Welcome to the Kinder Morgan 's Quarterly Earnings Conference Call. Today's call is being recorded. If you have any objections, you may disconnect at this time. All lines will be in a listen-only mode until the question-and-answer session of today's call. [Operator's Instruction]. And please make sure your phone is unmuted and record your name and Company clearly, when prompted. I would now like to turn the call over to Mr. Richard Kinder, Executive Chairman of Kinder Morgan. Thank you, sir. You may begin.

Thank you, Missy. Before we begin, as usual, I'd like to remind you that KMI 's earnings released today. And this call includes forward-looking statements within the [Indiscernible] of the Private Securities Litigation Reform Act of 1995 and the Securities and Exchange Act of 1934, as well as certain non-GAAP financial measures. Before making any investment decisions, we strongly encourage you to read our full disclosure on forward-looking statements and use of non-GAAP financial measures set forth at the end of our earnings release, as well as review our latest filings with the SEC for important material assumptions, expectations, and risk factors that may cause actual results to differ materially from those anticipated and described in such forward-looking statements. With that out of the way, let me just say that, like a broken record, each quarter I open our call with comments on the strong cash flow we're generating, and how we're using, and intend to use that cash flow. Whether you look at our cash flow for the second quarter, for year-to-date, or our projections for the full-year, it's apparent that we continue to be a strong generator of cash flow. It's also apparent that we continue to live comfortably within that cash flow. The question investors should ask on a continuous basis is whether we are wise stewards of that cash. We have said repeatedly that we would use our funds to maintain a strong balance sheet, pay a good and growing dividend, invest in new projects or acquisitions when they met our relatively high return hurdle rates, and opportunistically repurchase our shares. This quarter, we announced two fairly significant acquisitions. The first was our purchase of the Stagecoach natural gas storage and pipeline assets in the Northeast for approximately $1.2 billion. These assets expand our services to our customers by helping connect natural gas supply with Northeast demand areas. The acquisition is immediately accretive to our shareholders, and I believe it will be an important and profitable asset for KMI for many years to come. Our second acquisition is to make an attractive platform investment in the rapidly growing renewable natural gas market by purchasing Kinetrex for approximately $300 million. Steve will talk about this acquisition in detail. We believe there is a bright future for this business and other related energy transition businesses that we are exploring. Now, let me conclude with two important points. Both of these acquisitions meet our hurdle rates that I referred to earlier and both are being paid for with our internally generated cash. I believe both fit within the long-term financial strategy that I speak to each quarter, and I can assure you that our Board looks at all alternatives in a manner completely consistent with that financial strategy. And with that, I'll turn it over to Steve.

Okay. Thanks, Rich. I'm going to make a couple of additional comments about the two acquisitions and then turn it over to Kim and David. On the Stagecoach, storage and transportation assets drew $1.2 billion. We closed that transaction earlier this month. It adds 41 Bcf of certificated and pretty flexible working gas storage capacity and 185 miles of pipeline. We're excited about this transaction for several reasons. As we discussed in the first quarter call, we think storage value is going to increase over time. It's value was certainly revealed during Winter Storm Uri, and we've seen that start to show up in our commercial transactions. Storage will also become more valuable as more intermittent renewable resources are added to the grid. The Stagecoach assets are well interconnected with our Tennessee Gas Pipeline system as well as other third-party systems in a part of the country that is constrained from an infrastructure standpoint, and frankly where it is difficult to get new infrastructure permitted and built. We're excited about this transaction and believe it will pay off nicely for our shareholders. The second transaction, which we announced at the end of last week, was accomplished by our newly formed Energy Transition Ventures Group. We put that together in the first quarter of this year. We're acquiring Kinetrex, a renewable natural gas business subject to regulatory approval and a couple of other closing conditions. At signing, Kinetrex had secured three new, signed development projects that we will build out over the next 18 months, resulting in a purchase price plus capital at a less than 6 times EBITDA multiple by the time we get to 2023. With Kinetrex, we're picking up a rare platform investment in a highly fragmented market. It gives us a nice head start on working on…

