Table of Contents


Kinder
Morgan Management, LLC Form 10-K





UNITED
STATES SECURITIES AND EXCHANGE COMMISSION


Washington,
D.C. 20549


_______________





Form
10-K




[X]
            
            ANNUAL
      REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF
      THE SECURITIES EXCHANGE ACT OF 1934





For
the fiscal year ended December 31, 2009





or




[  ]
            
            TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d)
              OF
      THE SECURITIES EXCHANGE ACT OF 1934





For
the transition period from _____to_____







Commission
file number: 1-16459





Kinder
Morgan Management, LLC


(Exact
name of registrant as specified in its charter)





Delaware
            76-0669886(State
      or other jurisdiction of
            (I.R.S.
      Employerincorporation
      or organization)
            Identification
      No.)





500
Dallas Street, Suite 1000, Houston, Texas 77002


(Address
of principal executive offices)(zip code)





Registrant’s
telephone number, including area code: 713-369-9000


_______________





Securities
registered pursuant to Section 12(b) of the Act:





Title of each
      class
            Name of each exchange
      on which registeredShares
      Representing Limited Liability Company Interests
            New
      York Stock Exchange





Securities
registered pursuant to Section 12(g) of the Act:


None





Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act of 1933.  Yes [X]    No
[   ]




Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Securities Exchange Act of
1934.  Yes [   ]   No [X]




Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.  Yes [X]   No
[   ]




Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate website, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding
12 months (or for such shorter period that the registrant was required to submit
and post such files).  Yes [   ]   No
[X]




Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K.  [X]


Kinder
Morgan Management, LLC Form 10-K





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company (as
defined in Rule 12b-2 of the Securities Exchange Act of 1934).
  Large
accelerated filer [X]   Accelerated filer
[   ]     Non-accelerated filer
[   ]     Smaller reporting company
[   ]
  Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act of 1934).  Yes
[   ]   No [X]
  Aggregate
market value of the voting and non-voting common equity held by non-affiliates
of the registrant, based on closing prices in the daily composite list for
transactions on the New York Stock Exchange on June 30, 2009 was approximately
$3,163,263,547.  As of January 29, 2010, the registrant had two voting
shares and 85,538,261 listed shares.
  DOCUMENTS
INCORPORATED BY REFERENCE
  Annual
Report on Form 10-K of Kinder Morgan Energy Partners, L.P. for the year ended
December 31, 2009.
  2
 Kinder
      Morgan Management, LLC Form 10-K
  KINDER
MORGAN MANAGEMENT, LLC AND SUBSIDIARY
 CONTENTS
  Page
                NumberPART IItems 1. and 2.
              Business and Properties
              4Item 1A.
              Risk Factors
              6Item 1B.
              Unresolved Staff Comments
              9Item 3.
              Legal Proceedings
              9Item 4.
              Submission of Matters to a Vote of Security
      Holders
              9PART IIItem 5.
              Market for Registrant’s Common Equity, Related Stockholder
      Matters and Issuer Purchasesof Equity Securities
              10Item 6.
              Selected Financial Data
              11Item 7.
              Management’s Discussion and Analysis of Financial Condition
      and Results of Operations
              11Item 7A.
              Quantitative and Qualitative Disclosures About Market
      Risk
              17Item 8.
              Financial Statements and Supplementary
    Data
              18Item 9.
              Changes in and Disagreements with Accountants on Accounting
      and Financial Disclosure
              32Item 9A.
              Controls and Procedures
              32Conclusion Regarding the Effectiveness of Disclosure
      Controls and Procedures
              32Management’s Report on Internal Control over Financial
      Reporting
              32Changes in Internal Control over Financial
      Reporting
              32Item 9B.
              Other Information
              32PART IIIItem 10.
              Directors, Executive Officers and Corporate
      Governance
              33Item 11.
              Executive Compensation
              36Item 12.
              Security Ownership of Certain Beneficial Owners and
      Management andRelated Stockholder Matters
              45Item 13.
              Certain Relationships and Related Transactions, and
      Director Independence
              46Item 14.
              Principal Accounting Fees and Services
              51PART IVItem 15.
              Exhibits and Financial Statement
    Schedules
              52Signatures
              54
 
 Note:  Individual
financial statements of the parent company are omitted pursuant to the
provisions of Accounting Series Release No. 302.
   3
 Kinder
      Morgan Management, LLC Form 10-K
  PART I
  Items 1 and 2.  Business and
Properties.
  In
this report, unless the context requires otherwise, references to “we,” “us,”
“our,” or the “Company” are intended to mean Kinder Morgan Management, LLC and
its consolidated subsidiary. Our shares representing limited liability company
interests are traded on the New York Stock Exchange under the symbol “KMR”. Our
executive offices are located at 500 Dallas Street, Suite 1000, Houston, Texas
77002 and our telephone number is (713) 369-9000.
  We
are a publicly traded Delaware limited liability company that was formed on
February 14, 2001. We are a limited partner in Kinder Morgan Energy Partners,
L.P (“Kinder Morgan Energy Partners”), and manage and control its business and
affairs pursuant to a delegation of control agreement. Our success is dependent
upon our operation and management of Kinder Morgan Energy Partners and its
resulting performance. Therefore, we have included Kinder Morgan Energy
Partners’ Annual Report on Form 10-K for the year ended December 31, 2009 in
this filing as Exhibit 99.1 and incorporated such Form 10-K herein by reference.
Pursuant to the delegation of control agreement among Kinder Morgan G.P., Inc.,
Kinder Morgan Energy Partners, Kinder Morgan Energy Partners’ operating
partnerships and us (as the agreement was amended effective May 30,
2007):
  ·
              Kinder
      Morgan G.P., Inc., as general partner of Kinder Morgan Energy Partners,
      delegated to us, to the fullest extent permitted under Delaware law and
      the Kinder Morgan Energy Partners partnership agreement, and we assumed,
      all of Kinder Morgan G.P., Inc.’s power and authority to manage and
      control the business and affairs of Kinder Morgan Energy Partners and
      Kinder Morgan Energy Partners’ operating partnerships;
  and
  ·
              We
      have agreed that we will not take any of the following actions without the
      approval of Kinder Morgan G.P.,
Inc.:
  –
              amend
      or propose an amendment to the Kinder Morgan Energy Partners partnership
      agreement,
  –
              change
      the amount of the distribution made on the Kinder Morgan Energy Partners
      common units,
  –
              allow
      a merger or consolidation involving Kinder Morgan Energy
      Partners,
  –
              allow
      a sale or exchange of all or substantially all of the assets of Kinder
      Morgan Energy Partners,
  –
              dissolve
      or liquidate Kinder Morgan Energy Partners, or, after taking into account
      the creditors of Kinder Morgan Energy Partners, SFPP, L.P. or Calnev Pipe
      Line, L.L.C., respectively, allow Kinder Morgan Energy Partners, SFPP,
      L.P. or Calnev Pipe Line, L.L.C. to take any of the following
      actions: (a) instituting proceedings to be adjudicated bankrupt or
      insolvent, or (b) consenting in writing to the institution of bankruptcy
      or insolvency proceedings against it, or (c) filing a petition seeking or
      consenting to reorganization or relief under any applicable federal or
      state law relating to bankruptcy, or (d) consenting in writing to the
      appointment of a receiver, liquidator, assignee, trustee, sequestrator (or
      other similar official) of Kinder Morgan Energy Partners, SFPP, L.P. or
      Calnev Pipe Line, L.L.C. or a substantial part of their respective
      property, or (e) making any assignment for the benefit of its creditors,
      or (f) except as required by law, admitting in writing its inability to
      pay its respective debts generally as they become
  due,
  –
              take
      any action requiring unitholder
approval,
  –
              call
      any meetings of the Kinder Morgan Energy Partners common
      unitholders,
  –
              take
      any action that, under the terms of the partnership agreement of Kinder
      Morgan Energy Partners, must or should receive a special approval of the
      conflicts and audit committee of Kinder Morgan G.P.,
  Inc.,
  –
              take
      any action that, under the terms of the partnership agreement of Kinder
      Morgan Energy Partners, cannot be taken by the general partner without the
      approval of all outstanding units,
  –
              settle
      or compromise any claim or action directly against or otherwise relating
      to indemnification of our or the general partner’s (and respective
      affiliates) officers, directors, managers or members or relating to our
      structure or securities,
  –
              settle
      or compromise any claim or action relating to the i-units, which are a
      separate class of Kinder Morgan Energy Partners’ limited partnership
      interests, our shares or any offering of our
  shares,
  –
              settle
      or compromise any claim or action involving tax
  matters,
   4
 Items 1 and
      2.Business
      and Properties.(continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  –
              allow
      Kinder Morgan Energy Partners to incur indebtedness if the aggregate
      amount of its indebtedness then exceeds 50% of the market value of the
      then outstanding units of Kinder Morgan Energy Partners,
  or
  –
              allow
      Kinder Morgan Energy Partners to issue units in one transaction, or in a
      series of related transactions, having a market value in excess of 20% of
      the market value of the then outstanding units of Kinder Morgan Energy
      Partners.
  ·
              Kinder
      Morgan G.P., Inc.:
  –
              is
      not relieved of any responsibilities or obligations to Kinder Morgan
      Energy Partners or its unitholders as a result of such
      delegation,
  –
              owns,
      or one of its affiliates owns, all of our voting shares,
    and
  –
              will
      not withdraw as general partner of Kinder Morgan Energy Partners or
      transfer to a non-affiliate all of its interest as general partner, unless
      approved by both the holders of a majority of each of the i-units and the
      holders of a majority of all units voting as a single class, excluding
      common units and Class B units held by Kinder Morgan G.P., Inc. and its
      affiliates and excluding the number of i-units corresponding to the number
      of our shares owned by Kinder Morgan G.P., Inc. and its
      affiliates.
  ·
              Kinder
      Morgan Energy Partners has agreed
to:
  –
              recognize
      the delegation of rights and powers to
us,
  –
              indemnify
      and protect us and our officers and directors to the same extent as it
      does with respect to Kinder Morgan G.P., Inc. as general partner,
      and
  –
              reimburse
      our expenses to the same extent as it does with respect to Kinder Morgan
      G.P., Inc. as general partner.
  The
delegation of control agreement will continue in effect until either Kinder
Morgan G.P., Inc. has withdrawn or been removed as the general partner of Kinder
Morgan Energy Partners or all of our shares are owned by Kinder Morgan, Inc.
(formerly Knight Inc.) and its affiliates. The partnership agreement of Kinder
Morgan Energy Partners recognizes the delegation of control agreement. The
delegation of control agreement also applies to the operating partnerships of
Kinder Morgan Energy Partners and their partnership agreements.
  Kinder
Morgan G.P., Inc. remains the sole general partner of Kinder Morgan Energy
Partners and all of its operating partnerships. Kinder Morgan G.P., Inc. retains
all of its general partner interests and shares in the profits, losses and
distributions from all of these partnerships.
  The
withdrawal or removal of Kinder Morgan G.P., Inc. as general partner of Kinder
Morgan Energy Partners will simultaneously result in the termination of our
power and authority to manage and control the business and affairs of Kinder
Morgan Energy Partners. Similarly, if Kinder Morgan G.P., Inc.’s power and
authority as general partner are modified in the partnership agreement of Kinder
Morgan Energy Partners, then the power and authority delegated to us will be
modified on the same basis. The delegation of control agreement can be amended
by all parties to the agreement, but on any amendment that would reduce the time
for any notice to which owners of our shares are entitled or that would have a
material adverse effect on our shares, as determined by our board of directors
in its sole discretion, the approval of the owners of a majority of the shares,
excluding shares owned by Kinder Morgan, Inc. and its affiliates, is
required.
  Through
our ownership of i-units, we are a limited partner in Kinder Morgan Energy
Partners. We do not receive any cash flow attributable to our ownership of the
i-units, but instead we receive quarterly distributions of additional i-units
from Kinder Morgan Energy Partners. The number of additional i-units we receive
is based on the amount of cash distributed by Kinder Morgan Energy Partners to
its common unitholders. The amount of cash distributed by Kinder Morgan Energy
Partners to its common unitholders is dependent on the operations of Kinder
Morgan Energy Partners and its operating limited partnerships and their
subsidiaries and investees, and is determined in accordance with its partnership
agreement.
  We
have elected to be treated as a corporation for federal income tax purposes.
Because we are treated as a corporation for federal income tax purposes, an
owner of our shares will not report on its federal income tax return any of our
items of income, gain, loss and deduction relating to an investment in
us.
  We
are subject to federal income tax on our taxable income; however, the i-units
owned by us generally are not entitled to allocations of income, gain, loss or
deduction of Kinder Morgan Energy Partners until such time as there is a
liquidation of Kinder Morgan Energy Partners. Therefore, we have not had, and do
not expect to have material amounts of taxable income
   5
 Items 1 and
      2.Business
      and Properties.(continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  resulting
from our ownership of the i-units unless we enter into a sale or exchange of the
i-units or Kinder Morgan Energy Partners is liquidated.
  We
have no properties. Our assets consist of a small amount of working capital and
the i-units that we own.
  We
have no employees. For more information, see Note 4 of the accompanying Notes to
Consolidated Financial Statements and Kinder Morgan Energy Partners’ Annual
Report on Form 10-K for the year ended December 31, 2009, which is incorporated
herein by reference.
  We
make available free of charge on or through our Internet website, at
http://www.kindermorgan.com, our annual report on Form 10-K, quarterly reports
on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed
or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934 as soon as reasonably practicable after we electronically file such
material with, or furnish it to, the Securities and Exchange Commission. The
information contained on or connected to our Internet website is not
incorporated by reference into this Form 10-K and should not be considered part
of this or any other report that we file with or furnish to the Securities and
Exchange Commission.
  Item 1A.  Risk Factors
  You
should carefully consider the risks described below, in addition to the other
information contained in this document. Realization of any of the following
risks could have a material adverse effect on our business, financial condition,
cash flows and results of operations.
  Because our only significant assets
are the i-units issued by Kinder Morgan Energy Partners, our success is
dependent solely upon our operation and management of Kinder Morgan Energy
Partners and its resulting performance.We are a limited partner in
Kinder Morgan Energy Partners. In the event that Kinder Morgan Energy Partners
decreases its cash distributions to its common unitholders, distributions of
i-units on the i-units that we own will decrease correspondingly, and
distributions of additional shares to owners of our shares will decrease as
well. The risk factors that affect Kinder Morgan Energy Partners also affect us;
see “Risk Factors” within Kinder Morgan Energy Partners’ Annual Report on Form
10-K for the year ended December 31, 2009, included in this filing as Exhibit
99.1 and incorporated herein by reference.
  The value of the quarterly
distribution of an additional fractional share may be less than the cash
distribution on a common unit of Kinder Morgan Energy Partners.The
fraction of a Kinder Morgan Management, LLC share to be issued per share
outstanding with each quarterly distribution is based on the average closing
price of the shares for the ten consecutive trading days preceding the
ex-dividend date for our shares. Because the market price of our shares may vary
substantially over time, the market value of our shares on the date a
shareholder receives a distribution of additional shares may vary substantially
from the cash the shareholder would have received had the shareholder owned
common units instead of our shares.
  The tax treatment applied to Kinder
Morgan Energy Partners depends on its status as a partnership for United States
federal income tax purposes, as well as Kinder Morgan Energy Partners not being
subject to a material amount of entity-level taxation by individual states. If
the Internal Revenue Service treats Kinder Morgan Energy Partners as a
corporation or if Kinder Morgan Energy Partners becomes subject to a material
amount of entity-level taxation for state tax purposes, it would substantially
reduce the amount of cash available for distribution to common unitholders, the
value of i-units that Kinder Morgan Energy Partners will distribute quarterly to
us and the value of our shares that we will distribute quarterly to our
shareholders.The anticipated after-tax economic benefit of an investment
in our shares depends largely on the treatment of Kinder Morgan Energy Partners
as a partnership for United States federal income tax purposes. In order for
Kinder Morgan Energy Partners to be treated as a partnership for United States
federal income tax purposes, current law requires that 90% or more of its gross
income for every taxable year consist of “qualifying income,” as defined in
Section 7704 of the Internal Revenue Code. Kinder Morgan Energy Partners may not
meet this requirement or current law may change so as to cause, in either event,
Kinder Morgan Energy Partners to be treated as a corporation for United States
federal income tax purposes or otherwise subject to federal income tax. Kinder
Morgan Energy Partners has not requested, and does not plan to request, a ruling
from the IRS on this or any other matter affecting Kinder Morgan Energy
Partners.
  If
Kinder Morgan Energy Partners were to be treated as a corporation for United
States federal income tax purposes, it would pay United States federal income
tax on its income at the corporate tax rate, which is currently a maximum of
35%, and would pay state income taxes at varying rates. Under current law,
distributions to us of additional i-units would generally be taxed again as a
corporate distribution, and no income, gain, losses or deductions would flow
through to us. Because a tax would be imposed upon Kinder Morgan Energy Partners
as a corporation, the cash available for distribution to common unitholders
would be substantially reduced, which would reduce the values of i-units
distributed quarterly to us and our shares distributed quarterly to our
shareholders. Treatment of Kinder Morgan Energy Partners as a corporation would
result in a material reduction in the anticipated cash flows and after-tax
return to us, likely causing a substantial reduction in the value of our
shares.
   6
 Item
      1A.Risk
      Factors.(continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  Current
law or Kinder Morgan Energy Partners’ business may change so as to cause Kinder
Morgan Energy Partners to be treated as a corporation for United States federal
income tax purposes or otherwise subject Kinder Morgan Energy Partners to
entity-level taxation. Periodically, Congress considers substantive changes to
the existing United States federal income tax laws that affect certain
publicly traded partnerships. For example, at one time federal income tax
legislation was proposed that would eliminate partnership tax treatment for
certain such partnerships. Although currently proposed legislation
would not appear to affect Kinder Morgan Energy Partners’ tax treatment as
a partnership, we are unable to predict whether such proposals could ultimately
be enacted. Any such changes could negatively impact the value of an investment
in our shares.
  In
addition, because of widespread state budget deficits and other reasons, several
states are evaluating ways to subject partnerships to entity-level taxation
through the imposition of state income, franchise or other forms of taxation.
For example, Kinder Morgan Energy Partners is now subject to an entity-level tax
on the portion of its total revenue that is generated in Texas. Specifically,
the Texas margin tax is imposed at a maximum effective rate of 0.7% of Kinder
Morgan Energy Partners’ total revenue that is apportioned to Texas. This tax
reduces, and the imposition of such a tax on Kinder Morgan Energy Partners by
any other state, will reduce Kinder Morgan Energy Partners’ cash available for
distribution to its partners. If any state were to impose a tax upon Kinder
Morgan Energy Partners as an entity, the cash available for distribution to its
common unitholders would be reduced, which would reduce the value of i-units
distributed quarterly to us and our shares distributed quarterly to our
shareholders.
  Kinder
Morgan Energy Partners’ partnership agreement provides that if a law is enacted
that subjects Kinder Morgan Energy Partners to taxation as a corporation or
otherwise subjects Kinder Morgan Energy Partners to entity-level taxation for
federal income tax purposes, the minimum quarterly distribution and the target
distribution levels will be adjusted to reflect the impact on Kinder Morgan
Energy Partners of that law.
  As an owner of i-units, we may not
receive value equivalent to the common unit value for our i-unit interest in
Kinder Morgan Energy Partners if Kinder Morgan Energy Partners is liquidated. As
a result, a shareholder may receive less per share in our liquidation than is
received by an owner of a common unit in a liquidation of Kinder Morgan Energy
Partners.If Kinder Morgan Energy Partners is liquidated and Kinder
Morgan, Inc. does not satisfy its obligation to purchase our shares, which is
triggered by a liquidation, then the value of our shares will depend on the
after-tax amount of the liquidating distribution received by us as the owner of
i-units. The terms of the i-units provide that no allocations of income, gain,
loss or deduction will be made in respect of the i-units until such time as
there is a liquidation of Kinder Morgan Energy Partners.  If there is
a liquidation of Kinder Morgan Energy Partners, it is intended that we will
receive allocations of income and gain in an amount necessary for the capital
account attributable to each i-unit to be equal to that of a common unit. As a
result, we will likely realize taxable income upon the liquidation of Kinder
Morgan Energy Partners. However, there may not be sufficient amounts of income
and gain to cause the capital account attributable to each i-unit to be equal to
that of a common unit. If they are not equal, we, and therefore our
shareholders, will receive less value than would be received by an owner of
common units.
  Further,
the tax indemnity provided to us by Kinder Morgan, Inc. only indemnifies us for
our tax liabilities to the extent we have not received sufficient cash in the
transaction generating the tax liability to pay the associated tax. Prior to any
liquidation of Kinder Morgan Energy Partners, we do not expect to receive cash
in a taxable transaction. If a liquidation of Kinder Morgan Energy Partners
occurs, however, we likely would receive cash which would need to be used at
least in part to pay taxes. As a result, our residual value and the value of our
shares likely will be less than the value of the common units upon the
liquidation of Kinder Morgan Energy Partners.
  Our management and control of the
business and affairs of Kinder Morgan Energy Partners and its operating
partnerships could result in our being liable for obligations to third parties
who transact business with Kinder Morgan Energy Partners and its operating
partnerships and to whom we held ourselves out as a general partner.
We also could be responsible
for environmental costs and liabilities associated with Kinder Morgan Energy
Partners’ assets in the event that it is not able to perform all of its
obligations under environmental laws. Kinder Morgan Energy Partners may
not be able to reimburse or indemnify us as a result of its insolvency or
bankruptcy. The primary adverse impact of that insolvency or bankruptcy on us
would be the decline in or elimination of the value of our i-units, which are
our only significant assets. Assuming under these circumstances that we have
some residual value in our i-units, a direct claim by creditors of Kinder Morgan
Energy Partners against us could further reduce our net asset value and cause us
also to declare bankruptcy. Another risk with respect to third party claims will
occur, however, under the circumstances when Kinder Morgan Energy Partners is
financially able to pay us, but for some other reason does not reimburse or
indemnify us. For example, to the extent that Kinder Morgan Energy Partners
fails to satisfy any environmental liabilities for which it is responsible, we
could be held liable under environmental laws. For additional information, see
the following risk factor.
  If we are not fully indemnified by
Kinder Morgan Energy Partners for all the liabilities we incur in performing our
obligations under the delegation of control agreement, we could face material
difficulties in paying those liabilities, and the net value of our assets could
be adversely affected. Under the delegation of control agreement, we have
been delegated
   7
 Item
      1A.Risk
      Factors.(continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  management
and control of the business and affairs of Kinder Morgan Energy Partners and its
operating partnerships. There are circumstances under which we may not be
indemnified by Kinder Morgan Energy Partners or Kinder Morgan G.P., Inc. for
liabilities we incur in managing and controlling the business and affairs of
Kinder Morgan Energy Partners. These circumstances include:
  ·
              if
      we act in bad faith; and
 ·
              if
      we breach laws like the federal securities laws, where indemnification may
      not be allowed.
  If in the future we cease to manage
and control the business and affairs of Kinder Morgan Energy Partners, we may be
deemed to be an investment company for purposes of the Investment Company Act of
1940. In that event, we would either have to register as an investment
company under the Investment Company Act, obtain exemptive relief from the
Securities and Exchange Commission, or modify our organizational structure or
our contract rights to fall outside the definition of an investment company.
Registering as an investment company could, among other things, materially limit
our ability to engage in transactions with our affiliates, including the
purchase and sale of certain securities or other property to or from our
affiliates, restrict our ability to borrow funds or engage in other transactions
involving leverage, and require us to add directors who are independent of us or
our affiliates.
  Kinder Morgan Energy Partners may
issue additional common or other units and we may issue additional shares, which
would dilute the ownership interest of our shareholders. The issuance of
additional common or other units by Kinder Morgan Energy Partners or shares by
us other than in our quarterly distributions of shares may have the following
effects:
  ·
              the
      amount available for distributions on each share may
    decrease;
 ·
              the
      relative voting power of each previously outstanding share may decrease;
      and
 ·
              the
      market price of our shares may
decline.
  The market price of our shares on
any given day generally is less than the market price of the common units of
Kinder Morgan Energy Partners. Since our initial public offering, our
shares generally have traded on the New York Stock Exchange at prices at a
discount to, but in general proximity to, the prices of common units of Kinder
Morgan Energy Partners. Thus, the market price of our shares on any given day
generally is less than the market price of the common units of Kinder Morgan
Energy Partners. The market price of our shares will depend, as does the market
price of the common units of Kinder Morgan Energy Partners, on many factors,
including our operation and management of Kinder Morgan Energy Partners, the
future performance of Kinder Morgan Energy Partners, conditions in the energy
transportation and storage industry, general market conditions, and conditions
relating to businesses that are similar to that of Kinder Morgan Energy
Partners.
  Owners of our shares have limited
voting rights and, therefore, have little or no opportunity to influence or
change our management.Kinder Morgan G.P., Inc. owns all of our
shares eligible to vote on the election of our directors and, therefore, is
entitled to elect all of the members of our board of directors.
  Our shares are subject to optional
and mandatory purchase provisions which could result in our shareholders having
to sell our shares at a time or price they do not like and could result in a
taxable event to our shareholders. If either of the optional purchase
rights are exercised by Kinder Morgan, Inc., or if there is a mandatory
purchase event, our shareholders will be required to sell our shares at a time
or price that may be undesirable, and could receive less than they paid for our
shares. Any sale of our shares for cash, to Kinder Morgan, Inc. or otherwise,
will be a taxable transaction to the owner of the shares sold. Accordingly, a
gain or loss will be recognized on the sale equal to the difference between the
cash received and the owner’s tax basis in the shares sold.
  Our board of directors has the power
to change the terms of the shares in ways our board determines, in its sole
discretion, are not materially adverse to the owners of our shares. Our
shareholders may not like the changes, and even if they believe the changes are
materially adverse to the owners of shares, they may have no recourse to prevent
such changes.Our
shareholders may not like the changes made to the terms of the shares and may
disagree with the board’s decision that the changes are not materially adverse
to our shareholders. A shareholder’s recourse if it disagrees will be limited
because our limited liability company agreement gives broad latitude and
discretion to the board of directors and eliminates or reduces the fiduciary
duties that our board of directors would otherwise owe to our
shareholders.
  Kinder Morgan, Inc. may be unable to
purchase shares upon the occurrence of the mandatory purchase events, resulting
in a loss in value of our shares.The satisfaction of the obligation of
Kinder Morgan, Inc. to purchase shares following a purchase event is dependent
on Kinder Morgan, Inc.’s financial ability to meet its obligations. There is no
requirement for Kinder Morgan, Inc. to secure its obligation or comply with
financial covenants to ensure its performance of these obligations. If Kinder
Morgan, Inc. is unable to meet its obligations upon the occurrence of a
mandatory purchase event, shareholders may not receive cash for our
shares.
   8
 Item
      1A.Risk
      Factors.(continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  There is a potential for change of
control if Kinder Morgan, Inc. defaults on debt. Kinder Morgan, Inc. owns
all of the outstanding common equity of the general partner of Kinder Morgan
Energy Partners. If Kinder Morgan, Inc. defaults on its debt, in exercising
their rights as lenders, Kinder Morgan, Inc.’s lenders could acquire control of
the general partner of Kinder Morgan Energy Partners or otherwise influence the
general partner of Kinder Morgan Energy Partners through control of Kinder
Morgan, Inc.
  The interests of Kinder Morgan, Inc.
may differ from our interests, the interests of our shareholders and the
interests of unitholders of Kinder Morgan Energy Partners. Kinder Morgan,
Inc. owns all of the outstanding common equity of the general partner of Kinder
Morgan Energy Partners and elects all of its directors. The general partner of
Kinder Morgan Energy Partners owns all of our voting shares and elects all of
our directors. Furthermore, some of our directors and officers are also
directors and officers of Kinder Morgan, Inc. and the general partner of Kinder
Morgan Energy Partners and have fiduciary duties to manage the businesses of
Kinder Morgan, Inc. and Kinder Morgan Energy Partners in a manner that may not
be in the best interest of our shareholders. Kinder Morgan, Inc. has a number of
interests that differ from the interests of our shareholders and the interests
of the unitholders. As a result, there is a risk that important business
decisions will not be made in the best interest of our
shareholders.
  Our limited liability company
agreement restricts or eliminates a number of the fiduciary duties that would
otherwise be owed by our board of directors to our shareholders, and the
partnership agreement of Kinder Morgan Energy Partners restricts or eliminates a
number of the fiduciary duties that would otherwise be owed by the general
partner to the unitholders. Modifications of state law standards of
fiduciary duties may significantly limit the ability of our shareholders and the
unitholders to successfully challenge the actions of our board of directors and
the general partner of Kinder Morgan Energy Partners, respectively, in the event
of a breach of their fiduciary duties. These state law standards include the
duties of care and loyalty. The duty of loyalty, in the absence of a provision
in the limited liability company agreement or the limited partnership agreement
to the contrary, would generally prohibit our board of directors or the general
partner of Kinder Morgan Energy Partners from taking any action or engaging in
any transaction as to which it has a conflict of interest. Our limited liability
company agreement and the limited partnership agreement of Kinder Morgan Energy
Partners contain provisions that prohibit our shareholders and the limited
partners, respectively, from advancing claims that otherwise might raise issues
as to compliance with fiduciary duties or applicable law. For example, the
limited partnership agreement of Kinder Morgan Energy Partners provides that the
general partner of Kinder Morgan Energy Partners may take into account the
interests of parties other than Kinder Morgan Energy Partners in resolving
conflicts of interest. Further, it provides that in the absence of bad faith by
the general partner of Kinder Morgan Energy Partners the resolution of a
conflict by the general partner will not be a breach of any duty. The provisions
relating to the general partner of Kinder Morgan Energy Partners apply equally
to us as its delegate. Our limited liability company agreement provides that
none of our directors or officers will be liable to us or any other person for
any acts or omissions if they acted in good faith.
  A person or group owning 20% or more
of the aggregate number of issued and outstanding Kinder Morgan Energy Partners
common units and our shares, other than Kinder Morgan, Inc. and its affiliates,
may not vote common units or shares; as a result, you are less likely to receive
a premium for your shares in a hostile takeover.Any common units and
shares owned by a person or group that owns 20% or more of the aggregate number
of issued and outstanding common units and shares cannot be voted. This
limitation does not apply to Kinder Morgan, Inc. and its affiliates. This
provision may:
  ·
              discourage
      a person or group from attempting to take over control of us or Kinder
      Morgan Energy Partners; and
 ·
              reduce
      the prices at which the common units and our shares will trade under
      certain circumstances.
  For
example, a third party will probably not attempt to remove the general partner
of Kinder Morgan Energy Partners and take over our management of Kinder Morgan
Energy Partners by making a tender offer for the common units at a price above
their trading market price.
  Item 1B.
              Unresolved
      Staff Comments.
 
