Kinder Morgan Pulls Plug on Wilmington, Del., Bid

Kinder Morgan Pulls Plug on Wilmington, Del., Bid

The attempt to privatize the Port of Wilmington, Del., has foundered on the rocks of local port business and labor opposition.

Kinder Morgan Energy Partners said last week it has “suspended” its bid to take over the lease for 65 years to operate the port, which is currently operated by the Diamond State Port Corp., a state agency.

Kinder Morgan had proposed investing at least $200 million at the port, including $142 million in lease payments and an upfront payment of $16.5 million. The company also said it would spend millions more on infrastructure, maintenance and expansion, including extending the Christina River port out onto the Delaware River.

The Houston-based company cited opposition from organized labor as the reason for its decision to suspend its bid. Kinder Morgan said in a letter to Delaware economic development director Alan Levin, who is also chairman of Diamond State Port Corp., that it was concerned that leaders of the local longshoreman's union, which has fought the deal, had become so antagonistic that forging a productive relationship with a future work force would be impossible.

“Simply put, we have choices in terms of where we will invest substantial resources and the current union leadership at your facility does not make Delaware a good choice at this time," John Schlosser, president of Kinder Morgan’s terminal division, said in the letter.

State officials put out a request for proposals for operating and upgrading the port in 2011, which elicited bids from Kinder Morgan and a local group. The Diamond State Port Corp. named Kinder in December 2013 as the "preferred" bidder to lease the port, which immediately aroused opposition from local Wilmington port businesses and organized labor, which feared that turning over the entire port to a private operator would mean the loss of business and jobs.

“We felt that we wouldn’t be on a level playing field,” said John Vitale, president of Intercontinental Services of Delaware, a bulk handling and warehouse operator outside the port, and one of the leaders opposing the privatization bid. “Anyone who got full control of the port without regulatory oversight could have made life tough for us and go after our customers regardless of what they told us upfront. They would have the keys to the gate.”

Vitale also felt the state would not be getting adequate compensation for the lease sale. “It seemed like a fire sale.” Vitale said that once the state selected Kinder as the preferred bidder, it abandoned its plan to expand the port out onto the Delaware River.

The group of port businesses that opposed the bid was also concerned that Kinder Morgan’s other port terminals were largely bulk operations and that the company did not have the knowhow or experience to handle refrigerated cargoes, which make up most of Wilmington’s container activities. Wilmington is the largest banana port in the United States. Vitale said he had heard that Dole Foods, which uses the port as a gateway for its fruit imports, also opposed the Kinder bid.

The Kinder Morgan bid also touched off opposition from the International longshoremen’s Association. Julius Cephas, president of ILA Local 1694-1, said the union was concerned about job preservation, salaries, and the potentially hazardous cargoes Kinder might export, such as coal and natural gas.

The ILA and local businesses that were opposed to the bid teamed up to persuade the Delaware Legislature to pass a law requiring any bid for the port to undergo legislative review and approval. Cephas elicited support from several Delaware lawmakers, who approved a bill requiring legislative sign-off on any lease.

Once that requirement became known, Kinder Morgan called off its bid. “Of course, several members of the General Assembly made it clear in January that they are not likely to approve any such transaction unless we can come to terms with Local 1694," Schlosser wrote in his letter. "This puts Kinder Morgan in an impossible situation."

He said Kinder Morgan planned to add "hundreds of new jobs, significantly more capital investment, with significant work done by the local building trades and substantially increased competitiveness for the Port of Wilmington.

"However, none of this is realistic if the local work force is not productive because a volatile union leader is not even willing to negotiate, let alone agree to, a reasonable contract."

Cephas said workers and nearby residents were worried about the potential for coal dust, air pollution, spills and gas explosions if Kinder shipped coal or petroleum products.

After Kinder bowed out, Cephas, in a statement, thanked the "diverse coalition of community leaders and concerned citizens" who wanted to protect the port. "Our fight is not over," he said. "We must continue to work with Gov. (Jack) Markell and Alan Levin to develop a strategic plan to continue to make the port viable and sustainable for our future generation and create middle-class jobs."

Contact Peter Leach at pleach@joc.com and follow him at twitter.com/petertleach.