Okay. Thanks Steve. First, I'm going to start with our business fundamentals, and then I'll talk very high level about our forecast for the full year. Starting with the natural gas business fundamentals for the quarter, transport volumes were up 4% or approximately 1.5 dekatherms per day versus the second quarter of 2020, and that was driven primarily by LNG Mexico exports and power demand on TGP, the PHP in-service, higher industrial and LNG demand on our Texas Intrastate system, and then higher deliveries to our Elba Express LNG facility. These increases were partially offset by lower volumes on CIG, and that's due to declines in Rockies production, and Fayetteville Express contract expirations. Physical deliveries to LNG off of our pipelines averaged approximately 5 million dekatherms per day. That's a huge increase versus the second quarter of 2020. LNG volumes also increased versus the first quarter of this year by approximately 8%. Our market share of LNG export volumes is about 48%. Exports to Mexico were up about 20% versus the second quarter of 2020. Our share of Mexico volumes is about 54%. Overall deliveries for power plants were relatively flat. Deliveries to LDCs were down slightly, while deliveries to industrial facilities were up 4%. Our natural gas gathering volumes were down about 12% in the quarter compared to the second quarter of '20. For gathering volumes though, I think the more informative comparison is the sequential quarter. So, compared to the first quarter of this year, volumes were up about 6%. And here we saw nice increases in Hiland volumes, which were up about 10%, and the Haynesville volumes, which reports were up about 13%. In our Product Pipeline segment, refined products were up 37% for the quarter versus the second quarter of '20. Volumes are also up about…

All right. Thanks, Kim. For the second quarter of 2021 we're declaring a dividend of $0.27 per share, which is a $1.08 annualized, and that's up 3% from the second quarter of 2020. This quarter, we generated revenue of $3.15 billion, which is up $590 million from the second quarter of 2020. We also had higher cost of sales with an increase there of $495 million. So netting those two together, gross margin was up $95 million. This quarter, we also took an impairment of our South Texas gathering and processing assets of $1.6 billion. So with that impact, we generated a loss -- net loss of $757 million for the quarter. Looking at adjusted earnings, which is before certain items, primarily the South Texas asset impairment this quarter and the Midstream goodwill impairment a year ago, we generated income of $516 million this quarter, up $135 million from the second quarter of 2020. Moving onto the segment EBDA and distributable cash flow performance, natural gas -- our natural gas segment was up $48 million for the quarter. And that was up primarily due to favorable margins in our Texas Intrastate business, greater contributions from our PHP asset, which is now in service, An increase volumes on our Bakken gas gathering systems. Partially offsetting those items were lower volumes on our South Texas and KinderHawk gathering and processing assets and lower contributions from FEP due to contract roll-offs. Our product segment was up $66 million driven by a nice recovery in refined product volume. Terminals was up $17 million, also driven by the nice refined product volume recovery, partially offset by lower utilization of our Jones Act tankers. Our CO2 segment was down $5 million due to lower crude oil CO2 volumes and some increased well work costs. Those are…

All right. Missy(ph), let's open it up for questions. And just a reminder to everyone as a courtesy to the others on the call, we ask that you limit your questions to 1 and a follow-up, and then if you've got more, get back in the queue and we will get to you. All right? Missy(ph) let's open up.

Yes, sir. [ Operator instructions]. Please make sure that your phone is unmuted, and records your name and Company when prompted. [ Operator Instructions]. Our first question comes from Jeremy Tonet from JPMorgan. Your line is open, sir.

Good afternoon.

Good afternoon.

I'm going to resist the temptation to ask about CCUS, and ask about two different questions. I was just curious, I guess, with the RNG space. It seems like that's a very fragmented industry where Kinder historically has played a role in fragmented industries in being a consolidator. Do you see a similar opportunity set here? And I guess also, it seems like there is a good amount of competition from private equity and those with very low cost of capital to go after these types of targets. Just wondering if you could talk about the competitive landscape at this point?

Sure, it is a very fragmented market as you pointed out, and that does create some, I think, some good open fields running for us. There aren't as -- as I said, this is kind of a rare platform investment. We don't generally comment on M&A just because it's very hard to project results there. It's something that we'd be open to again if we can get the right returns, but we think we've got a lot of opportunity to build this business organically. And we think what we bring to the table in terms of competitive advantage is our existing network and our existing footprint, and I would describe that not just in terms of the obvious physical assets, the pipelines and storage that we have, but also the customer access and customer contacts that we have that will enable us, I think, in some decent-sized chunks to develop and originate some additional business. Really in both categories, the voluntary market as well as the transport market, we’ve got good project management expertise. We're actually looking at whether or not we can make some of the equipment that's being deployed in these areas. And so we think we bring a lot to the table. We're getting a good team as part of this acquisition, so we think we can expand this business, expanding it organically, and do it in a way that the returns are attractive.

