Kinder Morgan Energy to Buy Two Jones Act Tanker Fleets

Pipeline operator Kinder Morgan Energy Partners LP said it would buy two tanker companies from affiliates of Blackstone Group and Cerberus Capital Management for $962 million to expand its crude and refined products transportation business.

American Petroleum Tankers and State Class Tankers, which ship crude oil, condensate and refined products in the United States, comply with the Jones Act.

"This is a strategic and complementary extension of our existing crude oil and refined products transportation business," said John Schlosser, a Kinder Morgan executive.

The Jones Act requires all ships moving between U.S. ports to be U.S.-owned, U.S.-made and U.S.-crewed.

Rates for Jones Act tankers have surged this year as growing U.S. crude production drives up demand.

The majority of Jones Act tankers ferry refined products from the Gulf Coast to the isolated market in Florida, ship Alaskan crude along the West Coast, or haul crude within the Gulf.

But recently traffic has picked up on the longer U.S. Gulf-East Coast route.

East Coast refiners, who typically process imported crude oil, are turning to U.S. crude oil as it becomes cheaper than European Brent crude.

The closely watched price gap between the two benchmarks crude has begun to widen again after leveling out in July for the first time since 2010.

On Monday, a barrel of Brent was about $12 more expensive than a barrel of U.S. crude.

American Petroleum Tankers has a fleet of five product tankers, while State Class Tankers has ordered four. The vessels are scheduled to be delivered in 2015 and 2016.

Kinder Morgan said on Monday it would invest about $214 million to complete their construction.

The deal is expected to add to the cash available to Kinder Morgan unitholders in the first quarter of 2014, when it is likely to close.