Tulsa-based Magellan foresees minimal impact from K.C. fire

Journal Record, The (Oklahoma City), Jun 5, 2008 by Kirby Lee Davis

Magellan Midstream Partners projects a minimal supply disruption from a large fire that destroyed one fuel storage tank at its Kansas City, Kan., terminal.

In a Securities and Exchange Commission filing Wednesday, Tulsa- based Magellan said the master limited partnership faced a $1 million insurance deductible with the incident.

Although he thought it too early to estimate tank replacement costs, Magellan Vice President of Finance and Assistant Treasurer Jeff Holman said Magellan foresees few material results beyond that deductible.

"Basically, it will reduce our flexibility at the terminal to some degree," he said. "But we don't expect that to be down very long."

Magellan said an apparent lightning strike at 7:45 p.m. Tuesday hit the above-ground storage tank near downtown, slightly removed from Magellan's main terminal.

Kansas City, Kan., Fire Department Capt. Stan Castaneda also attributed the fire to lightning, according to an Associated Press report.

The resulting fire, which the AP said fueled soaring flames and dark smoke, was limited to one 145,000-barrel-capacity tank, which held only 28,000 barrels of unleaded gasoline at the time.

The fire caused no injuries. Magellan said federal, state and local authorities were assisting recovery efforts. Spokesman Bruce Heine commended the Kansas City fire crews and other agencies for their part in managing the event.

Holman said the fire continued to burn through Wednesday afternoon.

"That's typical that these things would burn out as long as they're under control," he said.

The company temporarily discontinued distribution services from the terminal as a safety precaution. Holman said partial operations resumed Wednesday.

"Rack volumes are back up," he said of the terminal, which provides distribution services for gasoline, gasoline/ethanol blends, diesel and jet fuel. "Some product is being moved north."

Although operations neighboring the lost tank will remain down until the firm can complete integrity assessments, Holman said Magellan should be able to meet most market needs.

"It shouldn't be extensive," he said of the limited downtime. "A couple of days."

MMP units fell 89 cents Wednesday on the New York Stock Exchange to close at $38.49, near its 52-week low of $38.14. Wednesday's 210,736 trading volume more than doubled Magellan's daily average.

The company could project no estimates on lost transportation or storage revenue, although Holman suspected it would be minimal. He noted the company may draw from 29 million barrels of storage on its pipeline system, illustrating the limited scope of one lost storage tank.

"We're already moving product north again from that facility," he said. "We don't anticipate much impact on revenue."