Got it. That's helpful, thanks. And then maybe just shifting to the Permian and gas takeaway, just wondering if you could update us there on thoughts. It seems the capacity is loose now with PHP online, Whistler soon to be online, but if the Permian grows as some expect, there could be tightness in the next couple of years, two to three years, but I guess that timing really depends also on how much Mexican demand materializes. And it seems like the long awaited demand started to show up here, so just wondering if you could talk about those dynamics and I guess how you see Permian gas takeaway needs evolving over time?

Yes, so agree generally with your projection there. We do think that the Permian, as it continues to fill up, and it is a very active area again, as you know, that there will be a need for yet another pipe to come out of there, and both our view of it as well as third-party views that we gather on this is that's probably mid-decade, which means that you have to start the commercial conversations a couple of years or maybe a little more ahead of that. We had pretty active conversations in that arena before. We know who to talk to about it. I wouldn't characterize those as super active right now, but we think they could as we get closer to tightening up the Permian.

Got it. I'll leave it there. Thank you.

Thank you. Our next question comes from Shneur Gershuni, from UBS. Your line is open, sir.

Hi. Good afternoon, everyone. Maybe I'll start off on the guidance side. I definitely appreciate the color that you just provided to Jeremy's question. But with respect to the guidance, it seems like it's raised by a couple hundred million and sort of seemed to indicating about meeting or exceeding the top end of the range. I was wondering if you can just sort of expand on the drivers on the change. Obviously, there's the Stagecoach acquisition which you mentioned. There’s the RNG acquisition as well, but it doesn't seem to account for all of it. Is it something related to better expectations in your refined products business? Is it on the natural gas side? I'm just curious if you can give us a little bit of color on the elements involved in the guidance update?

Yeah. The two primary factors other than the Stagecoach acquisition are improved refined product volumes from what we've previously expected. And as we said, on the product side of the business, doal fuel is now flat with 2019 if you compare the second quarter of this year versus the second quarter of 2019. And then the other primary driver is higher commodity prices. And I'm measuring -- those are the primary changes against the high end of the guidance of 5.3 billion. Q – Shneur Gershuni: Okay. Great. And maybe as a follow-up question. Last quarter when you adjusted your guidance, you sort of pulled forward the Ruby recontracting and sort of – in fact I've sort of been thinking about the last 3 or 4 years, you've had like a recontracting trend in the Natural Gas segment. That's essentially resulted in lower contract ranges and so forth. It’s been about 100 million to 200 million a year drag on EBITDA. Is that now substantially over, and so all the growth-related projects that you're talking about on the energy venture side and so forth or any of the capital growth that you spend will in fact be additive to EBITDA from this point going forward? Just kind of curious if we're done with the recontracting resets, maybe if there's a little bit left, but is it substantially out of the way at this point?

Yes. We do see it being lower post 2021. And we update that, as you know, every January when we do our investor conference, and we'll do that again. But it is -- we see it as being lower in terms of the roll off post 2021. And so the background there is, I think you know well is that 10 years ago or a little bit more, we built a number of pipelines that were kind of point-to-point pipelines, and they were built on the strength of long-term contractual commitments in a very high-basis environment. And so, as we get to the end of those 10 or 10-plus-year contracts and they start to roll off, they're rolling off into more challenged basis environment for those particular pipes. And so, that has had the effect of masking or dampening, however, you want to see it, some of the, I think, strong underlying performance in our Natural Gas Pipeline segment. So that's what's been going on. And as I said, I think we see that as being lower from here. In terms of your broader question, it is -- we invest all of our capital on a return. Each one stands on its own from a return standpoint. We've been getting good returns, as we show in our performance update there, very attractive returns on the capital that we've deployed. In terms of the overall puts and takes though, there are puts and takes across a diversified asset portfolio like ours, and those puts and takes and the uncertainty around them in further out periods are hard enough to quantify around, certain enough to quantify for me to give you a specific answer to your question about base business then plus. Right? And so generally what we do is give you the best view we can of the fundamental drivers underpinning our business economically and commercially so that our investors can make their own -- come to their own expectations about that future, but we don't guide beyond the current budget year or updates to the guidance like we're giving you today. So, we try to provide the transparency and particularly around the roll-off issue in particular, but we don't guide beyond the current year.

