demand at its Tampa terminal.