July 2017, Vol. 244, No. 7

Features

Kimberly Watson Leads SGA through Era of Industry Change

It would be hard to find a pipeline industry executive as fluent in change as Kimberly Watson.  As a young Texas A&M University accounting graduate, the Houston native started her job search at the epicenter of an oil bust and a savings and loan crisis that plunged the Texas economy into a major recession.  The university’s placement office helped Watson land a job at Houston Natural Gas, giving her a front-row seat to the most intensive period of consolidation the industry had ever seen.

Within a few years, the intrastate operator transformed into an interstate powerhouse through a string of mergers and acquisitions that combined Houston Natural Gas with Transwestern Pipeline, Florida Gas Transmission and the InterNorth companies – a conglomeration that soon rebranded as Enron. After serving on the team responsible for integrating those businesses into one functional organization, Watson held several back-office and mid-office positions before finding her sweet spot in commercial marketing.

She joined Kinder Morgan in 2002, where she worked in business development for Natural Gas Pipeline Company of America and was part of the team that developed Kinder Morgan Louisiana Pipeline, Midcontinent Express Pipeline and Fayetteville Express Pipeline. She also assisted in the transition that followed Kinder Morgan’s $21 billion acquisition of El Paso Corp. in 2012, which led her to become the president of Kinder Morgan’s North Region Pipeline group. Kinder Morgan’s North Region Pipeline group is composed of Tennessee Gas Pipeline, Kinder Morgan Louisiana Pipeline and Natural Gas Pipeline Company of America (as operator).

Still on the forefront of industry change, Watson in January became the first woman to serve as chair of the Southern Gas Association.

PG&J: Why did you choose “Natural Gas: Navigating Change through Leadership & Innovation” as your theme for 2017?  

Watson: I’ve been in the pipeline industry for 34 years, and our industry has been constantly evolving throughout that period. But, in terms of both pace and scale, the changes our industry faces now on a national, regional and local level are clearly unprecedented. It’s important for us, as leaders in the industry, to recognize fundamental changes, and be willing to think about things differently. That includes the way we think about developing projects. In the past, our entire industry has been operating mostly under the radar. It’s been very low key – identifying customers’ requirements for natural gas service, figuring out how to do that physically and then filing for the facilities and working with the communities to get them built. But now, with a heightened public awareness of the energy industry and growing activism, we really do need to take more of a grassroots look at developing projects and start out on the ground in each local community.

Part of this is simply educating people about what natural gas is and how it compares to other energy sources, and the costs of each. We have to engage in more education and be more transparent to obtain local buy-in. If you allow others to set the agenda and the talking points, then it’s much harder to get your message across.  So we have to set the tone and the message, and this changes how we develop projects.

P&GJ: Are project timelines changing to accommodate this kind of grassroots effort?

Watson: Yes. It means starting earlier, being more involved and having conversations with all of the stakeholders, whether they are landowners or local officials, state representatives and senators for a particular area, all the way up to a governor’s office on a state level, and often to U.S. representatives or senators on the national level. We have to engage all of the stakeholders – private landowners, local businesses, community organizations, the entire spectrum. So it’s a very different process now, but I believe it is the right conversation to have.

P&GJ: You’ve had direct experience with pipeline protesters. What do you consider to be the primary driver behind it?

Watson: If you think about why this has become such a big part of the conversation over the past 10 years when the pipeline industry has been out there for 70 or 80 years, I doubt there’s much question that a substantial part of this shift has occurred because of the shale boom, which has driven the significant infrastructure that has been developed over the past decade. To a large degree, pipeline opposition has become a stand-in for opposition to fossil fuels, and much of this opposition is in response to hydraulic fracturing and shale gas production. Some are trying to block pipelines because they see this as a way to stop fracking, knowing producers must have a way to transport natural gas to markets. So, if they can stop the pipeline, they can stop the fracking. Ironically, this opposition is counterproductive to the goal of dealing with climate change. While natural gas is a fossil fuel, it remains critical to reducing greenhouse gas emissions.  For example, CO₂ emissions are back to 1993 levels mainly because natural gas-fired electricity generation continues to grow.  Natural gas is also essential to our economy with many industrial applications and basic uses such as heating homes and businesses.

P&GJ: Is the issue of eminent domain for pipeline rights-of-way a growing concern?

Watson:  The anti-pipeline movement certainly wants to raise this as a concern. Natural gas is a unique commodity in that the only way it can be transported in its gaseous state is through pipelines. Because there is no alternative to transportation by pipeline and because pipelines must be built across state lines, the federal government provides for federal eminent domain authority under the Natural Gas Act if the project is found to be in the public interest.

P&GJ: When you talk to SGA members, do you find that they’re especially focused on these external issues, or are they concentrating more on internal operations?

Watson: All of the above. SGA is primarily a training organization, so many of our conversations relating to industry change involve ensuring the training we provide is relevant. The technical training isn’t impacted significantly by outside dynamics, but much of what we’re doing is thinking ahead and considering when we might need to change how we look at certain things, what we’re doing and when we’re doing it.

We, along with the agencies, have to be incredibly thorough at every regulatory level due to the high number of groups that file as interested. You may receive a FERC certificate to build an interstate project, but it is still subject to other permit approvals at the state and local levels.