Just to clarify, so the roll-offs will continue for multiple years or are we approaching the end of it?

There is still a couple of years to run, but they're very modest after you get through this year. Quite modest.

Okay. Got it. Okay. Perfect. Thank you very much. We really appreciate the color today.

Thank you. Next question comes from Spiro Dounis from Credit Suisse. Your line is open, sir.

Thank you. Afternoon, everybody. I would like to start off with Gas Macro, if we could. Would appreciate your all thoughts on the environment here and what that could mean for the near-medium term? Specifically, just curious how sustainable you think this price environment is. I'm sure you're all talking to your producers, and so curious what they're saying about their plans and activity for growth on the gas-directed side of things. And is there something incremental you could be doing here on the LNG side as well to capture even more of that market and more of that growth?

The overall on gas, the macro look on gas is we remain as others do, bullish on U.S. natural gas. And I think, we see, between now and 20 years from now, updated third-party analysis see growth in that market of about 23 DCF, or almost 24%, a pretty nice long runway. And a lot of that is driven by exports. There's some industrial in there as well, but exports are a part of that picture. And for our business, we've tried to distinguish ourselves with our customers, as a storage provider and a transport provider, and a good operating partner, to be able to capture as much of that business as we can. We have a very good share of that business moving through our pipes today and we look to expand it. And the map of where those facilities are coming in is lined up very nicely with our natural gas pipeline footprint. And just to put a little more context on it, as we look at, and this is a different timeframe now, 2020 to 2030, the growth that we see in natural gas happening over that 10-year period, 80% of that is Texas and Louisiana, and a lot of that is the export market, and our assets are very well positioned for that. In terms of the current natural gas pricing and the sustainability of it, and how our producers are responding to that, I'll ask Tom to comment a bit. It's hard to predict the future, but I do think that given that demand growth seems pretty clear that we certainly going to have a tight market, at least for the intermediate term. What we're seeing here on the producer side is a measured response. I mean, definitely, we're seeing an increase in activity. The rig growth has been certainly visible, but I think there's also a strong financial disappointment we're seeing in the producer community that's I think going to make the supply-side response a bit more delayed relative to what we're seeing on the demand side. I do anticipate a fairly tight supply -demand balance here, and I hope for the next couple of years at least. And I think that means a higher price environment.

Got it. And that's a double next time. And then if you could just go back to Kinetrex quickly, it sounds like the path forward or at least the base case is organic growth and not necessarily M&A, although I'm sure there remains an opportunity for you. And so as we're thinking about the returns on organic growth, I think the press release cited a less than 6 times fully capitalized return on this project plus the M&A. And so I think a lot of us took that to mean that, organically, you can do even better than that. And so rereading through it the right way, are these 3 to 4X return type s of projects? At some point, do those get computed away? I'm just curious how you're thinking about that component.

Yeah. I don't want to get into specific returns. There is -- it is at least a potentially competitive environment out there. But the returns that we're seeing are attractive for how we look at other deployments of capital in the expansion context. And we make appropriate adjustments to those return hurdles based on the level of exposure to things like RINS, okay. We need to do better where there's more RINS exposure. And if we got secured, firm, long-term fixed prices, we can look at that a bit differently. But they are good compensatory returns, and we are happy to invest in these opportunities.

Great. That's all I had. Thanks, Steve. Thanks [Indiscernable]

Thank you. Next question comes from Keith Stanley with Wolfe Research. Your line is open.

Sorry to beat a dead horse on Kinetrex. I just want to confirm, are there any fixed price contracts in place today for the RNG sales? And then, I guess, bigger picture, can you talk a little more about the revenue streams for the business? You mentioned the RIN s. Can you benefit from the Low Carbon Fuel Standard, just other attributes in China, better understand the business? And then last parts of that is just, I'm assuming most of the EBITDA from this business that you're buying is from RNG stills and the existing LNG business is pretty small. Is that fair?

I would ask Anthony to answer.