 None.
  Item 3.
              Legal
      Proceedings.
 
 We
are not a party to any litigation.
  Item 4.
              Submission
      of Matters to a Vote of Security
Holders.
 
 There
were no matters submitted to a vote of our shareholders during the fourth
quarter of 2009.
   9
 Kinder
      Morgan Management, LLC Form 10-K
  PART II
  Item 5.
              Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities.
 
 Our
shares are listed for trading on the New York Stock Exchange under the symbol
“KMR.” The per share high and low sale prices of our shares, as reported on the
New York Stock Exchange, by quarter for the last two years are provided
below.
  Market Price Per
Share2009
              
              2008Low
              
              High
              
              Low
              
              HighQuarter
      EndedMarch
      31
              
              $
              35.33
              
              
              $
              44.97
              
              
              $
              47.21
              
              
              $
              56.23June
      30
              
              $
              39.77
              
              
              $
              46.67
              
              
              $
              51.02
              
              
              $
              57.32September
      30
              
              $
              43.56
              
              
              $
              48.29
              
              
              $
              46.45
              
              
              $
              56.62December
      31
              
              $
              46.10
              
              
              $
              55.00
              
              
              $
              34.01
              
              
              $
              50.80
 
 There
were approximately 62,000 holders of our listed shares as of January 29, 2010,
which includes individual participants in security position
listings.
  Under
the terms of our limited liability company agreement, except in connection with
our liquidation, we do not pay distributions on our shares in cash but instead
make distributions on our shares in additional shares or fractions of shares. At
the same time Kinder Morgan Energy Partners makes a distribution on its common
units and i-units, we distribute on each of our shares that fraction of a share
determined by dividing the amount of the cash distribution to be made by Kinder
Morgan Energy Partners on each common unit by the average market price of a
share determined for the ten-trading day period ending on the trading day
immediately prior to the ex-dividend date for our shares.
  Share
      DistributionsShares Distributed Per
                Outstanding
      Share
              
              Equivalent Distribution
                Value Per Share(a)
              
              
              Total
      Number of Additional
                Shares
      Distributed2009
              
              
              2008
              
              2009
              
              2008
              
              
              2009
              
              
              2008Quarter EndedMarch
      31
              
              
              0.025342
              
              
              
              0.017716
              
              
              $
              1.05
              
              
              $
              0.96
              
              
              
              2,025,208
              
              
              
              1,305,429June
      30
              
              
              0.022146
              
              
              
              0.018124
              
              
              $
              1.05
              
              
              $
              0.99
              
              
              
              1,814,650
              
              
              
              1,359,153September 30
              
              
              0.021292
              
              
              
              0.021570
              
              
              $
              1.05
              
              
              $
              1.02
              
              
              
              1,783,310
              
              
              
              1,646,891December 31
              
              
              0.018430
              
              
              
              0.024580
              
              
              $
              1.05
              
              
              $
              1.05
              
              
              
              1,576,470
              
              
              
              1,917,189
 __________
 (a)
              This
      is the cash distribution paid or payable to each common unit of Kinder
      Morgan Energy Partners for the quarter indicated and is used to calculate
      our distribution of shares as discussed above. Because of this
      calculation, the market value of the shares distributed on the date of
      distribution may be less or more than the cash distribution per common
      unit of Kinder Morgan Energy
Partners.
 
 There
were no sales of unregistered equity securities during the periods covered by
this report. We did not repurchase any shares during the fourth quarter of
2009.
  For
information regarding our equity compensation plans, please refer to Item 12,
included elsewhere herein.
   10
 Kinder
      Morgan Management, LLC Form 10-K
  
 Item 6.
              Selected Financial
      Data.
 
 KINDER
MORGAN MANAGEMENT, LLC AND SUBSIDIARY
  Post- Acquisition Basis(a)
              
              
              Pre-Acquisition Basis(a)Year Ended December 31,
              
              
              Seven Months
                Ended
                December
      31,
              
              
              Five Months
                Ended
                May
      31,
              
              
              Year Ended December
      31,2009
              
              
              2008
              
              
              2007
              
              
              2007
              
              
              2006
              
              
              2005(In
      millions except per share amounts)
              
              
              (In
      millions except per share amounts)Equity
      in earnings (loss) of Kinder Morgan Energy Partners.
              
