On Sept. 22, 2016, the Securities and Exchange Commission granted a request from Kinder Morgan (KMI 0.59%) to exclude information from a regulatory filing. The filing, a Form 8-K dated June 22, 2017, relates to Kinder Morgan's newly minted publicly traded subsidiary, Kinder Morgan Canada (KML), and how it's going to fund a CA$4 billion expansion of its Trans Mountain expansion project, which will increase capacity from 300,000 to 890,000 barrels of oil per day.

Why is Kinder Morgan excluding exhibits from a simple regulatory filing, and what does it mean for investors?

An oil pipeline cutting across a grassy plain.

Image source: Getty Images.

A long road

To answer this question, we need to go back to earlier this year.

On May 30, Kinder Morgan announced the creation of Kinder Morgan Canada Limited, a new majority-owned subsidiary. Over 100 million shares were offered on the Toronto Stock Exchange and raised some CA$1.75 billion, marking one of the largest IPOs in Canadian history. Proceeds went straight to Kinder Morgan in exchange for the 30% of Kinder Morgan Canada that went to the public -- more on that in a moment.

The other key fact is that the public offering was the final condition for Kinder Morgan's investment in the Trans Mountain Expansion Project. And that brings us to the real reason Kinder Morgan Canada held its public offering.

You see, the IPO of Kinder Morgan Canada was the final of a whopping 173 conditions required to build the Trans Mountain expansion. The expansion itself is massive -- running in parallel with Kinder's current 1,150-kilometer Trans Mountain Pipeline. It's also arguably needed -- the existing pipeline was built in 1953 and serves as the only link between Canada's oil sands and the coast.
 
Map of the planned Trans Canada Pipeline Expansion.

Image source: Trans Mountain website.

 
Kinder has been trying to expand its pipeline for a long time, having filed an application with the Canadian National Energy Board as long ago as December 2013. That's exactly when the public outcry began. There are more stakeholders here than just Kinder Morgan and oil-sands producers, as climate-change activists and aboriginal groups immediately began expressing their concerns with the project.
 
As detailed by Ted Morton, former Progressive Conservative finance and energy minister in Alberta, in a recent Globe and Mail op-ed, the situation became so precarious that it looked as if the expansion wouldn't even happen as recently as six months ago. Writing on Sept. 15, Morton stated:
A year ago, I wrote that there was little likelihood that Kinder Morgan's Trans Mountain pipeline expansion would ever be approved, much less built. Six months ago, I changed my opinion: That completion was highly probable. Three months ago, I had fallen back into the pessimists' corner. Today, I believe that the completion of the Trans Mountain expansion is almost certain. 
Morton goes on to describe the winding road of the approvals process. After countless negotiations with the various constituent groups and the British Columbia government, Kinder Morgan finally got its wish. The tale culminated with the sale of 30% of Kinder Morgan Canada to the public, a move that Morton says gave a piece of the company to 24 of Canada's "largest institutional investors -- banks, pension funds, private equity."
"It is, as they say, too big to fail," Morton stated.

Lock and key

There are probably multiple reasons for Kinder Morgan's request to exclude data from its recent 8-K filing related to Trans Mountain. The excluded information itself revolves primarily around two basic types of information: (1) summaries of the various parties and their litigated arguments against the expansion, and (2) the estimated costs of the project itself. Clearly, the company is trying to satisfy a huge number of stakeholders.

What investors need to know

Kinder Morgan is withholding information not for some nefarious purpose designed to trick shareholders, but out of respect for the various constituent groups and a lack of certainty on outcomes. It seems likely that while the project will almost certainly be completed, adding fuel to the Kinder Morgan bull case, the company simply doesn't know the outcome of some of these court motions, fees, and project costs. By holding an IPO for Kinder Morgan Canada, Kinder Morgan's management solidified local inclusion in this major project and assured its completion.