On the last part of that, I think currently like now, about 60% is from the RNG side of the business, and the remaining piece from LNG. Once the redevelopment plants are in service, it's closer to 90% RNG at that point in time. LNG is not decreasing over that point in time. It's just that, obviously, the RNG component is increasing. And then sorry, remind me, Keith, on your --- Yes. In order to capitalize on LCFS, you need to establish a pathway. We haven't established a pathway, so these specific facilities, they are under contract locally with a transportations provider. And MD&A internal rating the RIN s, you would have to settle that environmental attribute. Intech California established the pathway. And quite frankly, the California market has really dominated from an RNG standpoint, by really that [Indiscernable] side of the industry, because the carbon-intensity scores are much lower. And so there's a much greater benefit for the RNG so LCFS a result of that. I would tend to think of it as terms of landfill is the market for it is really is outside of the California market.

And then fixed price are variable today?

Yes. There's a certain part of the LNG uptake which is [Indiscernable] currently. The RNG that's going to be settled into the CNG market with the 3 development plans is effectively at an index price.

Got it. Thanks a lot. That was very good color. Second question, I know the first was long-winded there. You positioned it pretty well that Stagecoach adds to the core gas pipeline business, and Kinetrex gives you this platform for growth in a new and exciting area. Strategically, would you be open to maybe looking to selling down some of, call it your less core businesses, whether that's refined products pipelines and terminals crude, or other areas with less scale, as a source of funds to continue this strategy where you're putting money into the core gas business and into some of the energy ventures?

We like the portfolio of assets that we have today. Having said that, we say what we always say. Everything is for sale at the right valuation. If someone can make more of a particular investment that we have than we can, then we'll consider that. If we did If -- We did a bit of a sell-down on NGPL. We continue to operate it and continue to like our position in that asset. But we got good value there, and so we do look at those things. But I think we've done a good job, particularly in John Schlosser, the terminals business; pruning assets to stay focused on the things that we really do well over the years or our hub positions and the like. And so there's not a have-to sell on anything, and we like the portfolio that we have today. But at the right price, we'll transact.

Thank you.

Our next question comes from Tristan Richardson from Truist Securities. Your line is open, sir.

Hi. Good afternoon, guys. I think it may have been pre-pandemic when you last discussed possible incremental investment in SACROC expansion that might be more chunky type of Capex. Is the municipal approvals you noted a precursor to that type of expansion that you had discussed back then, or can you remind us the potential size and scope of this project?

Yeah. What we did that is talked about in the release today is we aggregated some rights to do further development. We did it in a place that is geographically adjacent to the SACROC Unit, and we got approval to incorporate it into the unit. And there's advantage to that in that we think we have good insight into the geology. By buying up the rights, we entered it in a fairly cost-effective way. And we have good facilities at SACROC that let us do economic expansions there. It's a nice opportunity for us, and we continue to look at that as well as additional incremental investments within the unit -- within the existing unit along the way. Jesse, anything you want to add?

I think you got it.

Okay.

Thanks, Steve. And then in an earlier question, you talked about the gas macro. But curious, maybe on the midstream side. Obviously, Kim noted that the Eagle Ford remains competitive, but clearly seeing improved activity at Hiland, does the view on Midstream accelerate in the second half based on what you're hearing from customers?

You need to look asset by asset. You're right. We've got some good performance happening on Hiland. We're expecting to see some incremental performance based on the gas price dynamics that Tom mentioned in the Haynesville as well. That's come slower than what we expected, but I think it's coming. And then just overall, on the broader picture, natural gas Midstream infrastructure, our pipeline network and our storage network continues to attract good value. Coming out of the winter storm, for example, not just in Texas, but really along our system, we've successfully transacted for incremental and also attractive, that is increasing renewal rates. Particularly on our storage assets, especially in Texas, but also elsewhere on our system. It was a bit of a, I think a wake-up call to the market generally that there is real value in having that delivery flexibility, and real value in holding firm transport capacity. I think, just overall, we are seeing uplift, if you will, in that area.

Thanks, Steve.

Thank you. Our next question comes from Jean Ann Salisbury with Bernstein. Your line is open.