              $
              90.6
              
              
              $
              142.2
              
              
              $
              65.4
              
              
              $
              (64.6
              )
              
              $
              131.1
              
              
              $
              88.4Provision
      (benefit) for income taxes
              
              
              31.6
              
              
              
              59.0
              
              
              
              15.0
              
              
              
              (23.3
              )
              
              
              47.0
              
              
              
              32.1Net
      income (loss)
              
              $
              59.0
              
              
              $
              83.2
              
              
              $
              50.4
              
              
              $
              (41.3
              )
              
              $
              84.1
              
              
              $
              56.3Earnings
      (loss) per share, basic and diluted
              
              $
              0.72
              
              
              $
              1.11
              
              
              $
              0.71
              
              
              $
              (0.65
              )
              
              $
              1.40
              
              
              $
              1.00Number
      of shares used in computing basic and diluted earnings per
      share
              
              
              81.9
              
              
              
              75.1
              
              
              
              71.1
              
              
              
              63.7
              
              
              
              60.1
              
              
              
              56.1Equivalent
      distribution value per share(b)
              
              $
              4.20
              
              
              $
              4.02
              
              
              $
              2.65
              
              
              $
              0.83
              
              
              $
              3.26
              
              
              $
              3.13Total
      number of additional shares distributed
              
              
              7.2
              
              
              
              6.2
              
              
              
              3.6
              
              
              
              1.0
              
              
              
              4.4
              
              
              
              3.8Total
      assets at end of
      period
              
              $
              2,534.7
              
              
              $
              2,462.1
              
              
              $
              2,213.8
              
              
              $
              1,944.5
              
              
              $
              1,707.9
              
              
              $
              1,583.7
 __________
 (a)
              On
      May 30, 2007, Kinder Morgan, Inc. (formerly Knight Inc.) completed a
      merger transaction under which investors including Richard D. Kinder,
      Kinder Morgan, Inc.’s Chairman and Chief Executive Officer, acquired all
      of the outstanding shares of that company, referred to as the “Going
      Private transaction.” The purchase price of Kinder Morgan, Inc. has been
      “pushed-down” and allocated to the assets and liabilities of its
      subsidiary companies, including us. Accordingly, our post-acquisition
      selected financial data shown above for the years ended December 31, 2009
      and 2008, and the seven months ended December 31, 2007 reflect a new basis
      of accounting. The selected financial data for the periods ended May 31,
      2007, December 31, 2006 and December 31, 2005 reflect the operations of
      the Company prior to the acquisition. Hence, there is a blackline division
      on the selected financial data shown above, which is intended to signify
      that the amounts shown for periods prior to and subsequent to the
      acquisition are not comparable.(b)
              This
      is the amount of cash distributions payable to each common unit of Kinder
      Morgan Energy Partners for each period shown. Under the terms of our
      limited liability company agreement, except in connection with our
      liquidation, we do not pay distributions on our shares in cash but we make
      distributions on our shares in additional shares or fractions of shares.
      At the same time Kinder Morgan Energy Partners makes a distribution on its
      common units and i-units, we distribute on each of our shares that
      fraction of a share determined by dividing the amount of the cash
      distribution to be made by Kinder Morgan Energy Partners on each common
      unit by the average market price of a share determined for a ten-trading
      day period ending on the trading day immediately prior to the ex-dividend
      date for our shares. Because of this calculation, the market value of the
      shares distributed on the date of distribution may be less or more than
      the cash distribution per common unit of Kinder Morgan Energy
      Partners.
  Item 7.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations.
 
 General
  We
are a limited liability company, formed in Delaware in February 2001, which has
elected to be treated as a corporation for United States federal income tax
purposes. Our shares trade on the New York Stock Exchange under the symbol
“KMR.” Our voting shares are owned by Kinder Morgan G.P., Inc., of which Kinder
Morgan, Inc. (formerly Knight Inc.) owns all the outstanding common equity.
Kinder Morgan G.P., Inc. is the general partner of Kinder Morgan Energy
Partners, L.P. (“Kinder Morgan Energy Partners”). Kinder Morgan G.P., Inc. has
delegated to us, to the fullest extent permitted under Delaware law and the
Kinder Morgan Energy Partners partnership agreement, all of its rights and
powers to manage and control the business and affairs of Kinder Morgan Energy
Partners and its subsidiary operating limited partnerships and their
subsidiaries, subject to Kinder Morgan G.P., Inc.’s right to approve specified
actions.
  Our
consolidated financial statements include the accounts of Kinder Morgan
Management, LLC and its wholly owned subsidiary, Kinder Morgan Services LLC. All
material intercompany transactions and balances have been eliminated. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses. Actual results
could differ from these estimates.
  On
May 30, 2007, Kinder Morgan, Inc. merged with a wholly owned subsidiary of
Kinder Morgan Holdco LLC (formerly Knight Holdco LLC), with Kinder Morgan, Inc.
continuing as the surviving legal entity. The purchase price of Kinder Morgan,
Inc. has been “pushed-down” and allocated to the assets and liabilities of its
subsidiary companies, including us. As
  11
 Item
      7.
                    Management’s
      Discussion and Analysis of Financial Condition and
      Results of Operations.(continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  a
result of this transaction, we have adopted a new basis of accounting for our
assets and liabilities. Therefore, in the accompanying financial information,
transactions and balances prior to the closing of the Going Private transaction
(the amounts labeled “Pre-Acquisition Basis”) reflect the historical basis of
accounting for our assets and liabilities, while the amounts subsequent to the
closing (the amounts labeled “Post-Acquisition Basis”) reflect the push-down of
Kinder Morgan, Inc.’s new accounting basis to our financial
statements.
  For
further information on Kinder Morgan, Inc.’s Going Private transaction and
critical accounting policies, see Note 2 of the accompanying Notes to
Consolidated Financial Statements.
  Kinder
Morgan Energy Partners is one of the largest publicly traded pipeline limited
partnerships in the United States in terms of market capitalization, and is a
leading pipeline transportation and energy storage company in North America.
Kinder Morgan Energy Partners owns an interest in or operates approximately
28,000 miles of pipelines and approximately 180 terminals. Kinder Morgan Energy
Partners’ pipelines transport natural gas, gasoline, crude oil, carbon dioxide
and other products, and its terminals store petroleum products and chemicals and
handle bulk materials like coal and petroleum coke. Kinder Morgan Energy
Partners is also the leading provider of carbon dioxide for enhanced oil
recovery projects in North America.
  We
are a limited partner in Kinder Morgan Energy Partners and manage and control
its business and affairs pursuant to a delegation of control agreement. Our
success is dependent upon our operation and management of Kinder Morgan Energy
Partners, and its resulting performance. Therefore, we have included Kinder
Morgan Energy Partners’ Annual Report on Form 10-K for the year ended December
31, 2009 in this filing as Exhibit 99.1. The following discussion should be read
in conjunction with the accompanying financial statements and related notes and
the financial statements of Kinder Morgan Energy Partners, which is included in
this filing as Exhibit 99.1 and incorporate such Form 10-K herein by
reference.
  Business
  Kinder
Morgan G.P., Inc. has delegated to us, to the fullest extent permitted under
Delaware law and Kinder Morgan Energy Partners’ limited partnership agreement,
all of its rights and powers to manage and control the business and affairs of
Kinder Morgan Energy Partners subject to Kinder Morgan G.P., Inc.’s right to
approve specified actions.
  Results
of Operations
  Our
results of operations consist of the offsetting expenses and receipts associated
with our managing and controlling the business and affairs of Kinder Morgan
Energy Partners and our equity in the earnings of Kinder Morgan Energy Partners
attributable to the i-units we own. At December 31, 2009, through our ownership
of i-units, we owned approximately 28.8% of all of Kinder Morgan Energy
Partners’ outstanding limited partner interests. We use the equity method of
accounting for our investment in Kinder Morgan Energy Partners and record
earnings as described below. Our percentage ownership in Kinder Morgan
Energy Partners changes over time upon the distribution of additional i-units to
us or upon issuances of additional common units or other equity securities by
Kinder Morgan Energy Partners.
  Our
net income (loss) for the years ended December 31, 2009 and 2008, seven months
ended December 31, 2007 and five months ended May 31, 2007 was $59.0 million,
$83.2 million, $50.4 million, and ($41.3) million, respectively. Our earnings,
as reported in the accompanying Consolidated Statements of Income, represent
equity in earnings of Kinder Morgan Energy Partners, attributable to the i-units
we own, reduced by a deferred income tax provision and adjusted for the push
down effect of Kinder Morgan, Inc.’s purchase of us and Kinder Morgan Energy
Partners. The deferred income tax provision is calculated based on the book/tax
basis difference created by our recognition, under accounting principles
generally accepted in the United States of America, of our share of the earnings
of Kinder Morgan Energy Partners. Our earnings per share (both basic and
diluted) is our net income divided by our weighted-average number of outstanding
shares during each period presented. There are no securities outstanding that
may be converted into or exercised for our shares.
  Notwithstanding
the consolidation of Kinder Morgan Energy Partners and its subsidiaries into
Kinder Morgan, Inc.’s financial statements, Kinder Morgan, Inc. is not liable
for, and its assets are not available to satisfy, the obligations of Kinder
Morgan Energy Partners and/or its subsidiaries and vice versa. Responsibility
for payments of obligations reflected in Kinder Morgan, Inc.’s or Kinder Morgan
Energy Partners’ financial statements is a legal determination based on the
entity that incurs the liability.
  Kinder
Morgan Energy Partners’ acquisitions from Kinder Morgan, Inc. of Trans Mountain
pipeline system in April 2007, the one-third interest in the Express pipeline
system (“Express”) and the full interest of the net assets of the Jet Fuel
pipeline system (“Jet Fuel”) in August 2008 were accounted for as transfers of
net assets between entities under common control. The carrying amounts of net
assets recognized in the balance sheets of each combining entity were carried
forward to the balance sheet of the combined entity, and no other assets or
liabilities were recognized as a result of the combination (that is, no
recognition was made for a purchase premium or discount representing any
difference between the cash consideration and the book value of the net assets
acquired). Trans Mountain (included in the Kinder Morgan Canada segment) has
been
   12
 Item
      7.
                    Management’s
      Discussion and Analysis of Financial Condition and
      Results of Operations.(continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  incorporated
into Kinder Morgan Energy Partners’ financial statements beginning January 1,
2006, the date of common control. Kinder Morgan, Inc. recorded charges of $377.1
million in 2007 related to the impairment of Trans Mountain goodwill. This
amount is included in Kinder Morgan Canada’s 2007 net loss of $293.6 million.
Due to the immaterial impact of Express and Jet Fuel operations and earnings,
Kinder Morgan Energy Partners and we have only included these operations and
earnings in our financial statements effective as of August 28,
2008.
  Following
is summarized income statement information and segment earnings contribution by
business segment for Kinder Morgan Energy Partners. Additional information on
Kinder Morgan Energy Partners’ results of operation and financial position are
contained in its Annual Report on Form 10-K for the year ended December 31,
2009, included in this filing as Exhibit 99.1 and incorporated herein by
reference (in millions).
  Kinder
Morgan Energy Partners
  Year
      Ended December 31,2009
              
              
              2008
              
              
              2007Segment
      earnings contributionProduct
      Pipelines
              
              $
              584.5
              
              
              $
              546.2
              
              
              $
              569.6Natural
      Gas Pipelines
              
              
              789.6
              
              
              
              760.6
              
              
              
              600.2CO2
              
              
              782.9
              
              
              
              759.9
              
              
              
              537.0Terminals
              
              
              599.0
              
              
              
              523.8
              
              
              
              416.0Kinder
      Morgan Canada
              
              
              154.5
              
              
              
              141.2
              
              
              
              (293.6
              )Total
      segment earnings
              
              
              2,910.5
              
              
              
              2,731.7
              
              
              
              1,829.2Depreciation,
      depletion and amortization expenses
              
              
              (850.8
              )
              
              
              (702.7
              )
              
              
              (547.0
              )Amortization
      of excess cost of investments
              
              
              (5.8
              )
              
              
              (5.7
              )
              
              
              (5.8
              )General
      administrative expenses
              
              
              (330.3
              )
              
              
              (297.9
              )
              
              
              (278.7
              )Interest
      and other non-operating expenses (a)(b)
              
              
              (439.8
              )
              
              
              (406.9
              )
              
              
              (400.4
              )Net
      income
              
              
              1,283.8
              
              
              
              1,318.5
              
              
              
              597.3Net
      income attributable to noncontrolling interests (b)
              
              
              (16.3
              )
              
              
              (13.7
              )
              
              
              (7.0
              )Net
      income attributable to Kinder Morgan Energy Partners
              
              $
              1,267.5
              
              
              $
              1,304.8
              
              
              $
              590.3General
      Partner’s interest in net income
              
              $
              935.8
              
              
              $
              805.8
              
              
              $
              611.6Limited
      Partners’ interest in net income
              
              $
              331.7
              
              
              $
              499.0
              
              
              $
              (21.3
              )
 ____________
 (a)
              Includes
      unallocated interest income and income tax expense and interest and debt
      expense.(b)
              2008
      and 2007 restated for certain provisions concerning the accounting and
      reporting for noncontrolling interests, see Note 2 of the accompanying
      Notes to Consolidated Financial
Statements.
 