PG&J: You’ve been responsible for projects across areas of the country during your career.  Have you found there to be significant differences between regions – for instance, in the Northeast, where pipeline projects have encountered opposition?

Watson: There is definitely a difference as each region really has its own personality as to how it views energy. The regions have ISOs (independent system operators) that may be set up differently and each has different physical characteristics.

Much of my early career was spent marketing to the West Coast, and when I began working with Tennessee Gas, I learned the New England region has unique challenges that the western region does not. The Northeast has limited pipeline capacity so the shale play gas has really been a game changer there. For those in the Marcellus Shale, it makes obvious sense to develop pipelines for that market to access; but the Northeast is uncertain how to grow their energy mix, and it’s complicated as they want more renewables than what is actually scalable for them. So, this region is a pipeline-constrained region, probably the most constrained in the country. The pipelines in this area are full and have been for some time.

PG&J: And they pay more than any other region for natural gas.

Watson: Clearly when you talk to businesses in the New England area, they pay higher prices for energy. It’s a big part of their operating costs. Canadian gas that used to flow into the region has diminished, making them also rely on imported LNG for which they have to compete on the world market, leaving them vulnerable to price volatility.  Additionally, the higher prices impact residential customers.

P&GJ: The Trump administration was quick to get involved in some pipeline industry issues.  Do you think they’re on the right track?

Watson:  I think the general consensus is that President Trump’s platform during his campaign and since taking office has suggested a more pro-business tone – that we have to encourage business growth to strengthen the economy, and domestic energy is a vital component of that process.

I think there is movement to push governmental agencies to be friendlier to grow infrastructure, whether that’s roads, bridges or pipelines. So far, the administration has appeared to be natural gas-friendly.

P&GJ: Do you have any concerns that the push to reduce federal regulations could have a negative impact on pipeline safety?

Watson: What we’ve heard thus far is that President Trump would like to push more authority down from the federal to the state and local levels, and I wouldn’t necessarily call that deregulation. I think some regulatory authority can be pushed down to the state and local levels, depending on how it’s done. It’s a double-edged sword because there is opposition when entering those state and local arenas, too, and I think we do need an overview authority.

I haven’t seen any proposals that would result in less safety regulation, so there’s really nothing to comment on specifically in that regard. Generally speaking, I’m confident our industry’s safety culture is deeply ingrained and safety has always been a bipartisan issue.  I do think that we will have regulation better tailored to the issues being addressed.

P&GJ: SGA has had a few changes of its own this year. Can you discuss your goals in relation to the new leadership and your theme of navigating change?

Watson: First of all, we have a new president with the retirement of Mike Grubb. William Cantrell has stepped in and brought a strong industry background to that leadership role. We’re both coming in with fresh eyes and he is helping us take a closer look at our strategic plan to ensure SGA is focused on the long term.

Along with this, the SGA team has been looking at what training is effective, what we might need to end that is no longer as relevant to our members versus what types of training do we need to blend in. One new program is the Women and Leadership Forum.  This is typically a smaller component built into regional conferences, but it’s becoming a larger focus since it’s received greater interest from members – enough to merit a standalone event this year in Texas. Members also indicated that they wanted to create an Inclusion and Diversity Task Force, which we launched in April. So we have a lot of relevant information coming to us from our membership, and we want to be nimble to respond quickly and incorporate their ideas.

P&GJ: Are there other key areas of focus on SGA’s agenda for 2017?

Watson: Across our industry we have workers hovering toward retirement, and then you’ve got all the young people coming up. We recognize that we need to properly train those younger members of our workforce. This is especially important when you consider the pace of change in our industry.

Looking back over my 34 years in this industry, the amount of natural gas infrastructure built across the U.S. in the past seven to 10 years is three-fold greater than what happened in my first 20 years. Looking to the next five to eight years, I think integration of the different energy sources will become more important and continue to evolve. This is an excellent time to come into the industry, but it takes patience and experience to learn all the pieces – the commercial aspect, the physical world, the contractual world, the regulated and unregulated – and understand how it all folds together. It’s vital that our training remains relevant and that we develop those individuals to be our future leaders and spokespersons for natural gas. And, of course, we absolutely want more diversity in our industry.

P&GJ: On that note, SGA changed the title from chairman to Chair as you became the first woman in that position. How do you think the industry is doing in regard to diversity?

Watson:  There have been women who broke the glass ceiling ahead of me, so I’m grateful for that. At Kinder Morgan, specifically, there are quite a few women in high leadership positions. For example, Kimberly Dang is CFO and a member of the Office of the Chair, in addition to serving on Kinder Morgan, Inc.’s Board of Directors, as does Deborah Macdonald – who was previously the president of Kinder Morgan’s Natural Gas Pipelines. There certainly has been progress, yet there are some areas of the industry that could be a little more inclusive, and that starts with getting more diversity through college science or business programs. More women and minorities are coming out of that process, but it takes 10 to 20 years to see the fruits of that in leadership positions. That’s why it’s so important to ensure we have the right kind of training programs to develop and foster the young people entering our industry.