Hi. Good afternoon. I guess I will ask one on CCUS, since no one has yet. The way I understand it, the most near-term opportunity is taking CO2 from Permian processing plants and putting it into existing CO2 infrastructure for EOR. Can you give some sense of just the timing of this potential opportunity, that basically how long does it take to install the equipment and physically connect one of these plants? And what is the sense of urgency that you're hearing on this from processors?

I'll start and then I'll ask Jesse to comment more specifically on the deal front. You made the right point in your opening on the question, which is that the near-term opportunity really is long existing infrastructure and primarily processing, and also ethanol plants, because the CO2 stream is pure or fairly pure there, and so it still needs to be compressed and get it into the pipe, etc. The other thing about it is the pipe itself. The CO2 moves most efficiently in a liquid state, which mean s high pressure. That's 1800 to 2200 PSI. And what that means is, you're not going to repurpose a lot of gas pipe or oil pipe for that, for example, when you tend to operate, and call it 600 psi or maybe 1,450 on the newer gas pipes. And so that has been a barrier, right? If you've got to build new heavy-wall pipe in order to get it to a place where you can sequester it, that's a barrier. EOR is a valuable application of that CO2. And so that does make that the near-term opportunity. So Having said that, I will ask Jesse to comment on the timing and current deal activities.

In the Permian, there are several operators that we are in discussions with currently. Timing, you're probably looking at 12-18 months if it goes into the EOR. EOR permits are in place, and you can go in, albeit at a lower credit. If it's sequestration, you're looking at much longer horizons because you'll need a Class VI well permit, which currently the EPA has authority over. And there's only a couple of these in place throughout the United States, so that's probably more of a 3-5 year timeframe in obtaining one. That's current today. But in EOR, that could be taken, I would suspect, within the next 12-18 months.

Great. And can you comment on the system urgency any further?

There is a lot of interest. Obviously, the credits were clarified earlier in the year, so the rules of engagement are there and the economic decisions are being made. There is a lot of interest. The moving into the FID stage in order and equipment, like I said, it's probably a good year to 18 months away.

Great. That's all for me. Thank you.

Thank you. Our next question comes from Michael Lapides with Goldman Sachs. Your line is open.

Hey guys, thanks for taking my question. Actually, two of them, and totally unrelated from each other. First of all, I know you addressed the potential need for Permian takeaway. But how are you guys thinking about the need for Haynesville [Indiscernable] takeaway, and whether you think the Haynesville is starting to get tight from basically taking it out of the basin and either to the Southeast or straight down on the Gulf? That's question one. Question two is a follow-up one. Somebody earlier asked a little bit about the asset mix and asset disposals. Steve, I think you made the comment about everything for a price. Well, where does the Elba fit into that? Because it seems like the infrastructure funds market, where others are paying pretty healthy multiples for minority stakes in LNG -- contracted LNG facilities. Just curious, is there anything that would keep Elba off that table or your stake, or do you view that as super core to the business?

I'll start with Elba and I'll ask Conover to comment on Haynesville. You may recall -- actually that's, I think, predates you covering us. But we did sell down an interest in Venmo when we were post contract but still developing it. We did that. It was an attractive valuation for us and it helps share the capital burden. And so we've done that move, if you will, already. And in terms of it's -- how it fits in the overall Portfolio, it is integrated with our broader system. We have the Elba Express Pipeline which we have opportunities on as well. We have the potential to do more at Elba in terms of storage and the like, and it's interconnected with our SNG system. And so, it fits nicely within the portfolio of assets we have. Also, as you know, it's under a long-term contract with Shell, which is an attractive credit and risk profile for us, a very long-term contract with Shell. It fits very well and we did a partial sell-down earlier, as I mentioned. Tom, on the Haynesville takeaway needs.

I think given the increase in gas prices and the activity that we're seeing in the Haynesville sector, there's a real possibility that there will be additional Haynesville takeaway necessary. I think to my point that I made earlier, I think producers are really wanting to have sustainable prices at these higher levels before and they are, I think, living within their means managing their balance sheet s appropriately. I don't think the activity is definitely increasing. But I think if we see sustained gas prices and additional activity in the [Indiscernable] There will be 3-5 years, probably closer to a 3-year timeframe. There may be a need for additional capacity out of that market.

Got it. Thank you, guys. Much appreciated.

Thank you. Our next question comes from Becca Followill with U.S. Capital Advisors. Your line is open.