 Income
Taxes
  We
are a limited liability company that has elected to be treated as a corporation
for financial and tax reporting purposes. Our entire income tax provision
(benefit) consists of deferred income tax, and deferred income tax assets and
liabilities are recognized for temporary differences between the basis of our
assets and liabilities. Under our new basis of accounting, we have excluded
nondeductible goodwill associated with our investment in Kinder Morgan Energy
Partners. Prior to the Going Private transaction we recognized temporary
differences between the basis of our assets and liabilities for financial and
tax reporting purposes including nondeductible goodwill associated with our
investment in Kinder Morgan Energy Partners. Changes in tax legislation are
included in the relevant computations in the period in which such changes are
effective.
  We
are a party to a tax indemnification agreement with Kinder Morgan, Inc. Pursuant
to this tax indemnification agreement, Kinder Morgan, Inc. agreed to indemnify
us for any tax liability attributable to our formation or our management and
control of the business and affairs of Kinder Morgan Energy Partners and for any
taxes arising out of a transaction involving the i-units we own to the extent
the transaction does not generate sufficient cash to pay our taxes with respect
to such transaction.
  The
$27.4 million decrease in tax expense to $31.6 million for 2009 as compared to
$59.0 million for 2008 is primarily due to a $51.6 million decrease in pretax
income and the 2008 income tax expense associated with $7.7 million of out of
period adjustments attributable to the nondeductible goodwill associated with
our investment in Kinder Morgan Energy Partners.
  The
seven months ended December 31, 2007 provision for income taxes of $15.0 million
consists of $23.1 million of federal income tax expense and $0.5 million of
state income taxes. These income tax expenses were offset by a tax benefit of
$8.6 million attributable to the nondeductible goodwill associated with our
investment in Kinder Morgan Energy Partners.
   13
 Item
      7.
                    Management’s
      Discussion and Analysis of Financial Condition and
      Results of Operations.(continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  The
five months ended May 31, 2007 benefit for income taxes of $23.3 million
consists of $22.6 million of federal income tax benefit and $0.7 million of
state income tax benefit.
  See
Notes 6 and 7 of the accompanying Notes to Consolidated Financial Statements for
additional information on income taxes and the out of period adjustments,
respectively.
  Liquidity
and Capital Resources
  Our
authorized capital structure consists of two classes of interests: (1) our
listed shares and (2) our voting shares, collectively referred to in this
document as our “shares.” Additional classes of interests may be approved by our
board and holders of a majority of our shares, excluding shares held by Kinder
Morgan, Inc. and its affiliates. Our only off-balance sheet arrangement is our
equity investment in Kinder Morgan Energy Partners.
  The
number of our shares outstanding will at all times equal the number of i-units
of Kinder Morgan Energy Partners, all of which we own. Under the terms of our
limited liability company agreement, except in connection with our liquidation,
we do not pay distributions on our shares in cash but we make distributions on
our shares in additional shares or fractions of shares. At the same time Kinder
Morgan Energy Partners makes a distribution on its common units and i-units, we
distribute on each of our shares that fraction of a share determined by dividing
the amount of the cash distribution to be made by Kinder Morgan Energy Partners
on each common unit by the average market price of a share determined for a
ten-trading day period ending on the trading day immediately prior to the
ex-dividend date for our shares. We have paid share distributions totaling
7,540,357, 5,565,424, 2,402,439 and 2,028,367 shares in the years ended December
31, 2009 and 2008, seven months ended December 31, 2007 and five months ended
May 31, 2007, respectively. On February 12, 2010, we paid a share distribution
of 0.018430 shares per outstanding share (1,576,470 total shares) to
shareholders of record as of January 29, 2010, based on the $1.05 per common
unit distribution declared by Kinder Morgan Energy Partners.
  On
May 15, 2007, we issued 5.7 million listed shares in a public offering at a
price of $52.26 per share. We used the net proceeds of $297.9 million from the
sale to purchase 5.7 million i-units from Kinder Morgan Energy
Partners.
  Kinder
Morgan Energy Partners’ partnership agreement requires that it distribute 100%
of available cash, as defined in the partnership agreement, to its partners
within 45 days following the end of each calendar quarter in accordance with
their respective percentage interests. Available cash consists generally of all
of Kinder Morgan Energy Partners’ cash receipts, including cash received by its
operating partnerships and net reductions in reserves, less cash disbursements
and net additions to reserves and amounts payable to the former general partner
of SFPP, L.P. in respect of its remaining 0.5% interest in SFPP,
L.P.
  Kinder
Morgan Energy Partners’ general partner is granted discretion by the partnership
agreement, which discretion has been delegated to us, subject to the approval of
the general partner in certain cases, to establish, maintain and adjust reserves
for the proper conduct of its business, which might include reserves for matters
such as future operating expenses, debt service, maintenance capital
expenditures and rate refunds and for distributions for the next four quarters.
These reserves are not restricted by magnitude, but only by type of future cash
requirements with which they can be associated. When we determine Kinder Morgan
Energy Partners’ quarterly distributions, we consider current and expected
reserve needs along with current and expected cash flows to identify the
appropriate sustainable distribution level.
  The
general partner and owners of Kinder Morgan Energy Partners’ common units and
Class B units receive distributions in cash, while we, the sole owner of Kinder
Morgan Energy Partners’ i-units, receive distributions in additional i-units.
For each outstanding i-unit, a fraction of an i-unit will be issued. The
fraction is calculated by dividing the amount of cash being distributed per
Kinder Morgan Energy Partners common unit by the average closing price of our
shares over the ten consecutive trading days preceding the date on which the
shares begin to trade ex-dividend under the rules of the New York Stock
Exchange. The cash equivalent of distributions of i-units is treated as if it
had actually been distributed for purposes of determining the distributions to
the general partner, although Kinder Morgan Energy Partners does not distribute
cash to i-unit owners but retains the cash for use in its business.
  Pursuant
to Kinder Morgan Energy Partners’ partnership agreement, distributions to its
unitholders are characterized either as distributions of cash from operations or
as distributions of cash from interim capital transactions.  This
distinction affects the distributions to its owners of common units,
Class B units and i-units relative to the distributions to its general
partner.
  Cash from
Operations.  Cash from operations generally refers to Kinder
Morgan Energy Partners’ cash balance on the date it commenced operations, plus
all cash generated by the operation of its business, after deducting related
cash expenditures, net additions to or reductions in reserves, debt service and
various other items.
  Cash from Interim Capital
Transactions.  Cash from interim capital transactions will
generally result only from Kinder Morgan Energy Partners’ distributions that are
funded from borrowings, sales of debt and equity securities and sales or
other
   14
 Item
      7.
                    Management’s
      Discussion and Analysis of Financial Condition and
      Results of Operations.(continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  dispositions
of its assets for cash, other than inventory, accounts receivable and other
current assets and assets disposed of in the ordinary course of its
business.
  Rule for Characterizing
Distributions.  All available cash distributed by Kinder Morgan
Energy Partners from any source will be treated as distributions of cash from
operations until the sum of all available cash distributed equals the cumulative
amount of cash from operations actually generated from the date it commenced
operations through the end of the calendar quarter prior to that
distribution.  Any distribution of available cash which, when added to
the sum of all prior distributions, is in excess of the cumulative amount of
cash from operations, will be considered a distribution of cash from interim
capital transactions until the initial common unit price is fully recovered as
described under “—Allocation of Distributions from Interim Capital
Transactions.”  For purposes of calculating the sum of all
distributions of available cash, the total equivalent cash amount of all
distributions of i-units to us, as the holder of all i-units, will be treated as
distributions of available cash, even though the distributions to us are made in
additional i-units rather than cash.  Kinder Morgan Energy Partners
retains this cash and uses it in its business.  To date, all of Kinder
Morgan Energy Partners’ cash distributions have been treated as distributions of
cash from operations.
  Allocation of Distributions from
Operations.  Kinder Morgan Energy Partners will distribute cash
from operations for each quarter effectively as follows:
  ·
              first,
      98% to the owners of all classes of units pro rata and 2% to the general
      partner until the owners of all classes of units have received a total of
      $0.15125 per unit in cash or equivalent i-units for such
      quarter;
 ·
              second,
      85% of any available cash then remaining to the owners of all classes of
      units pro rata and 15% to the general partner until the owners of all
      classes of units have received a total of $0.17875 per unit in cash or
      equivalent i-units for such
quarter;
 ·
              third,
      75% of any available cash then remaining to the owners of all classes of
      units pro rata and 25% to the general partner until the owners of all
      classes of units have received a total of $0.23375 per unit in cash or
      equivalent i-units for such quarter;
and
 ·
              fourth,
      50% of any available cash then remaining to the owners of all classes of
      units pro rata, to owners of common units and Class B units in cash and to
      owners of i-units in the equivalent number of i-units, and 50% to the
      general partner.
  Incentive
distributions are generally defined as all cash distributions paid to the
general partner that are in excess of 2% of the aggregate value of cash and
i-units being distributed. The general partner’s incentive distribution for the
distributions that Kinder Morgan Energy Partners declared for 2009 was $932.3
million. The general partner’s incentive distribution that Kinder Morgan Energy
Partners paid during 2009 to the general partner (for the fourth quarter of 2008
and the first nine months of 2009) was $906.5 million. The difference between
declared and paid distributions is due to the fact that distributions for the
fourth quarter of each year are declared and paid in the first quarter of the
following year.
  Allocation of Distributions from
Interim Capital Transactions.  Any distribution by Kinder
Morgan Energy Partners of available cash that would constitute cash from interim
capital transactions would be distributed effectively as follows:
  ·
              98%
      to all owners of common units and Class B units pro rata in cash and
      to us in equivalent i-units; and
  ·
              2%
      to the general partner, until Kinder Morgan Energy Partners has
      distributed cash from this source in respect of a common unit outstanding
      since its original public offering in an aggregate amount per unit equal
      to the initial common unit price of $5.75, as adjusted for
      splits.
  As
cash from interim capital transactions is distributed, it would be treated as if
it were a repayment of the initial public offering price of the common
units.  To reflect that repayment, the first three distribution levels
of cash from operations would be adjusted downward proportionately by
multiplying each distribution level amount by a fraction, the numerator of which
is the unrecovered initial common unit price immediately after giving effect to
that distribution and the denominator of which is the unrecovered initial common
unit price immediately prior to giving effect to that
distribution.  For example, assuming the unrecovered initial common
unit price is $5.75 per common unit and if cash from the first interim capital
transaction of $2.375 per unit was distributed to owners of common units, then
the amount of the first three distribution levels would each be reduced to 50%
of its then current level.  The unrecovered initial common unit price
generally is the amount by which the initial common unit price exceeds the
aggregate distribution of cash from interim capital transactions per common
unit.
  When
the initial common unit price is fully recovered, then each of the first three
distribution levels will have been reduced to zero. Thereafter all distributions
of available cash from all sources will be treated as if they were cash from
operations and available cash will be distributed 50% to all classes of units
pro rata with the distribution to i-units being made instead in the form of
i-units and 50% to the general partner.
   15
 Item
      7.
                    Management’s
      Discussion and Analysis of Financial Condition and
      Results of Operations.(continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  We
expect that our expenditures associated with managing and controlling the
business and affairs of Kinder Morgan Energy Partners and the reimbursement for
these expenditures received by us from Kinder Morgan Energy Partners will
continue to be equal. As stated above, the distributions we expect to receive on
the i-units we own will be in the form of additional i-units. Therefore, we
expect neither to generate nor to require significant amounts of cash in ongoing
operations. We currently have no debt and have no plans to incur any debt. Any
cash received from the sale of additional shares will immediately be used to
purchase additional i-units. Accordingly, we do not anticipate any other sources
or needs for additional liquidity.
  Recent
Accounting Pronouncements
  Refer
to Note 8 of the accompanying Notes to Consolidated Financial Statements for
information regarding recent accounting pronouncements.
  Information
Regarding Forward-looking Statements
  This
filing includes forward-looking statements. These forward-looking statements are
identified as any statement that does not relate strictly to historical or
current facts. They use words such as “anticipate,” “believe,” “intend,” “plan,”
“projection,” “forecast,” “strategy,” “position,” “continue,” “estimate,”
“expect,” “may,” or the negative of those terms or other variations of them or
comparable terminology. In particular, statements, express or implied,
concerning future actions, conditions or events, future operating results or the
ability to generate sales, income or cash flow or to pay dividends or make
distributions are forward-looking statements. Forward-looking statements are not
guarantees of performance. They involve risks, uncertainties and assumptions.
Future actions, conditions or events and future results of our operations and
those of Kinder Morgan Energy Partners may differ materially from those
expressed in these forward-looking statements. Please see “Information Regarding
Forward-Looking Statements” for Kinder Morgan Energy Partners included in
Exhibit 99.1 of this filing and incorporated herein by reference. Many of the
factors that will determine these results are beyond our ability to control or
predict. Specific factors that could cause actual results to differ from those
in the forward-looking statements include:
  ·
              price
      trends and overall demand for natural gas liquids, refined petroleum
      products, oil, carbon dioxide, natural gas, electricity, coal, steel and
      other bulk materials and chemicals in North
  America;
 ·
              economic
      activity, weather, alternative energy sources, conservation and
      technological advances that may affect price trends and
      demand;
 ·
              changes
      in tariff rates charged by Kinder Morgan Energy Partners’ pipeline
      subsidiaries implemented by the Federal Energy Regulatory Commission,
      other regulatory agency or the California Public Utilities
      Commission;
 ·
              Kinder
      Morgan Energy Partners’ ability to acquire new businesses and assets and
      integrate those operations into its existing operations, as well as the
      ability to expand its facilities;
 ·
              difficulties
      or delays experienced by railroads, barges, trucks, ships or pipelines in
      delivering products to or from Kinder Morgan Energy Partners’ terminals or
      pipelines;
 ·
              Kinder
      Morgan Energy Partners’ ability to successfully identify and close
      acquisitions and make cost-saving changes in
  operations;
 ·
              shut-downs
      or cutbacks at major refineries, petrochemical or chemical plants, ports,
      utilities, military bases or other businesses that use Kinder Morgan
      Energy Partners’ services or provide services or products to
      it;
 ·
              changes
      in crude oil and natural gas production from exploration and production
      areas that Kinder Morgan Energy Partners serves, such as the Permian Basin
      area of West Texas, the U.S. Rocky Mountains and the Alberta, Canada oil
      sands;
 ·
              changes
      in laws or regulations, third-party relations and approvals and decisions
      of courts, regulators and governmental bodies that may adversely affect
      Kinder Morgan Energy Partners’ business or its ability to
      compete;
 ·
              changes
      in accounting pronouncements that impact the measurement of Kinder Morgan
      Energy Partners’ or our results of operations, the timing of when such
      measurements are to be made and recorded, and the disclosures surrounding
      these activities;
 ·
              our
      ability to offer and sell equity securities, and Kinder Morgan Energy
      Partners’ ability to offer and sell equity securities and debt securities
      or obtain debt financing in sufficient amounts to implement that portion
      of Kinder Morgan Energy Partners’ business plan that contemplates growth
      through acquisitions of operating businesses and assets and expansions of
      its facilities;
 ·
              Kinder
      Morgan Energy Partners’ indebtedness, which could make it vulnerable to
      general adverse economic and industry conditions, limit its ability to
      borrow additional funds and/or place it at competitive disadvantages
      compared to its competitors that have less debt or have other adverse
      consequences;
 ·
              interruptions
      of electric power supply to Kinder Morgan Energy Partners’ facilities due
      to natural disasters, power shortages, strikes, riots, terrorism, war or
      other causes;
 ·
              our
      or Kinder Morgan Energy Partners’ ability to obtain insurance coverage
      without significant levels of self-retention of
  risk;
  16
 Item
      7.
                    Management’s
      Discussion and Analysis of Financial Condition and
      Results of Operations.(continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  ·
              acts
      of nature, sabotage, terrorism or other similar acts causing damage
      greater than Kinder Morgan Energy Partners’ insurance coverage
      limits;
 ·
              capital
      and credit markets conditions, inflation and interest
    rates;
 ·
              the
      political and economic stability of the oil producing nations of the
      world;
 ·
              national,
      international, regional and local economic, competitive and regulatory
      conditions and developments;
 ·
              Kinder
      Morgan Energy Partners’ ability to achieve cost savings and revenue
      growth;
 ·
              foreign
      exchange fluctuations;
 ·
              the
      timing and extent of changes in commodity prices for oil, natural gas,
      electricity and certain agricultural
products;
 ·
              the
      extent of Kinder Morgan Energy Partners’ success in discovering,
      developing and producing oil and gas reserves, including the risks
      inherent in exploration and development drilling, well completion and
      other development activities;
 ·
              engineering
      and mechanical or technological difficulties that Kinder Morgan Energy
      Partners may experience with operational equipment, in well completions
      and workovers, and in drilling new
wells;
 ·
              the
      uncertainty inherent in estimating future oil and natural gas production
      or reserves that Kinder Morgan Energy Partners may
    experience;
 ·
              the
      ability of Kinder Morgan Energy Partners to complete expansion projects on
      time and on budget;
 ·
              the
      timing and success of Kinder Morgan Energy Partners’ business development
      efforts; and
 ·
              unfavorable
      results of litigation and the fruition of contingencies referred to in
      Kinder Morgan Energy Partners’ Annual Report on Form 10-K for the year
      ended December 31, 2009, included in this filing as Exhibit 99.1 and
      incorporated herein by reference.
  The
foregoing list should not be construed to be exhaustive. We believe the
forward-looking statements in this filing are reasonable. However, there is no
assurance that any of the actions, events or results of the forward-looking
statements will occur, or if any of them do, what impact they will have on our
results of operations or financial condition. Because of these uncertainties,
you should not put undue reliance on any forward-looking
statements.
  See
Item 1A “Risk Factors” for a more detailed description of these and other
factors that may affect the forward-looking statements. When considering
forward-looking statements, one should keep in mind the risk factors described
in Item A “Risk Factors.” The risk factors could cause our actual results to
differ materially from those contained in any forward-looking statement. We
disclaim any obligation, other than as required by applicable law, to update the
above list or to announce publicly the result of any revisions to any of the
forward-looking statements to reflect future events or
developments.
  Item 7A.
              Quantitative
      and Qualitative Disclosures About Market
Risk.
 
 The
nature of our business and operations is such that no activities or transactions
of the type requiring discussion under this item are conducted or entered
into.
  17
 Kinder
      Morgan Management, LLC Form 10-K
  
 Item 8.
              Financial
      Statements and Supplementary Data.
 
 INDEX
  PageReports of Independent Registered Public Accounting
      Firm
              18Consolidated Statements of Income
              20Consolidated Statements of Comprehensive
      Income
              20Consolidated Balance Sheets
              21Consolidated Statements of Cash
      Flows
              23Consolidated Statements of Shareholders’
      Equity
              22Notes to Consolidated Financial
      Statements
              23
 
  18
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  
 
 Report of Independent
Registered Public Accounting Firm
 
 To
the Board of Directors
 and
Shareholders of Kinder Morgan Management, LLC:
 
 In
our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income, of comprehensive income, of shareholders’
equity and of cash flows present fairly, in all material respects, the financial
position of Kinder Morgan Management, LLC and its subsidiary (the “Company”) at
December 31, 2009 and 2008, and the results of their operations and their cash
flows for the years ended December 31, 2009 and 2008 and the period from June 1,
2007 to December 31, 2007 in conformity with accounting principles generally
accepted in the United States of America.  Also in our opinion, the
Company maintained, in all material respects, effective internal control over
financial reporting as of December 31, 2009, based on criteria established in
Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (COSO).  The Company’s management is responsible
for these financial statements, for maintaining effective internal control over
financial reporting and for its assessment of the effectiveness of internal
control over financial reporting, included in Management’s Report on Internal
Control over Financial Reporting (not presented herein) appearing under Item 9A
of the Company’s 2009 Annual Report on Form 10-K.  Our responsibility
is to express opinions on these financial statements and on the Company’s
internal control over financial reporting based on our integrated
audits.  We conducted our audits in accordance with the standards of
the Public Company Accounting Oversight Board (United States).  Those
standards require that we plan and perform the audits to obtain reasonable
assurance about whether the financial statements are free of material
misstatement and whether effective internal control over financial reporting was
maintained in all material respects.  Our audits of the financial
statements included examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation.  Our audit of internal control over
financial reporting included obtaining an understanding of internal control over
financial reporting, assessing the risk that a material weakness exists, and
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk.  Our audits also included
performing such other procedures as we considered necessary in the
circumstances. We believe that our audits provide a reasonable basis for our
opinions.
 
 A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with generally accepted accounting principles.  A company’s internal
control over financial reporting includes those policies and procedures that
(i) pertain to the maintenance of records that, in reasonable detail,
accurately and fairly reflect the transactions and dispositions of the assets of
the company; (ii) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in
accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with
authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection
of unauthorized acquisition, use, or disposition of the company’s assets that
could have a material effect on the financial statements.
 
 Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Also, projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate.
 
 
 
 PricewaterhouseCoopers
LLP
 Houston,
Texas
 February
25, 2010
  19
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  
 
 
 
 
 
 
 Report of Independent
Registered Public Accounting Firm
 
 To
the Board of Directors
 and
Shareholders of Kinder Morgan Management, LLC:
 
 In
our opinion, the accompanying consolidated statements of income, of
comprehensive income, of shareholders' equity and of cash flows present fairly,
in all material respects, the results of the operations and cash flows for the
period from January 1, 2007 to May 31, 2007 of Kinder Morgan Management, LLC and
its subsidiary (the “Company”) in conformity with accounting principles
generally accepted in the United States of America.  These financial
statements are the responsibility of the Company’s management.  Our
responsibility is to express an opinion on these financial statements based on
our audit.  We conducted our audit of these statements in accordance
with the standards of the Public Company Accounting Oversight Board (United
States).  Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement.  An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement
presentation.  We believe that our audit provides a reasonable basis
for our opinion.
 
 
 
 PricewaterhouseCoopers
LLP
 Houston,
Texas
 March
2, 2009, except with respect to the change in the Company’s accounting for
noncontrolling interests as discussed in Note 8 (to the financial statements in
the Company's Current Report on Form 8-K filed on September 18, 2009 which is
not presented herein), as to which the date is September 18, 2009.
 
