Crestwood Will Retain Rights to Store Gas and LPG After Planned $225M Sale of U.S. Salt

{THIS STORY WAS UPDATED AT 2:30 p.m. Oct. 31. An earlier version incorrectly stated that Crestwood was abandoning it’s natural gas and LPG storage interests at the site}

Crestwood Equity Partners LP announced today that it will sell its U.S. Salt subsidiary near Watkins Glen to an affiliate of Kissner Group Holdings LP for $225 million, but it will preserve its rights to store natural gas and liquid petroleum gas, or LPG, in abandoned salt caverns on adjacent property.
Crestwood announced its plans to hold on to the hydrocarbon storage caverns in a statement issued this afternoon. It’s initial press release earlier in the day did not mention its plans to retain the storage interests.

“Crestwood has preserved its rights to store natural gas and natural gas liquids through its ownership of Arlington Storage Co. LLC and Finger Lakes LPG Storage, LLC, which were not include in the sale,” the company said in a statement emailed by Elizabeth Suman, Crestwood’s communications manager, at 1:58 p.m. “This will allow Crestwood the ability to provide low-cost storage services benefitting the New York market.”
U.S. Salt, one of the nation’s largest solution mining companies, will continue to operate under its own name as a Kissner subsidiary, and its salt refinery will remain fully operational, the new owners said in a press release.
Kissner, which is based in Kansas, is a salt company that serves Great Lakes and midwest markets.
Neither Kissner nor Crestwood commented initially on what would become of Crestwood’s existing natural gas storage at the site, or its controversial efforts to obtain a state permit to store liquid propane there.
Kissner is owned by Metalmark Capital Holdings LLC, a private equity firm based in New York City that has invested more than $7 billion in a broad range of businesses, including healthcare, industrials, agribusiness and energy.
On its website, Metalmark cites investments in a group of oil and gas exploration and production companies.
Kissner did not return phone calls. A spokesman for Metalmark accepted questions about the transaction but had not responded with answers by mid-afternoon.
Houston-based Crestwood obtained U.S. Salt in 2013 as part of its acquisition of Kansas City-based Inergy LP. That merger combined two “midstream” energy companies involved in energy storage and transportation.
Inergy had purchased U.S. Salt for an undisclosed amount in 2008, the early days of the Marcellus shale natural gas boom. At the time, Inergy announced plans to spend $191 million in developing 5 billion cubic feet of storage capacity in the unlined abandoned salt caverns at the U.S. Salt property next to Seneca Lake about two miles north of Watkins Glen.
Salt mining had never been a core business for either Inergy or Crestwood, both of whom purchased the property primarily for its energy storage potential.
Both companies have stored natural gas at the site, but neither was able to obtain a state permit to store LPG there.

“The divestiture of US Salt is part of Crestwood’s ongoing strategy to optimize its diverse portfolio of traditional midstream assets, identify non-core assets, and redeploy sales proceeds to high growth capital investments in the Bakken and Delaware Basin,” Crestwood added in its afternoon statement.

Suman explained that the follow-up statement was issued in response to questions about the sale of U.S. Salt.
Efforts to obtain that state license for LPG storage, which began shortly after Inergy’s 2008 purchase, touched off widespread opposition locally and throughout the region from dozens of wine and tourism business and several local towns and counties.
The state Department of Environmental Conservation has issued a draft permit for the LPG storage, but Gov. Andrew Cuomo has not yet made a final decision.