Hi, guys. 2 questions, 1 minor. But in the non-recurring items, there's legal and environmental and other tax charges that you got it back in a 28 million, and it was 84 million in Q1, so 112 million. Can you talk about what's in there, and do you expect more of that as we go into the rest of the year?

Visiting the non-recurring items, Becca.

Right. And if you want, I can ask another question while you're looking that up.

It's okay. Go ahead.

Okay. I could already tell, then you'll shoot. The other side -- it's a variation on what Tristan asked, is to see to we've got oil prices now close to $70, which is -- probably it's pretty attractive economics, I assume, for that business. Are you anticipating maybe ramping Capex back up in that business? And is there any way to stem some of the more significant declines that we've seen of late as you had backed off on spending?

Yeah, so we will continue to look at that like we always have, Becca, which is, we looked at it on an individual project basis, and we make our assumptions around crude price. It does uncover the potential for more projects to become economic. And we've got a couple that we're working on right now at both SACROC and Yates that are incremental. And so we'll continue to look for those. And we've also seen -- it's true, we are experiencing year-over-year declines in that production. But we're 5% above our plan. And that is some better performance from some of our SACROC developments, as well as a lesser decline rate than what we expected on some previous developments. And so, doing well versus our plan and continuing to invest opportunistically as we always have.

Okay. Let me sneak one more in while he's looking for that number. It's just, what commodity price is exchanged in guidance now?

$70 and 3.50. So $70 on crude and &3.50 on gas for the back half of the year.

For the balance of the year.

Got you. Thank you.

Okay. And on your questions with regard to the certain items, legal and environmental reserves that's exactly what it is, just additional legal and environmental reserves. In the first quarter, it was mostly some legal reserves with regard to a dispute that we had -- that we have outstanding. We're getting a little closer to settlements so we took a reserve there. And we also took some some reserve for incremental, environmental impact cost estimates that we have. In the second quarter, in this current quarter, it was related to a rate case reserve item that we've adjusted with, now that we have more information. And these things are hard to call and come up sporadically, so I don't think that this is something that we'd anticipate recurring on a regular basis, but they come up sporadically.

All right. Thank you.

Thank you. Our next question comes from Christine Cho with Barclays. Your line is open.

Hi, everyone. I just have one question. Historically, you guys had included the repayments, that your equity investments, in your Capex. And as we look to 2022 and try to think about and calculate free cash flow generation, with the Ruby Pipeline debt that coming through in first half of next year, how should we be thinking about that?

Yeah. That's right, Christine. We typically do. And we've done that in the years past where we had large known debt maturities coming due, where we knew we were going to be making a contribution for our share of that maturing debt at unconsolidated JVs. I think with the ongoing conversations that we're having with our partner at Ruby, I think the determination of what we're going to put in the budget is to be determined. But if we plan to fund our share of it, it'll be part of the use of cash that we would expect for next year.

I just want to make the point here, as we've done for multiple quarters now, we are working with our partners and we will be making an economic decision on this asset.

Do you have a timeframe on when exactly?

We're not the only person at the table, so we can't say that.

Okay. Thanks.

Thank you. Our next question comes from Pearce Hammond with Piper Sandler. Your line is open.

Good afternoon and thanks for taking my questions. You have a great slide in your deck Slide 24 that details the current estimate to U.S. carbon capture cost with ethanol in the low-end and on the high-end natural gas and then a comparison with the 45Q tax credit. That's a helpful slide. My first question is, are you hearing anything in Washington about maybe boosting the 45Q above that $50 a ton for non-EOR?

Yeah, there is some discussion around that because I think people are excited about incenting that activity, and I think people believe that part of the solution here on greenhouse gas emissions is going to have to involve continued use of hydrocarbons and also carbon capture, carbon capture just generally. And so I think there is interest in doing that and expand ing that. As Jesse pointed out, we just did get the final Regs on the 45Q and so that's out there and available to us to use today. But I think it will continue to be a part of the conversation. Now, predicting where that will come out, I will not even venture a guess.

And then, Steve, thank you for that. And as a follow-up, I know natural gas power plants, combined cycle power plants are listed on the high end of the cost -- carbon capture costs in your graphic. But are you seeing interest, is the phone ringing, from some of the big companies like the big combined cycle power companies? Are they interested in CCS?