  20
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  
  KINDER MORGAN MANAGEMENT, LLC AND
SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF INCOME
  Post-Acquisition
      Basis
              
              
              Pre-Acquisition
      BasisYear
      Ended December 31,
              
              
              Seven
      Months
                Ended
                December
      31,
              
              
              Five
      Months
                Ended2009
              
              
              2008
              
              
              2007
              
              
              May
      31, 2007(In
      millions)
              
              
              (In
      millions)Equity
      in earnings (loss) of Kinder Morgan Energy Partners.
              
              $
              90.6
              
              
              $
              142.2
              
              
              $
              65.4
              
              
              $
              (64.6
              )Income
      taxes
              
              
              31.6
              
              
              
              59.0
              
              
              
              15.0
              
              
              
              (23.3
              )Net
      Income (Loss)
              
              $
              59.0
              
              
              $
              83.2
              
              
              $
              50.4
              
              
              $
              (41.3
              )Earnings
      (loss) per share, basic and diluted
              
              $
              0.72
              
              
              $
              1.11
              
              
              $
              0.71
              
              
              $
              (0.65
              )Number
      of shares used in computing basic and diluted earnings per
      share
              
              
              81.9
              
              
              
              75.1
              
              
              
              71.1
              
              
              
              63.7
 
 
 KINDER MORGAN MANAGEMENT, LLC AND
SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF COMPREHENSIVE INCOME
  Post-Acquisition
      Basis
              
              
              Pre-Acquisition
      BasisYear
      Ended December 31,
              
              
              Seven
      Months
                Ended
                December
      31,
              
              
              Five
      Months
                Ended2009
              
              
              2008
              
              
              2007
              
              
              May
      31, 2007(In
      millions)
              
              
              (In
      millions)Net
      Income (Loss)
              
              $
              59.0
              
              
              $
              83.2
              
              
              $
              50.4
              
              
              $
              (41.3
              )Other
      comprehensive income (loss), net of tax:Change
      in fair value of derivatives utilized for hedging purposes (net of tax
      benefit (expense) of $30.9, $(37.6), $45.6 and $6.6,
      respectively)
              
              
              (55.3
              )
              
              
              66.4
              
              
              
              (80.7
              )
              
              
              (5.8
              )Reclassification of change in fair value of derivatives to net
      income (net of tax expense of $6.5, $38.0, $13.9 and $7.4,
      respectively)
              
              
              11.6
              
              
              
              67.0
              
              
              
              24.5
              
              
              
              6.5Change
      in foreign currency translation adjustment (net of tax benefit (expense)
      of $(17.0), $19.0, $(2.3) and $(2.5), respectively)
              
              
              30.4
              
              
              
              (33.6
              )
              
              
              4.1
              
              
              
              2.2Minimum
      pension liability adjustments, other postretirement benefit plan
      transition obligations,
      pension and other postretirement benefit plan actuarial
      gains/losses, and reclassification of pension and other postretirement
      benefit plan actuarial gains/losses, prior service costs/credits and
      transition obligations to net
      income, net of tax benefit (expense) of $0.2, $(0.2) and
      $0.2, respectively
              
              
              (0.3
              )
              
              
              0.4
              
              
              
              (0.3
              )
              
              
              -Total
      Other Comprehensive Income (Loss)
              
              
              (13.6
              )
              
              
              100.2
              
              
              
              (52.4
              )
              
              
              2.9Comprehensive
      Income (Loss)
              
              $
              45.4
              
              
              $
              183.4
              
              
              $
              (2.0
              )
              
              $
              (38.4
              )
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
   21
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  
  
  KINDER MORGAN MANAGEMENT, LLC AND
SUBSIDIARY
 CONSOLIDATED
BALANCE SHEETS
  December 31,2009
              
              
              2008(In
      millions)ASSETSCurrent
      AssetsAccounts
      receivable – related party
              
              $
              9.9
              
              
              $
              7.2Other
      current assets
              
              
              1.3
              
              
              
              0.8Total
      Current Assets
              
              
              11.2
              
              
              
              8.0Investment
      in Kinder Morgan Energy Partners.
              
              
              2,523.5
              
              
              
              2,454.1Total
      Assets
              
              $
              2,534.7
              
              
              $
              2,462.1LIABILITIES
      AND SHAREHOLDERS’ EQUITYCurrent
      LiabilitiesAccounts
      payable
              
              $
              2.6
              
              
              $
              1.3Accrued
      other current liabilities
              
              
              8.5
              
              
              
              6.6Total
      Current Liabilities
              
              
              11.1
              
              
              
              7.9Deferred
      income taxes
              
              
              146.1
              
              
              
              122.1Shareholders’
      EquityVoting
      shares - unlimited authorized; 2 voting shares issued and
      outstanding
              
              
              0.1
              
              
              
              0.1Listed
      Shares - unlimited authorized; 85,538,261 and 77,997,904 listed shares
      issued and outstanding, respectively
              
              
              2,966.0
              
              
              
              2,630.1Retained
      deficit
              
              
              (549.3
              )
              
              
              (272.4
              )Accumulated
      other comprehensive loss
              
              
              (39.3
              )
              
              
              (25.7
              )Total
      Shareholders’ Equity
              
              
              2,377.5
              
              
              
              2,332.1Total
      Liabilities and Shareholders’ Equity
              
              $
              2,534.7
              
              
              $
              2,462.1
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
   22
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  
  KINDER
MORGAN MANAGEMENT, LLC AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 Increase
(Decrease) in Cash and Cash Equivalents
  Post-Acquisition
      Basis
              
              
              Pre-Acquisition
      BasisYear Ended
      December 31,
              
              
              Seven Months
                Ended
                December 31,
              
              
              Five Months
                Ended2009
              
              
              2008
              
              
              2007
              
              
              May 31, 2007(In
      millions)
              
              
              (In
      millions)Cash
      Flows From Operating activitiesNet
      income (loss)
              
              $
              59.0
              
              
              $
              83.2
              
              
              $
              50.4
              
              
              $
              (41.3
              )Adjustments
      to reconcile net income to net cash flows from operating
      activitiesDeferred
      income taxes
              
              
              31.6
              
              
              
              59.0
              
              
              
              15.0
              
              
              
              (23.3
              )Equity
      in (earnings) loss of Kinder Morgan Energy Partners.
              
              
              (90.6
              )
              
              
              (142.2
              )
              
              
              (65.4
              )
              
              
              64.6Changes
      in components of working capitalAccounts
      receivable
              
              
              (2.7
              )
              
              
              21.4
              
              
              
              (16.1
              )
              
              
              2.2Other
      current assets
              
              
              (0.5
              )
              
              
              1.5
              
              
              
              1.0
              
              
              
              0.7Accounts
      payable
              
              
              1.3
              
              
              
              -
              
              
              
              -
              
              
              
              0.1Accrued
      other current liabilities
              
              
              1.9
              
              
              
              (22.9
              )
              
              
              15.1
              
              
              
              (3.0
              )Net
      Cash Flows Provided by Operating Activities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Cash
      Flows From Investing ActivitiesPurchase
      of i-units of Kinder Morgan Energy Partners
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (297.9
              )Net
      Cash Flows Used in Investing Activities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              (297.9
              )Cash
      Flows From Financing ActivitiesShares
      issued
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              297.9Net
      Cash Flows Provided by Financing Activities
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              297.9Net
      Increase in Cash and Cash Equivalents
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Cash
      and Cash Equivalents, beginning of period
              
              
              -
              
              
              
              -
              
              
              
              -
              
              
              
              -Cash
      and Cash Equivalents, end of period
              
              $
              -
              
              
              $
              -
              
              
              $
              -
              
              
              $
              -
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
   23
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  
  KINDER MORGAN MANAGEMENT, LLC AND
SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY
  Post-Acquisition
      BasisYear
      Ended December 31,2009
                
                
                2008Shares
                
                
                Amount
                
                
                Shares
                
                
                Amount(Dollars
      in millions)Voting
      SharesBeginning
      Balance
                
                
                2
                
                
                $
                0.1
                
                
                
                2
                
                
                $
                0.1Ending
      Balance
                
                
                2
                
                
                
                0.1
                
                
                
                2
                
                
                
                0.1Listed
      SharesBeginning
      Balance
                
                
                77,997,904
                
                
                
                2,630.1
                
                
                
                72,432,480
                
                
                
                2,374.8Share
      dividends
                
                
                7,540,357
                
                
                
                335.9
                
                
                
                5,565,424
                
                
                
                289.6Purchase
      accounting adjustment
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                (34.3
                )Ending
      Balance
                
                
                85,538,261
                
                
                
                2,966.0
                
                
                
                77,997,904
                
                
                
                2,630.1Retained
      DeficitBeginning
      Balance
                
                
                
                
                
                
                (272.4
                )
                
                
                
                
                
                
                (66.0
                )Net
      income
                
                
                
                
                
                
                59.0
                
                
                
                
                
                
                
                83.2Share
      dividends
                
                
                
                
                
                
                (335.9
                )
                
                
                
                
                
                
                (289.6
                )Ending
      Balance
                
                
                
                
                
                
                (549.3
                )
                
                
                
                
                
                
                (272.4
                )Accumulated
      other comprehensive loss (net of tax benefits)DerivativesBeginning
      Balance
                
                
                
                
                
                
                3.7
                
                
                
                
                
                
                
                (129.7
                )Change
      in fair value of derivatives utilized for hedging purposes
                
                
                
                
                
                
                (55.3
                )
                
                
                
                
                
                
                66.4Reclassification
      of change in fair value of derivatives to net income
                
                
                
                
                
                
                11.6
                
                
                
                
                
                
                
                67.0Ending
      Balance
                
                
                
                
                
                
                (40.0
                )
                
                
                
                
                
                
                3.7Foreign
      currency translationBeginning
      Balance
                
                
                
                
                
                
                (29.5
                )
                
                
                
                
                
                
                4.1Currency
      translation adjustment
                
                
                
                
                
                
                30.4
                
                
                
                
                
                
                
                (33.6
                )Ending
      Balance
                
                
                
                
                
                
                0.9
                
                
                
                
                
                
                
                (29.5
                )Employee
      benefit plansBeginning
      Balance
                
                
                
                
                
                
                0.1
                
                
                
                
                
                
                
                (0.3
                )Pension
      plan amortization/adjustments
                
                
                
                
                
                
                (0.3
                )
                
                
                
                
                
                
                0.4Ending
      Balance
                
                
                
                
                
                
                (0.2
                )
                
                
                
                
                
                
                0.1Total
      accumulated other comprehensive loss
                
                
                
                
                
                
                (39.3
                )
                
                
                
                
                
                
                (25.7
                )Total
      Shareholders’ Equity
                
                
                85,538,263
                
                
                $
                2,377.5
                
                
                
                77,997,906
                
                
                $
                2,332.1
 24
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                        Kinder
      Morgan Management, LLC Form 10-K
 
  KINDER
MORGAN MANAGEMENT, LLC AND SUBSIDIARY
 CONSOLIDATED
STATEMENTS OF SHAREHOLDERS’ EQUITY (continued)
  Post-Acquisition
      Basis
              
              
              Pre-Acquisition
      BasisSeven
      Months Ended
                December
      31, 2007
              
              
              Five
      Months Ended
                May
      31,2007Shares
              
              
              Amount
              
              
              Shares
              
              
              Amount(Dollars
      in millions)
              
              
              (Dollars
      in millions)Voting
      SharesBeginning
      Balance
              
              
              2
              
              
              $
              0.1
              
              
              
              2
              
              
              $
              0.1Ending
      Balance
              
              
              2
              
              
              
              0.1
              
              
              
              2
              
              
              
              0.1Listed
      SharesBeginning
      Balance
              
              
              70,030,041
              
              
              
              2,258.6
              
              
              
              62,301,674
              
              
              
              2,109.4Listed
      shares issued
              
              
              -
              
              
              
              -
              
              
              
              5,700,000
              
              
              
              297.9Share
      dividends
              
              
              2,402,439
              
              
              
              116.4
              
              
              
              2,028,367
              
              
              
              105.2Share
      issuance costs
              
              
              -
              
              
              
              (0.2
              )
              
              
              -
              
              
              
              -Ending
      Balance
              
              
              72,432,480
              
              
              
              2,374.8
              
              
              
              70,030,041
              
              
              
              2,512.5Retained
      DeficitBeginning
      Balance
              
              
              
              
              
              
              -
              
              
              
              
              
              
              
              (387.0
              )Net
      income (loss)
              
              
              
              
              
              
              50.4
              
              
              
              
              
              
              
              (41.3
              )Share
      dividends
              
              
              
              
              
              
              (116.4
              )
              
              
              
              
              
              
              (105.2
              )Ending
      Balance
              
              
              
              
              
              
              (66.0
              )
              
              
              
              
              
              
              (533.5
              )Accumulated
      other comprehensive loss (net of tax benefits)DerivativesBeginning
      Balance
              
              
              
              
              
              
              (73.5
              )
              
              
              
              
              
              
              (139.1
              )Change
      in fair value of derivatives utilized for hedging
      purposes
              
              
              
              
              
              
              (80.7
              )
              
              
              
              
              
              
              (5.8
              )Reclassification
      of change in fair value of derivatives to net income
              
              
              
              
              
              
              24.5
              
              
              
              
              
              
              
              6.5Ending
      Balance
              
              
              
              
              
              
              (129.7
              )
              
              
              
              
              
              
              (138.4
              )Foreign
      currency translationBeginning
      Balance
              
              
              
              
              
              
              -
              
              
              
              
              
              
              
              (3.3
              )Currency
      translation adjustment
              
              
              
              
              
              
              4.1
              
              
              
              
              
              
              
              2.2Ending
      Balance
              
              
              
              
              
              
              4.1
              
              
              
              
              
              
              
              (1.1
              )Employee
      retirement benefitsBeginning
      Balance
              
              
              
              
              
              
              -
              
              
              
              
              
              
              
              (0.3
              )Adoption
      of pension plan accounting principle
              
              
              
              
              
              
              (0.3
              )
              
              
              
              
              
              
              -Ending
      Balance
              
              
              
              
              
              
              (0.3
              )
              
              
              
              
              
              
              (0.3
              )Total
      accumulated other comprehensive loss
              
              
              
              
              
              
              (125.9
              )
              
              
              
              
              
              
              (139.8
              )Total
      Shareholders’ Equity
              
              
              72,432,482
              
              
              $
              2,183.0
              
              
              
              70,030,043
              
              
              $
              1,839.3
 
 The
accompanying notes are an integral part of these consolidated financial
statements.
   25
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  KINDER
MORGAN MANAGEMENT, LLC AND SUBSIDIARY
  NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
  1.      General
  Kinder
Morgan Management, LLC is a publicly traded Delaware limited liability company
that was formed on February 14, 2001. Kinder Morgan G.P., Inc., of which Kinder
Morgan, Inc. (formerly Knight Inc.) indirectly owns all of the outstanding
common equity, is the general partner of Kinder Morgan Energy Partners, L.P.
(“Kinder Morgan Energy Partners”) and owns all of our voting shares. Kinder
Morgan G.P., Inc., pursuant to a delegation of control agreement among us,
Kinder Morgan G.P., Inc. and Kinder Morgan Energy Partners, has delegated to us,
to the fullest extent permitted under Delaware law and Kinder Morgan Energy
Partners’ limited partnership agreement, all of its rights and powers to manage
and control the business and affairs of Kinder Morgan Energy Partners, subject
to the general partner’s right to approve specified actions. We are a limited
partner in Kinder Morgan Energy Partners through our ownership of its i-units,
and manage and control its business and affairs pursuant to the delegation of
control agreement. Our success is dependent upon our operation and management of
Kinder Morgan Energy Partners and its resulting performance; see Note 5. Unless
the context requires otherwise, references to “we,” “us,” “our,” or the
“Company” are intended to mean Kinder Morgan Management, LLC and its
consolidated subsidiary, Kinder Morgan Services LLC.
  2.      Significant
Accounting Policies
  Basis
of Presentation
  Our
consolidated financial statements include the accounts of Kinder Morgan
Management, LLC and its wholly owned subsidiary, Kinder Morgan Services LLC. All
material intercompany transactions and balances have been
eliminated.
  The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions. These estimates and assumptions affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the reported amounts of revenues and expenses. Actual results
could differ from these estimates. Effective September 30, 2009, the Financial
Accounting Standards Boards’ Accounting Standards Codification became the single
source of generally accepted accounting principles, and in this report, we refer
to the Financial Accounting Standards Board as the FASB and the FASB Accounting
Standards Codification as the Codification.
  On
May 30, 2007, Kinder Morgan, Inc. merged with a wholly owned subsidiary of
Kinder Morgan Holdco LLC, with Kinder Morgan, Inc. continuing as the surviving
legal entity and subsequently renamed Knight Inc. On July 15, 2009, the
Company’s name was changed back to Kinder Morgan, Inc. Kinder Morgan Holdco LLC
is a private company owned by Richard D. Kinder, our Chairman and Chief
Executive Officer; our co-founder William V. Morgan; former Kinder Morgan, Inc.
board members Fayez Sarofim and Michael C. Morgan; other members of its senior
management, most of whom are also senior officers of Kinder Morgan G.P., Inc.
and us; and affiliates of (i) Goldman Sachs Capital Partners, (ii) Highstar
Capital, (iii) The Carlyle Group, and (iv) Riverstone Holdings LLC. This
transaction is referred to in this report as the Going Private transaction. The
acquisition was accounted for under the purchase method of accounting, as
required by Codification topic 805, Business Combinations. The purchase price of
Kinder Morgan, Inc. has been “pushed-down” and allocated to the assets and
liabilities of its subsidiary companies, including us. As a result of this
transaction, we have adopted a new basis of accounting for our assets and
liabilities. Therefore, in the accompanying financial information, transactions
and balances prior to the closing of the Going Private transaction (the amounts
labeled “Pre-Acquisition Basis”) reflect the historical basis of accounting for
our assets and liabilities, while the amounts subsequent to the closing (the
amounts labeled “Post-Acquisition Basis”) reflect the push-down of Kinder
Morgan, Inc.’s new accounting basis to our financial statements.
  The
purchase price of Kinder Morgan, Inc. was allocated to the assets it acquired
and the liabilities it assumed based on their fair values. The push-down of this
allocation of fair value to us caused a step-up in the recorded value of our
investment in Kinder Morgan Energy Partners of approximately $224.1 million. The
difference between the book value of our investment in Kinder Morgan Energy
Partners (reflected within the caption “Investment in Kinder Morgan Energy
Partners” in the accompanying Consolidated Balance Sheets) and our share of
Kinder Morgan Energy Partners’ recognized net assets at book value (our
ownership percentage in Kinder Morgan Energy Partners multiplied by the total
partners’ capital on Kinder Morgan Energy Partners’ Consolidated Balance Sheets)
consists of two pieces. First, an amount related to the difference between the
recognized net assets at book value and the fair value of those net assets, and
secondly, a premium in excess of the fair value of those underlying net assets
referred to as equity method goodwill.
  Notwithstanding
the consolidation of Kinder Morgan Energy Partners and its subsidiaries into
Kinder Morgan, Inc.’s financial statements, except as explicitly disclosed,
Kinder Morgan, Inc. is not liable for, and its assets are not available to
satisfy, the obligations of Kinder Morgan Energy Partners and/or its
subsidiaries and vice versa.  Responsibility for settlements of
obligations reflected in Kinder Morgan, Inc.’s or Kinder Morgan Energy Partners’
financial statements are a legal determination based on the entity that incurs
the liability.
   26
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  Cash
Equivalents
  We
consider all highly liquid investments purchased with an original maturity of
three months or less to be cash equivalents.
  Accounting
for Investment in Kinder Morgan Energy Partners
  We
use the equity method of accounting for our investment in Kinder Morgan Energy
Partners, which investment is further described in Notes 3 and 4. Kinder Morgan
Energy Partners is a publicly traded limited partnership and is traded on the
New York Stock Exchange under the symbol “KMP.” We record, in the period in
which it is earned, our share of the earnings of Kinder Morgan Energy Partners
attributable to the i-units we own, which beginning June 1, 2007, includes an
adjustment to reflect the impact of the push down of the purchase price of
Kinder Morgan, Inc. on our equity investment in Kinder Morgan Energy Partners.
We also record our proportionate share of Kinder Morgan Energy Partners’
accumulated other comprehensive income as an adjustment to our investment in
Kinder Morgan Energy Partners. We receive distributions from Kinder Morgan
Energy Partners in the form of additional i-units, which increase the number of
i-units we own. We issue additional shares (or fractions thereof) of the Company
to our existing shareholders in an amount equal to the additional i-units
received from Kinder Morgan Energy Partners. At December 31, 2009, through our
ownership of i-units, we owned approximately 28.8% of all of Kinder Morgan
Energy Partners’ outstanding limited partner interests.
  In
addition, we perform impairment testing of the amount at which we carry the
excess of cost over underlying fair value of net assets accounted for under the
equity method when events or circumstances warrant such testing. The impairment
test considers whether there is an inability to recover the carrying value of an
investment that is other than temporary. As of December 31, 2009, we believed no
such impairment had occurred on our investment in Kinder Morgan Energy
Partners.
  Accounting
for Share Distributions
  Our
board of directors declares and we make additional share distributions at the
same times that Kinder Morgan Energy Partners declares and makes distributions
on the i-units to us, so that the number of i-units we own and the number of our
shares outstanding remain equal. We account for the share distributions we make
by charging retained earnings and crediting outstanding shares with amounts that
equal the number of shares distributed multiplied by the closing price of the
shares on the date the distribution is payable. As a result, we expect that our
retained earnings will always be in a deficit position because (i) distributions
per unit for Kinder Morgan Energy Partners (which serve to reduce our retained
earnings) are based on “Available Cash” as defined by its partnership agreement,
which amount generally exceeds the earnings per unit (which serve to increase
our retained earnings) and (ii) the impact on our retained earnings attributable
to our equity in the earnings of Kinder Morgan Energy Partners is recorded after
a provision for income taxes.
  Income
Taxes
  We
are a limited liability company that has elected to be treated as a corporation
for federal income tax purposes. Our entire income tax provision (benefit)
consists of deferred income tax.  Deferred income tax assets and
liabilities are recognized for temporary differences between the basis of our
assets and liabilities for financial and tax reporting purposes.  Our
deferred tax liabilities balance was $146.1 million and $122.1 million as of
December 31, 2009 and 2008, respectively, as presented in the accompanying
Consolidated Balance Sheets. Under our current basis of accounting, we have
excluded nondeductible goodwill associated with our investment in Kinder Morgan
Energy Partners. Prior to the Going Private transaction we recognized temporary
differences between the basis of our assets and liabilities for financial
reporting and tax purposes including nondeductible goodwill associated with our
investment in Kinder Morgan Energy Partners. Changes in tax legislation are
included in the relevant computations in the period in which such changes are
effective. Currently, our only such temporary difference results from our
investment in Kinder Morgan Energy Partners.
  For
more information on income taxes, see Note 6.
  Earnings
Per Share
  Both
basic and diluted earnings per share are computed based on the weighted-average
number of shares outstanding during each period, adjusted for share splits.
There are no securities outstanding that may be converted into or exercised for
shares.
  Noncontrolling
Interests
  On
January 1, 2009, we and Kinder Morgan Energy Partners adopted certain provisions
concerning the accounting and reporting for noncontrolling interests included
within the “Consolidation” Topic of the Codification.  A
noncontrolling interest, previously referred to as a minority interest, is the
portion of equity in a subsidiary not attributable, directly or indirectly, to a
parent.
   27
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  Specifically,
these provisions establish accounting and reporting standards that require (i)
the ownership interests in subsidiaries held by parties other than the parent to
be clearly identified, labeled, and presented in the consolidated balance sheet
within equity, but separate from the parent’s equity and (ii) the equity amount
of consolidated net income attributable to the parent and to the noncontrolling
interests to be clearly identified and presented on the face of the consolidated
statement of operations.  Accordingly, our
presentation of Kinder Morgan Energy Partners’ consolidated net income is now
presented without deducting amounts attributable to its noncontrolling
interests.
  The
adopted provisions apply prospectively, with the exception of the presentation
and disclosure requirements, which have been applied retrospectively for all
periods presented.
  Subsequent
Events
  We
have evaluated subsequent events, which are events or transactions that occurred
after December 31, 2009 through the issuance of the accompanying Consolidated
Financial Statements.
  3.      Capitalization
  Our
authorized capital structure consists of two classes of interests: (1) our
listed shares and (2) our voting shares, collectively referred to in this
document as our “shares.” Prior to the May 2001 initial public offering of our
shares, our issued capitalization consisted of $100,000 contributed by Kinder
Morgan, G.P., Inc. for two voting shares. At December 31, 2009, Kinder Morgan,
Inc. owned approximately 12.2 million, or approximately 14.3% of our outstanding
shares.
  We
have paid share distributions totaling 7,540,357, 5,565,424, 2,402,439 and
2,028,367 shares in the years ended December 31, 2009 and 2008, seven months
ended December 31, 2007 and five months ended May 31, 2007,
respectively.  On February 12, 2010, we paid a share distribution of
0.018430 shares per outstanding share (1,576,470 total shares) to shareholders
of record as of January 29, 2010, based on the $1.05 per common unit
distribution declared by Kinder Morgan Energy Partners. These distributions were
paid in the form of additional shares or fractions thereof based on the average
market price of a share determined for a ten-trading day period ending on the
trading day immediately prior to the ex-dividend date for our
shares.
  4.      Business
Activities and Related Party Transactions
  At
no time after our formation and prior to our initial public offering did we have
any operations or own any interest in Kinder Morgan Energy Partners. Upon the
closing of our initial public offering in May 2001, we became a limited partner
in Kinder Morgan Energy Partners and, pursuant to a delegation of control
agreement, we assumed the management and control of its business and affairs.
Under the delegation of control agreement, Kinder Morgan G.P., Inc. delegated to
us, to the fullest extent permitted under Delaware law and the Kinder Morgan
Energy Partners’ partnership agreement, all of Kinder Morgan G.P., Inc.’s power
and authority to manage and control the business and affairs of Kinder Morgan
Energy Partners, subject to Kinder Morgan G.P., Inc.’s right to approve certain
transactions. Kinder Morgan Energy Partners will either pay directly or
reimburse us for all expenses we incur in performing under the delegation of
control agreement and will be obligated to indemnify us against claims and
liabilities provided that we have acted in good faith and in a manner we
believed to be in, or not opposed to, the best interests of Kinder Morgan Energy
Partners and the indemnity is not prohibited by law. Kinder Morgan Energy
Partners consented to the terms of the delegation of control agreement including
Kinder Morgan Energy Partners’ indemnity and reimbursement obligations. We do
not receive a fee for our service under the delegation of control agreement, nor
do we receive any margin or profit on the expense reimbursement. We incurred
approximately $273.2 million, $263.5 million, $135.8 million and $116.9 million
of expenses during the years ended December 31, 2009 and 2008, seven months
ended December 31, 2007 and five months ended May 31, 2007, respectively, on
behalf of Kinder Morgan Energy Partners. The expense reimbursements by Kinder
Morgan Energy Partners to us are accounted for as a reduction to the expense
incurred by us. The net monthly balance payable or receivable from these
activities is settled in cash in the following month. At December 31, 2009, $9.9
million, primarily a receivable from Kinder Morgan Energy Partners is recorded
in the caption “Accounts receivable—related party” in the accompanying
Consolidated Balance Sheet.
  Kinder
Morgan Services LLC is our wholly owned subsidiary and provides centralized
payroll and employee benefits services to us, Kinder Morgan G.P., Inc., Kinder
Morgan Energy Partners, and Kinder Morgan Energy Partners’ operating
partnerships and subsidiaries (collectively, the “Group”). Employees of KMGP
Services Company, Inc., a subsidiary of Kinder Morgan G.P., Inc., are assigned
to work for one or more members of the Group. When they do so, they remain under
our ultimate management and control. The direct costs of all compensation,
benefits expenses, employer taxes and other employer expenses for these
employees are allocated and charged by Kinder Morgan Services LLC to the
appropriate members of the Group, and the members of the Group reimburse Kinder
Morgan Services LLC for their allocated shares of these direct costs. There is
no profit or margin charged by Kinder Morgan Services LLC to the members of the
Group. The administrative support necessary to implement these payroll and
benefits services is provided by the human resource department of Kinder Morgan,
Inc., and the related administrative costs are allocated to members of the Group
in accordance with expense allocation procedures. The effect of these
arrangements is that each member of the Group bears the direct
   28
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  compensation
and employee benefits costs of its assigned or partially assigned employees, as
the case may be, while also bearing its allocable share of administrative costs.
Pursuant to its limited partnership agreement, Kinder Morgan Energy Partners
reimburses Kinder Morgan Services LLC for its share of these administrative
costs, and such reimbursements are accounted for as described above.
Additionally, Kinder Morgan Energy Partners reimburses us with respect to costs
incurred or allocated to us in accordance with Kinder Morgan Energy Partners’
limited partnership agreement, the delegation of control agreement among Kinder
Morgan G.P., Inc., Kinder Morgan Energy Partners, us and others, and our limited
liability company agreement. During the years ended December 31, 2009 and 2008,
seven months ended December 31, 2007 and five months ended May 31, 2007 expenses
totaled approximately $344.6 million, $310.7 million, $163.7 million and $112.1
million, respectively.
  5.      Summarized
Financial Information for Kinder Morgan Energy Partners
  Kinder
Morgan Energy Partners’ acquisition from Kinder Morgan, Inc. of Trans Mountain
pipeline system in April 2007, the one-third interest in Express and a full
interest in the net assets of Jet Fuel in August 2008 were accounted for as
transfers of net assets between entities under common control. The carrying
amounts of net assets recognized in the balance sheets of each combining entity
were carried forward to the balance sheet of the combined entity, and no other
assets or liabilities were recognized as a result of the combination (that is,
no recognition was made for a purchase premium or discount representing any
difference between the cash consideration and the book value of the net assets
acquired). Trans Mountain (included in the Kinder Morgan Canada segment) has
been incorporated into Kinder Morgan Energy Partners’ financial statements
beginning January 1, 2006, the date of common control. Kinder Morgan, Inc.
recorded charges of $377.1 million in 2007 related to the impairment of Trans
Mountain goodwill. Due to the immaterial impact of Express and Jet Fuel
operations and earnings, Kinder Morgan Energy Partners and we have only included
the operations and earnings of Express and Jet Fuel in our financial statements
effective as of August 28, 2008.
  Following
is summarized income statement and balance sheet information for Kinder Morgan
Energy Partners, a publicly traded limited partnership in which we own a
significant interest (in millions). Additional information on Kinder Morgan
Energy Partners’ results of operations and financial position are contained in
its Annual Report on Form 10-K for the year ended December 31, 2009, which is
included in this filing as Exhibit 99.1 and incorporated herein by
reference.
  Summarized
Kinder Morgan Energy Partners Income Statement Information
  Year
      Ended December 31,2009
              
              
              2008(a)
              
              
              2007(a)Revenues
              
              $
              7,003.4
              
              
              $
              11,740.3
              
              
              $
              9,217.7Operating
      expenses
              
              
              5,488.3
              
              
              
              10,188.8
              
              
              
              8,410.0Operating
      income
              
              $
              1,515.1
              
              
              $
              1,551.5
              
              
              $
              807.7Income
      from continuing operations
              
              $
              1,283.8
              
              
              $
              1,317.2
              
              
              $
              423.4Net
      income
              
              $
              1,283.8
              
              
              $
              1,318.5
              
              
              $
              597.3Net
      income attributable to Kinder Morgan Energy Partners, L.P.
              
              $
              1,267.5
              
              
              $
              1,304.8
              
              
              $
              590.3General
      Partner’s interest in net income
              
              $
              935.8
              
              
              $
              805.8
              
              
              $
              611.6Limited
      Partners’ interest in net income
              
              $
              331.7
              
              
              $
              499.0
              
              
              $
              (21.3
              )
 
 Summarized
Kinder Morgan Energy Partners Balance Sheet Information
  As
      of December 31,2009
              
              
              2008Current
      assets
              
              $
              1,244.7
              
              
              $
              1,244.4Noncurrent
      assets
              
              $
              19,017.5
              
              
              $
              16,641.4Current
      liabilities
              
              $
              2,017.6
              
              
              $
              1,782.1Noncurrent
      liabilities
              
              $
              11,520.5
              
              
              $
              9,987.4Kinder
      Morgan Energy Partners’ capital
              
              $
              6,644.5
              
              
              $
              6,045.6Noncontrolling
      interests(a)
              
              $
              79.6
              
              
              $
              70.7
 ____________
  29
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  
 (a)
              2008
      and 2007 restated for certain provisions concerning the accounting and
      reporting for noncontrolling interests; see Note
  2.
 
 6.
              Income
      Taxes
  The
difference between the statutory federal income taxes (and rate) and our actual
income taxes (and effective tax rate) are summarized as follows (in millions,
except percentages):
 
 Post-Acquisition
      Basis
                
                
                Pre-Acquisition
                  BasisYear
      Ended December 31,
                
                Seven
      Months Ended
                  December
      31, 2007
                
                
                Five
      Months Ended
                  May
      31, 20072009
                
                2008Federal
      income tax rate
                $
                31.6
                
                35.0
                %
                
                $
                49.8
                
                35.0
                %
                
                $
                23.1
                
                35.0
                %
                
                
                $
                (22.6)
                
                35.0
                %Other
      (a)
                
                (0.9)
                
                (1.1)
                %
                
                
                7.7
                
                5.4
                %
                
                
                (8.6)
                
                (13.2)
                %
                
                
                
                -
                
                -
                %State
      income tax, net of federal benefit
                
                0.9
                
                1.0
                %
                
                
                1.5
                
                1.1
                %
                
                
                0.5
                
                1.1
                %
                
                
                
                (0.7)
                
                1.1
                %Total
                $
                31.6
                
                34.9
                %
                
                $
                59.0
                
                41.5
                %
                
                $
                15.0
                
                22.9
                %
                
                
                $
                (23.3)
                
                36.1
                %
 ____________
 (a)
              Primarily
      changes in nondeductible goodwill and an out of period adjustment; See
      Note 7, “Out of Period Adjustment” for further
  discussion.
 