Very preliminary conversations with one of our power customers, but I would just say very preliminary, very preliminary.

But definitely more interest on the -- from the ethanol side?

That's just more within reach on the ethanol and the gas processing side, for the reasons that you pointed out.

Great. Thank you very much.

Thank you. Next question comes from Michael Blum with Wells Fargo. Your line is open.

Thanks. Good afternoon, everyone. I'm wondering, just in light of the acquisitions you've made this quarter, both on the Energy Transition side and obviously Stagecoach, just how you're thinking about where buybacks fit into the mix in terms of capital allocation? And clearly, this quarter it seems like you prioritized acquisition, so just want to get your thoughts on all that.

We've said repeatedly that we think we're good stewards of the cash flow we're producing. And we've said repeatedly, we want to maintain a strong balance sheet. We will look for acquisitions if they meet our targeted returns. In this case, both of these did, and we believe they're very strategic to us. We intend to continue to pay a good dividend or raising the dividend. And then we'll look opportunistically at the opportunity to repurchase shares. And we're looking at all those in concert. And so it just depends on what the opportunities are.

Okay. Got it. And then I guess my other question is on Stagecoach. So you made some interesting points about why you think storage rates are going to increase over time. My question is what is your ability going to be to capture that in that asset? What does the contract position looks like roughly so that as rates do go higher, you'll able to capture that? Thanks.

Yeah. So the average contract life on that asset is about 3 years. It's kind of split right now. About 50% of that is with utilities and end-users. The other 50% is predominantly producers, but includes some marketing firms as well. And so that's the general contractual timeframe. But look, we can look at doing short-term transactions and other things. A combination of TGP and that asset unlocks some other potential commercial opportunities, which are incremental to what Stagecoach could've done on a standalone basis. And the rates within -- the rates for Stagecoach services are market-based rates as well.

Perfect. Thank you so much.

Thank you. Next question comes from Jeremy Tonet with JPMorgan. Your line is open.

All right, thanks for let ting me speak one more, and just wanted to touch on carbon sequestration real quick. If Texas Railroad Commission is successful in say, the next year or so, getting primacy, just wondering how you think that might impact the timelines of Class 6 wells such as what happened with Wyoming and North Dakota? And do you think that the wells -- there's a greater chance that's offshore, onshore, just given offshore being more costly, but having benefits such as the rights for space, ports, what have you. I was just wondering your thoughts on sequestration development.

It will shorten up the timeframe if the Texas Railroad Commission is in-charge of it. And now there's a process alluded to there. The Texas legislature in this last session did what it needed to do to set the Railroad Commission up to go seek primacy. But then they have to go put their plan together and put that on file, which could be this fall. And then I don't know how long it will take the EPA necessarily to act. But once it acts, and the Railroad Commission has control of it, I think they're going to process it very quickly. Jesse made the point earlier, the permitting process itself is today, at the EPA, is just very slow. Now, I would think that they are going to want to, as a public policy matter, speed it up anyway, right? But it's 5 or 6 years right now. That doesn't work, and so whether it's the EPA speeding itself up in order to enable more of this for its own policy objectives or whether it's the Railroad Commission getting control of it, it will get sped up. In terms of onshore versus offshore we're obviously onshore focused in the opportunity that we have. And given what our footprint of the existing pipeline network is, which is a very important consideration for the reasons I've said earlier. But, Jesse, do you have any other comments on onshore versus offshore?

Yeah, I agree the surface ownership rights is important, but we -- there are opportunities onshore as well, where you have common ownership. Looking at both, but more cost effective to do onshore at this point.

The common ownership between the surface --

Surface and the middle. Yeah.

Got it. Thank you.

Thank you. Our next question comes from Colton Bean with Tudor, Pickering, Holt & Company. Your line is open.

Thanks. Just one on my end. A lot of questions on RNG and CPS. As you look at the concentration of CO2 and biogas coming off the landfill, is there an opportunity to integrate carbon capture with landfill RNG over time?

Yeah. There's certainly an opportunity. It's going to be a scale issue. These RNG facilities are relatively small at the plants themselves, so depending on the growth and the size of the emission, it will be challenging. But there is an opportunity.

Thank you.

Thank you. There are no further questions in queue at this time.

We thank all of you for listening to us and have a good evening.

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