 We
entered into a tax indemnification agreement with Kinder Morgan, Inc. Pursuant
to this tax indemnification agreement, Kinder Morgan, Inc. agreed to indemnify
us for any tax liability attributable to our formation or our management and
control of the business and affairs of Kinder Morgan Energy Partners and for any
taxes arising out of a transaction involving the i-units we own to the extent
the transaction does not generate sufficient cash to pay our taxes with respect
to such transaction.
  We
had no unrecognized tax benefits on the balance sheet at December 31, 2009 and
2008. In the event interest or penalties are incurred with respect to income tax
matters, our policy will be to include such items in income tax expense. We did
not have an accrual for interest and penalties at December 31, 2009 or 2008. At
December 31, 2009, tax years 2005 through 2009 remained subject to examination
by the Internal Revenue Service or applicable states. We do not expect any
material change in the balance of our unrecognized tax benefits over the next
twelve months.
  7.      Out
of Period Adjustment
  Effective
with the closing of the Going Private transaction and our change to a new basis
of accounting reflecting the push down of the purchase price to us, we now
provide for deferred taxes on only the portion of the book/tax basis difference
in our investment in Kinder Morgan Energy Partners that is not attributable to
non-tax-deductible goodwill. We developed an estimate that was used to determine
the provision for deferred income taxes and the net deferred tax balances
included in our Annual Report on Form 10-K for the year ended December 31, 2007
(“2007 Form 10-K”). Subsequent to the February 29, 2008 filing of our 2007 Form
10-K, we determined that the information used in making this estimate was
deficient in some respects and, therefore, a revised estimate was
developed.
  Our
consolidated financial statements for the year ended December 31, 2008 reflect
the revised calculation, including the correction of our previously reported
amounts. This change had the effects of (i) increasing our provision for
deferred income taxes by $7.7 million (resulting in a reduction to net income of
$7.7 million or $0.10 per diluted share) in 2008 and (ii) creating incremental
deferred income tax liability of $63.8 million, of which only the $7.7 million
referred to above in (i) had an effect on our results of operations due to the
application of purchase accounting.  This change has not had and will
not have an effect on the distributions we receive from Kinder Morgan Energy
Partners in the form of additional i-units or the share distributions we
declare. In addition, the deferred tax balance may not represent the taxes that
we would owe in the event of liquidation of Kinder Morgan Energy Partners as our
tax liabilities on liquidation may be impacted by our tax indemnification
agreement with Kinder Morgan, Inc.
  We
evaluated the impact of the error and determined that it was not material to our
consolidated financial statements in 2007 or 2008, and accordingly have recorded
the related effects in our consolidated financial statements for the year ended
December 31, 2008 (see Note 6).
  8.      Recent
Accounting Pronouncements
  In
August 2009, the FASB issued Accounting Standards Update No. 2009-05, “Measuring
Liabilities at Fair Value.”  This Accounting Standards Update, or ASU,
amends the “Fair Value Measurements and Disclosures” Topic of the Codification
to provide further guidance on how to measure the fair value of a
liability.  ASU No. 2009-05 is effective for the first reporting
period beginning after issuance (September 30, 2009 for us), and the adoption of
this ASU did not have a material impact on our consolidated financial
statements.
   30
 Item 8.Financial
      Statements and Supplementary Data.
      (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  On
January 6, 2010, the FASB issued ASU No. 2010-03, “Extractive Industries-Oil and
Gas: Oil and Gas Reserve Estimation and Disclosure (Topic 932),” which aligns
U.S. generally accepted accounting principles with the Securities and Exchange
Commission’s (“SEC”) final rule on the “Modernization of Oil and Gas
Reporting.”  The FASB and SEC disclosure requirements for oil and gas
companies have been updated to include expanded disclosure for oil and gas
activities, and certain definitions have also been changed that will impact the
determination of oil and gas reserve quantities.  The provisions of
the new requirements are effective for registration statements filed on or after
January 1, 2010, and for annual reports for fiscal years ending on or after
December 31, 2009.  We have fully adopted the provisions required
pursuant to the SEC’s final rule and ASU No. 2010-03; however, we are not able
to disclose the impact of these new guidelines due to the impracticability of
the effort that would be required to prepare reserve reports under both the old
and new rules.
  9.
              Selected
      Quarterly Financial Data
(Unaudited)
  Quarterly
Operating Results for 2009 and 2008
  2009–Three
      Months EndedMarch
      31
              
              
              June
      30
              
              
              September
      30
              
              
              December
      31(In
      millions except per share amounts)Equity
      in earnings of Kinder Morgan Energy Partners
              
              $
              10.4
              
              
              $
              25.1
              
              
              $
              34.4
              
              
              $
              20.7Income
      taxes
              
              
              5.1
              
              
              
              8.6
              
              
              
              13.1
              
              
              
              4.8Net
      income
              
              $
              5.3
              
              
              $
              16.5
              
              
              $
              21.3
              
              
              $
              15.9Earnings
      per share, basic and diluted
              
              $
              0.07
              
              
              $
              0.20
              
              
              $
              0.26
              
              
              $
              0.19Number
      of shares used in computing basic and diluted earnings per
      share
              
              
              79.0
              
              
              
              81.0
              
              
              
              82.9
              
              
              
              84.7
 
 2008–Three
      Months EndedMarch
      31
              
              
              June
      30
              
              
              September
      30
              
              
              December
      31(In
      millions except per share amounts)Equity
      in earnings of Kinder Morgan Energy Partners
              
              $
              46.5
              
              
              $
              47.5
              
              
              $
              35.8
              
              
              $
              12.4Income
      taxes
              
              
              24.4
              
              
              
              17.6
              
              
              
              12.9
              
              
              
              4.1Net
      income
              
              $
              22.1
              
              
              $
              29.9
              
              
              $
              22.9
              
              
              $
              8.3Earnings
      per share, basic and diluted
              
              $
              0.30
              
              
              $
              0.40
              
              
              $
              0.30
              
              
              $
              0.11Number
      of shares used in computing basic and diluted earnings per
      share
              
              
              73.1
              
              
              
              74.4
              
              
              
              75.7
              
              
              
              77.2
 
 10.
              Supplemental
      Information on Oil and Gas Producing Activities
  (Unaudited)
  At
December 31, 2009, through our ownership of i-units, we owned approximately
28.8% of all of Kinder Morgan Energy Partners’ outstanding limited partner
interests.  As discussed above, our results of operations are derived
principally from our investment in Kinder Morgan Energy Partners.  We use
the equity method of accounting for our investment in Kinder Morgan Energy
Partners, and record our share of its earnings and accumulated other
comprehensive income.  Though we do not directly have interests in oil
and gas producing activities, our equity method investee, Kinder Morgan Energy
Partners, has significant oil and gas producing activities.  Additional
information on Kinder Morgan Energy Partners’ oil and gas producing activities
are contained in its Annual Report on Form 10-K for the year ended December 31,
2009, which is included in this filing as Exhibit 99.1 and incorporated herein
by reference.
   31
 Kinder
Morgan Management, LLC Form 10-K
  
 Item
      9.
              Changes in and Disagreements with
      Accountants on Accounting and Financial
  Disclosure.
 
 None.
  Item 9A.
              Controls
      and Procedures.
 
 Conclusion Regarding the
Effectiveness of Disclosure Controls and Procedures
  As
of December 31, 2009, our management, including our Chief Executive Officer and
Chief Financial Officer, has evaluated the effectiveness of the design and
operation of our disclosure controls and procedures pursuant to Rule 13a-15(b)
under the Securities Exchange Act of 1934. There are inherent limitations to the
effectiveness of any system of disclosure controls and procedures, including the
possibility of human error and the circumvention or overriding of the controls
and procedures. Accordingly, even effective disclosure controls and procedures
can only provide reasonable assurance of achieving their control objectives.
Based upon and as of the date of the evaluation, our Chief Executive Officer and
our Chief Financial Officer concluded that the design and operation of our
disclosure controls and procedures were effective to provide reasonable
assurance that information required to be disclosed in the reports we file and
submit under the Securities Exchange Act of 1934 is recorded, processed,
summarized and reported as and when required, and is accumulated and
communicated to our management, including our Chief Executive Officer and our
Chief Financial Officer, to allow timely decisions regarding required
disclosure.
  Management’s Report on Internal Control
over Financial Reporting
  Our
management is responsible for establishing and maintaining adequate internal
control over financial reporting, as such term is defined in Exchange Act Rule
13a-15(f). Because of its inherent limitations, internal control over financial
reporting may not prevent or detect misstatements. Projections of any evaluation
of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of
compliance with the policies or procedures may deteriorate. Under the
supervision and with the participation of our management, including our Chief
Executive Officer and Chief Financial Officer, we conducted an evaluation of the
effectiveness of our internal control over financial reporting based on the
framework in Internal Control
– Integrated Frameworkissued by the Committee of Sponsoring
Organizations of the Treadway Commission. Based on our evaluation under the
framework in Internal Control
– Integrated Framework, our management concluded that our internal
control over financial reporting was effective as of December 31, 2009. The
effectiveness of our internal control over financial reporting as of December
31, 2009 has been audited by PricewaterhouseCoopers LLP, an independent
registered public accounting firm, as stated in their attestation report which
appears herein.
  Changes in Internal Control over
Financial Reporting
  There
has been no change in our internal control over financial reporting during the
fourth quarter of 2009 that has materially affected, or is reasonably likely to
materially affect, our internal control over financial reporting.
  Item 9B.
              Other
      Information.
 
 None
   32
 Kinder
Morgan Management, LLC Form 10-K
  PART III
  Item 10.
              Directors,
      Executive Officers and Corporate
Governance.
 
 Set
forth below is certain information concerning our directors and executive
officers. All directors are elected annually by, and may be removed by, Kinder
Morgan G.P., Inc. as the sole holder of our voting shares. All officers serve at
the discretion of our board of directors.
  Name
              Age
              PositionRichard
      D. Kinder
              65
              Director,
      Chairman and Chief Executive OfficerC.
      Park Shaper
              41
              Director
      and PresidentSteven
      J. Kean
              48
              Executive
      Vice President and Chief Operating OfficerGary
      L. Hultquist
              66
              DirectorC.
      Berdon Lawrence
              67
              DirectorPerry
      M. Waughtal
              74
              DirectorKimberly
      A. Dang
              40
              Vice
      President and Chief Financial OfficerJeffrey
      R. Armstrong
              41
              Vice
      President (President, Terminals)Thomas
      A. Bannigan
              56
              Vice
      President (President, Products Pipelines)Richard
      T. Bradley
              54
              Vice
      President (President, CO2)David
      D. Kinder
              35
              Vice
      President, Corporate Development and TreasurerJoseph
      Listengart
              41
              Vice
      President, General Counsel and SecretaryThomas A. Martin
              48
              Vice
      President (President, Natural Gas Pipelines)James E. Street
              53
              Vice
      President, Human Resources and
Administration
 
 Richard D. Kinder is
Director, Chairman and Chief Executive Officer of Kinder Morgan Management, LLC,
Kinder Morgan G.P., Inc. and Kinder Morgan, Inc. Mr. Kinder has served as
Director, Chairman and Chief Executive Officer of Kinder Morgan Management, LLC
since its formation in February 2001. He was elected Director, Chairman and
Chief Executive Officer of Kinder Morgan, Inc. in October 1999. He was elected
Director, Chairman and Chief Executive Officer of Kinder Morgan G.P., Inc. in
February 1997. Mr. Kinder was elected President of Kinder Morgan Management,
LLC, Kinder Morgan G.P., Inc. and Kinder Morgan, Inc. in July 2004 and served as
President until May 2005. He has also served as Chief Manager, and as a member
of the Board of Managers, of Kinder Morgan Holdco LLC since May 2007. Mr. Kinder
is the uncle of David Kinder, Vice President, Corporate Development and
Treasurer of Kinder Morgan Management, LLC, Kinder Morgan G.P., Inc. and Kinder
Morgan, Inc.
  C. Park Shaper is Director
and President of Kinder Morgan Management, LLC, Kinder Morgan G.P., Inc. and
Kinder Morgan, Inc. Mr. Shaper was elected President of Kinder Morgan
Management, LLC, Kinder Morgan G.P., Inc. and Kinder Morgan, Inc. in May 2005.
He served as Executive Vice President of Kinder Morgan Management, LLC, Kinder
Morgan G.P., Inc. and Kinder Morgan, Inc. from July 2004 until May 2005. Mr.
Shaper was elected Director of Kinder Morgan Management, LLC and Kinder Morgan
G.P., Inc. in January 2003 and of Kinder Morgan, Inc. in May 2007. He was
elected Vice President, Treasurer and Chief Financial Officer of Kinder Morgan
Management, LLC upon its formation in February 2001, and served as its Treasurer
until January 2004, and its Chief Financial Officer until May 2005. He was
elected Vice President, Treasurer and Chief Financial Officer of Kinder Morgan,
Inc. in January 2000, and served as its Treasurer until January 2004, and its
Chief Financial Officer until May 2005. Mr. Shaper was elected Vice President,
Treasurer and Chief Financial Officer of Kinder Morgan G.P., Inc. in January
2000, and served as its Treasurer until January 2004 and its Chief Financial
Officer until May 2005. He has also served as President, and as a member of the
Board of Managers, of Kinder Morgan Holdco LLC since May 2007. He received a
Masters of Business Administration degree from the J.L. Kellogg Graduate School
of Management at Northwestern University. Mr. Shaper also has a Bachelor of
Science degree in Industrial Engineering and a Bachelor of Arts degree in
Quantitative Economics from Stanford University. Mr. Shaper is also a trust
manager of Weingarten Realty Investors.
  Steven J. Kean is Executive
Vice President and Chief Operating Officer of Kinder Morgan Management, LLC,
Kinder Morgan G.P., Inc. and Kinder Morgan, Inc. Mr. Kean was elected Executive
Vice President and Chief Operating Officer of Kinder Morgan Management, LLC,
Kinder Morgan G.P., Inc. and Kinder Morgan, Inc. in January 2006. He also served
as President Natural Gas Pipelines of Kinder Morgan Management, LLC and Kinder
Morgan G.P., Inc. from July 2008 to November 2009. He served as Executive Vice
President, Operations of Kinder Morgan Management, LLC, Kinder Morgan G.P., Inc.
and Kinder Morgan, Inc. from May 2005 to January 2006. He served as President,
Texas Intrastate Pipeline Group from June 2002 until May 2005. He served as Vice
President of Strategic Planning for the Kinder Morgan Gas Pipeline Group from
January 2002 until June 2002. He has also served as Chief Operating Officer, and
as a member of the Board of Managers, of Kinder Morgan Holdco LLC since May
2007. Mr. Kean received his Juris Doctor from the University of Iowa in May 1985
and received a Bachelor of Arts degree from Iowa State University in May
1982.
   33
 Item
      10.Directors
      and Executive Officers of the Registrant.
    (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  Gary L. Hultquist is a
Director of Kinder Morgan Management, LLC and Kinder Morgan G.P., Inc. Mr.
Hultquist was elected Director of Kinder Morgan Management, LLC upon its
formation in February 2001. He was elected Director of Kinder Morgan G.P., Inc.
in October 1999. Since 1995, Mr. Hultquist has been the Managing Director of
Hultquist Capital, LLC, a San Francisco-based strategic and merger advisory
firm.  Since 2009, Mr. Hultquist has also been Chairman of the board
of directors of Prairie Bankers, LLC, a data center development company, and a
Principal of NewCap Partners, a FINRA-registered broker-dealer and investment
bank, specializing in technology, mergers and acquisitions.
  C. Berdon Lawrence is a
Director of Kinder Morgan Management, LLC and Kinder Morgan G.P., Inc. Mr.
Lawrence was elected Director of Kinder Morgan G.P., Inc. and Kinder Morgan
Management, LLC in January 2009. Since October 1999, Mr. Lawrence has served
Kirby Corporation, a publicly traded inland tank barge operator, as Chairman of
the Board. Prior to that, he served for 30 years as President of Hollywood
Marine, an inland tank barge company of which he was the founder. Mr. Lawrence
holds an M.B.A. degree and a B.B.A. degree in business administration from
Tulane University.
  Perry M. Waughtal is a
Director of Kinder Morgan Management, LLC and Kinder Morgan G.P., Inc. Mr.
Waughtal was elected Director of Kinder Morgan Management, LLC upon its
formation in February 2001. Mr. Waughtal was elected Director of Kinder Morgan
G.P., Inc. in April 2000. Since 1994, Mr. Waughtal has been the Chairman of
Songy Partners Limited, an Atlanta, Georgia-based real estate investment
company.  Mr. Waughtal was a director of HealthTronics, Inc. from 2004
to 2009.
  Kimberly A. Dang is Vice
President, and Chief Financial Officer of Kinder Morgan Management, LLC, Kinder
Morgan G.P., Inc. and Kinder Morgan, Inc. Mrs. Dang was elected Chief Financial
Officer of Kinder Morgan Management, LLC, Kinder Morgan G.P., Inc. and Kinder
Morgan, Inc. in May 2005. She served as Treasurer of Kinder Morgan Management,
LLC, Kinder Morgan G.P., Inc. and Kinder Morgan, Inc. from January 2004 to May
2005. She was elected Vice President, Investor Relations of Kinder Morgan
Management, LLC, Kinder Morgan G.P., Inc. and Kinder Morgan, Inc. in July 2002
and served in that role until January 2009. From November 2001 to July 2002, she
served as Director, Investor Relations of Kinder Morgan Management, LLC, Kinder
Morgan G.P., Inc. and Kinder Morgan, Inc. She has also served as Chief Financial
Officer of Kinder Morgan Holdco LLC since May 2007. Mrs. Dang received a Masters
in Business Administration degree from the J.L. Kellogg Graduate School of
Management at Northwestern University and a Bachelor of Business Administration
degree in accounting from Texas A&M University.
  Jeffrey R. Armstrong is Vice
President (President, Terminals) of Kinder Morgan Management, LLC and Kinder
Morgan G.P., Inc. Mr. Armstrong became Vice President (President, Terminals) in
July 2003. He served as President, Kinder Morgan Liquids Terminals LLC from
March 1, 2001, when the company was formed via the acquisition of GATX
Terminals, through July 2003. From 1994 to 2001, Mr. Armstrong worked for GATX
Terminals, where he was General Manager of their East Coast operations. He
received his Bachelor’s degree from the United States Merchant Marine Academy
and an MBA from the University of Notre Dame.
  Thomas A. Bannigan is Vice
President (President, Products Pipelines) of Kinder Morgan Management, LLC and
Kinder Morgan G.P., Inc. and President and Chief Executive Officer of Plantation
Pipe Line Company. Mr. Bannigan was elected Vice President (President, Products
Pipelines) of Kinder Morgan Management, LLC upon its formation in February 2001.
He was elected Vice President (President, Products Pipelines) of Kinder Morgan
G.P., Inc. in October 1999. Mr. Bannigan has served as President and Chief
Executive Officer of Plantation Pipe Line Company since May 1998. Mr. Bannigan
received his Juris Doctor, cum laude, from Loyola University in 1980 and
received a Bachelors degree from the State University of New York in
Buffalo.
  Richard T. Bradley is Vice
President (President, CO2) of Kinder
Morgan Management, LLC and of Kinder Morgan G.P., Inc. and President of Kinder
Morgan CO2 Company,
L.P. Mr. Bradley was elected Vice President (President, CO2) of Kinder
Morgan Management, LLC upon its formation in February 2001 and Vice President
(President, CO2) of Kinder
Morgan G.P., Inc. in April 2000. Mr. Bradley has been President of Kinder Morgan
CO2
Company, L.P. (formerly known as Shell CO2 Company,
Ltd.) since March 1998. Mr. Bradley received a Bachelor of Science in Petroleum
Engineering from the University of Missouri at Rolla.
  David D. Kinder is Vice
President, Corporate Development and Treasurer of Kinder Morgan Management, LLC,
Kinder Morgan G.P., Inc. and Kinder Morgan, Inc. Mr. Kinder was elected
Treasurer of Kinder Morgan Management, LLC, Kinder Morgan G.P., Inc. and Kinder
Morgan, Inc. in May 2005. He was elected Vice President, Corporate Development
of Kinder Morgan Management, LLC, Kinder Morgan G.P., Inc. and Kinder Morgan,
Inc. in October 2002. He served as manager of corporate development for Kinder
Morgan G.P., Inc. and Kinder Morgan, Inc. from January 2000 to October 2002. He
has also served as Treasurer of Kinder Morgan Holdco LLC since May 2007. Mr.
Kinder graduated cum laude with a Bachelors degree in Finance from Texas
Christian University in 1996. Mr. Kinder is the nephew of Richard D.
Kinder.
  Joseph Listengart is Vice
President, General Counsel and Secretary of Kinder Morgan Management, LLC,
Kinder Morgan G.P., Inc. and Kinder Morgan, Inc. Mr. Listengart was elected Vice
President, General Counsel and Secretary of Kinder Morgan Management, LLC upon
its formation in February 2001. He was elected Vice President and General
Counsel
   34
 Item
      10.Directors
      and Executive Officers of the Registrant.
    (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  of
Kinder Morgan G.P., Inc. and Vice President, General Counsel and Secretary of
Kinder Morgan, Inc. in October 1999. Mr. Listengart was elected Kinder Morgan
G.P., Inc.’s Secretary in November 1998 and has been an employee of Kinder
Morgan G.P., Inc. since March 1998. He has also served as General Counsel and
Secretary of Kinder Morgan Holdco LLC since May 2007. Mr. Listengart received
his Masters in Business Administration from Boston University in January 1995,
his Juris Doctor, magna cum laude, from Boston University in May 1994, and his
Bachelor of Arts degree in Economics from Stanford University in June
1990.
  Thomas A. Martin is Vice
President (President, Natural Gas Pipelines) of Kinder Morgan Management, LLC
and Kinder Morgan G.P., Inc.   Mr. Martin was elected Vice
President (President, Natural Gas Pipelines) of Kinder Morgan Management, LLC
and Kinder Morgan G.P., Inc. in November 2009.  Mr. Martin served as
President, Texas Intrastate Pipeline Group from May 2005 until November
2009.  From April 2003 to May 2005 he served as Vice President of
Storage and Optimization for our Texas Intrastate Pipeline Group.  Mr.
Martin received a Bachelor of Business Administration degree from Texas A&M
University.
  James E. Street is Vice
President, Human Resources and Administration of Kinder Morgan Management, LLC,
Kinder Morgan G.P., Inc. and Kinder Morgan, Inc. Mr. Street was elected Vice
President, Human Resources and Administration of Kinder Morgan Management, LLC
upon its formation in February 2001. He was elected Vice President, Human
Resources and Administration of Kinder Morgan G.P., Inc. and Kinder Morgan, Inc.
in August 1999. Mr. Street received a Masters of Business Administration degree
from the University of Nebraska at Omaha and a Bachelor of Science degree from
the University of Nebraska at Kearney.
  Qualifications of
Directors
  Mr.
Kinder’s experience as our Chief Executive Officer since our formation in 2001
and of Kinder Morgan G.P., Inc. since 1997, combined with his significant equity
ownership of Kinder Morgan Holdco LLC, which indirectly owns all the common
equity of Kinder Morgan G.P., Inc., uniquely qualify him to serve as the
Chairman and a Director of us and Kinder Morgan G.P., Inc.
  Mr.
Shaper’s experience as our and Kinder Morgan G.P., Inc.’s President since 2005,
together with his experience as an executive officer of various Kinder Morgan
entities since 2000, provide him intimate knowledge of our operations, finances
and strategy.
  Mr.
Hultquist has over 20 years of experience as an investment banker and over 15
years experience practicing law.  This combination of experience
provides him an understanding of the business and legal risks applicable to
us.
  Mr.
Lawrence has over 40 years of experience as an executive in the inland tank
barge business, giving him both experience heading a publicly traded company and
a thorough knowledge of the transportation business in which Kinder Morgan
Energy Partners is engaged.
  Mr.
Waughtal served for 30 years as Vice Chairman of development and operations and
as Chief Financial Officer of Hines Interests Limited Partnership, a privately
owned, international real estate firm, and for the last 15 years has been
Chairman of Songy Partners Limited, providing him with strategic planning,
management, finance and accounting experience.
  Corporate
Governance
  We
have a separately designated standing audit committee established in accordance
with Section 3(a)(58)(A) of the Securities Exchange Act of 1934 comprised of
Messrs. Hultquist, Lawrence and Waughtal. Mr. Waughtal is the chairman of the
audit committee and has been determined by the board to be an “audit committee
financial expert.” The board has determined that all of the members of the audit
committee are independent as described under the relevant
standards.
  We
have not, nor has Kinder Morgan Energy Partners, L.P. (“Kinder Morgan Energy
Partners”) or its general partner, made, within the preceding three years,
contributions to any tax-exempt organization in which any of our independent
directors serves as an executive officer that in any single fiscal year exceeded
the greater of $1.0 million or 2% of such tax-exempt organization’s consolidated
gross revenues.
  We
make available free of charge within the “Investors” information section of our
internet website, at www.kindermorgan.com, the governance guidelines, the
charters of the audit committee, compensation committee and nominating and
governance committee, and our code of business conduct and ethics (which applies
to senior financial and accounting officers and the chief executive officer,
among others). We intend to disclose any amendments to our code of business
conduct and ethics that would otherwise be disclosed on Form 8-K and any waiver
from a provision of that code granted to our executive officers or directors
that would otherwise be disclosed on Form 8-K on our internet website within
four business days following such amendment or waiver. The information contained
on or connected to our internet website
   35
 Item
      10.Directors
      and Executive Officers of the Registrant.
    (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  is
not incorporated by reference into this Form 10-K and should not be considered
part of this or any other report that we file with or furnish to the
SEC.
  Interested
parties may contact our lead director, the chairpersons of any of the board’s
committees, the independent directors as a group or the full board by mail to
Kinder Morgan Management, LLC, 500 Dallas Street, Suite 1000, Houston, Texas
77002, Attention: General Counsel, or by e-mail within the “Contact Us” section
of our internet website, at www.kindermorgan.com. Any communication should
specify the intended recipient.
  Section
16(a) Beneficial Ownership Reporting Compliance
  Section
16 of the Securities Exchange Act of 1934 requires our directors and officers,
and persons who own more than 10% of a registered class of our equity
securities, to file initial reports of ownership and reports of changes in
ownership with the SEC. Such persons are required by SEC regulation to furnish
us with copies of all Section 16(a) forms they file.
  Based
solely on our review of the copies of such forms furnished to us and written
representations from our executive officers and directors, we believe that all
Section 16(a) filing requirements were met during 2009.
  Item 11.
              Executive
      Compensation
 
 All
of our individual executive officers and directors serve in the same capacities
for Kinder Morgan G.P., Inc. Certain of those executive officers also serve as
executive officers of Kinder Morgan, Inc. and of Kinder Morgan Holdco LLC,
Kinder Morgan, Inc.’s privately owned parent company. Except as indicated
otherwise, all information in this report with respect to compensation of
executive officers describes the total compensation received by those persons in
all capacities for services rendered to Kinder Morgan Management, LLC, Kinder
Morgan G.P., Inc., Kinder Morgan, Inc. and their respective affiliates;
consequently, in this Item 11 “we,” “our” or “us” refers to Kinder Morgan
Management, LLC, Kinder Morgan G.P., Inc. and, where appropriate, Kinder Morgan,
Inc.
  Compensation
Discussion and Analysis
  Program
Objectives
  We
are a publicly traded Delaware limited liability company. We are a limited
partner in Kinder Morgan Energy Partners, and manage and control its business
and affairs pursuant to a delegation of control agreement. We seek to attract
and retain executives who will help us achieve our primary business strategy
objective of growing the value of Kinder Morgan Energy Partners’ portfolio of
businesses for the benefit of our shareholders and its unitholders. To help
accomplish this goal, we have designed an executive compensation program that
rewards individuals with competitive compensation that consists of a mix of
cash, benefit plans and long-term compensation, with a majority of executive
compensation tied to the “at risk” portions of the annual cash
bonus.
  The
key objectives of our executive compensation program are to attract, motivate
and retain executives who will advance our overall business strategies and
objectives to create and return value to our shareholders and Kinder Morgan
Energy Partners’ unitholders. We believe that an effective executive
compensation program should link total compensation to financial performance and
to the attainment of short- and long-term strategic, operational, and financial
objectives. We also believe it should provide competitive total compensation
opportunities at a reasonable cost. In designing our executive compensation
program, we have recognized that our executives have a much greater portion of
their overall compensation at-risk than do our other employees; consequently, we
have tried to establish the at-risk portions of our executive total compensation
at levels that recognize their much increased level of responsibility and their
ability to influence business results.
  Currently,
our executive compensation program is principally comprised of the following two
elements: (i) base cash salary and (ii) possible annual cash bonus (reflected in
the Summary Compensation Table below as Non-Equity Incentive Plan
Compensation).  In addition, we believe that the compensation of our
(i) principal executive officer, (ii) principal financial officer and (iii)
three most highly compensated executive officers (other than our principal
executive officer and principal financial officer) serving at fiscal year end
2009 and named below (collectively referred to in this Item 11 as our “named
executive officers”), should be directly and materially tied to the financial
performance of Kinder Morgan, Inc. and Kinder Morgan Energy Partners, and should
be aligned with the interests of Kinder Morgan Energy Partners’ unitholders.
Therefore, the majority of our named executive officers’ compensation is
allocated to the “at risk” portion of our compensation program—the annual cash
bonus. Accordingly, for 2009, our executive compensation was weighted toward the
cash bonus, payable on the basis of the achievement of (i) a free cash flow
target by Kinder Morgan, Inc. (described more fully below) and (ii) a cash
distribution per common unit target by Kinder Morgan Energy
Partners.
   36
 Item 11.Executive
      Compensation. (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  We
pay our executive officers a base salary not to exceed $300,000.  We
believe the base salaries paid to our executive officers are below the industry
average for similarly positioned executives, based upon independent salary
surveys in which we participate, and we periodically compare our executive
compensation components with market information. The purpose of this comparison
is to ensure that our total compensation package operates effectively, remains
both reasonable and competitive with the energy industry, and is generally
comparable to the compensation offered by companies of similar size and scope as
us. We also keep abreast of current trends, developments, and emerging issues in
executive compensation, and if appropriate, will obtain advice and assistance
from outside legal, compensation or other advisors.
  We
have endeavored to design our executive compensation program and practices with
appropriate consideration of all tax, accounting, legal and regulatory
requirements. Section 162(m) of the Internal Revenue Code limits the
deductibility of certain compensation for our executive officers to $1.0 million
of compensation per year; however, if specified conditions are met, certain
compensation may be excluded from consideration of the $1.0 million limit. Since
the bonuses paid to our executive officers are paid under Kinder Morgan, Inc.’s
Annual Incentive Plan as a result of reaching designated financial targets
established by Mr. Richard D. Kinder and our compensation committee, we expect
that all compensation paid to our executives would qualify for deductibility
under federal income tax rules. Though we are advised that limited partnerships
such as Kinder Morgan Energy Partners and private companies, such as Kinder
Morgan, Inc., are not subject to section 162(m), Kinder Morgan Energy Partners
and Kinder Morgan, Inc. have chosen to generally operate as if this code section
does apply to Kinder Morgan Energy Partners and Kinder Morgan, Inc. as a measure
of appropriate governance.
 For
each of the years ended December 31, 2009, 2008 and 2007, no restricted stock or
options to purchase our shares or shares of Kinder Morgan, Inc. or units of
Kinder Morgan Energy Partners were granted to any of our named executive
officers; however, as a result of Kinder Morgan, Inc.’s 2007 Going Private
transaction, Kinder Morgan Holdco LLC awarded members of Kinder Morgan, Inc.’s
management Class A-1 and Class B units of Kinder Morgan Holdco LLC. While not
awarded by us or Kinder Morgan Energy Partners, our compensation committee was
aware of the units awarded by Kinder Morgan Holdco LLC and took these awards
into account as components of the total compensation received by our executive
officers in 2007.
  In
accordance with generally accepted accounting principles, Kinder Morgan Holdco
LLC is required to recognize compensation expense in connection with the Class
A-1 and Class B units over the expected life of such units. As a subsidiary of
Kinder Morgan Holdco LLC, Kinder Morgan Energy Partners is, under accounting
rules, allocated a portion of this compensation expense, although neither Kinder
Morgan Energy Partners nor any of its subsidiaries have any obligation, nor does
Kinder Morgan Energy Partners expect to pay any amounts in respect of such
units. The Class A-1 and Class B units awarded to members of our management may
be viewed as a replacement of restricted stock as a component of long-term
executive compensation. For more information concerning the Kinder Morgan Holdco
LLC units; see “Elements of Compensation—Other Compensation—Kinder Morgan Holdco
LLC Units” below.
  Behaviors
Designed to Reward
  Our
executive compensation program is designed to reward individuals for advancing
our business strategies and the interests of our stakeholders, and we prohibit
engaging in any detrimental activities, such as performing services for a
competitor, disclosing confidential information or violating appropriate
business conduct standards. Each executive is held accountable to uphold and
comply with company guidelines, which require the individual to maintain a
discrimination-free workplace, to comply with orders of regulatory bodies, and
to maintain high standards of operating safety and environmental
protection.
  Unlike
many companies, we have no executive perquisites, supplemental executive
retirement, non-qualified supplemental defined benefit/contribution, deferred
compensation or split dollar life insurance programs. Additionally, we do not
have employment agreements, other than Kinder Morgan, Inc.’s agreement with its
Chairman and Chief Executive Officer, Richard D. Kinder, special severance
agreements or change of control agreements for our executives. Our executives
are eligible for the same severance policy as our workforce, which caps
severance payments at an amount equal to six months of salary. We have no
executive company cars or executive car allowances nor do we pay for financial
planning services. Additionally, we do not own any corporate aircraft, and we do
not pay for executives to fly first class. We believe that we are currently
below competitive levels for comparable companies in this area of our overall
compensation package; however, we have no current plans to change our policy of
not offering such executive benefits, perquisite programs or special executive
severance arrangements.
  At
his request, Mr. Richard D. Kinder, our Chairman and Chief Executive Officer,
receives $1 of base salary per year and no other compensation from Kinder
Morgan, Inc. Additionally, Mr. Kinder has requested that he receive no
annual bonus or other compensation from Kinder Morgan Energy Partners (other
than the unit awards by Kinder Morgan Holdco LLC he received in 2007). Mr.
Kinder does not have any deferred compensation, supplemental retirement or any
other special benefit, compensation or perquisite arrangement with Kinder Morgan
Energy Partners. Each year, Mr. Kinder reimburses us for his portion of health
care premiums and parking expenses. Mr. Kinder was awarded Class B units by and
in Kinder Morgan Holdco LLC in connection with Kinder Morgan, Inc.’s Going
Private transaction, and while Kinder Morgan Energy Partners
   37
 Item 11.Executive
      Compensation. (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  is,
under accounting rules, allocated compensation expense attributable to such
Class B units, it has no obligation, nor does it expect, to pay any amounts in
connection with the Class B units.
  Elements
of Compensation
  As
outlined above, our executive compensation program currently is principally
composed of two elements: (i) a base cash salary and (ii) a possible annual cash
bonus. Mr. Richard D. Kinder and our compensation committee review and approve
annually the financial goals and objectives of both Kinder Morgan, Inc. and
Kinder Morgan Energy Partners that are relevant to the compensation of our named
executive officers.
  Information
is solicited from relevant members of senior management regarding the
performance of our named executive officers, and determinations and
recommendations are made at the regularly scheduled first quarter board and
compensation committee meetings. If any of our or Kinder Morgan G.P., Inc.’s
executive officers is also an executive officer of Kinder Morgan, Inc., the
compensation determination or recommendation (i) may be with respect to the
aggregate compensation to be received by such officer from Kinder Morgan, Inc.,
Kinder Morgan G.P., Inc. and us that is to be allocated to Kinder Morgan, Inc.,
Kinder Morgan G.P. and us or alternatively (ii) may be with respect to the
compensation to be received by such executive officers from Kinder Morgan, Inc.,
Kinder Morgan G.P., Inc. or us, as the case may be, in which case such
compensation will be allocated among Kinder Morgan, Inc., on the one hand, and
Kinder Morgan G.P., Inc, Kinder Morgan Energy Partners and us, on the
other.
  Base
Salary
  Base
salary is paid in cash. Until October 2008, all of our named executive officers,
with the exception of our Chairman and Chief Executive Officer who receives $1
of base salary per year as described above, were paid a base salary of $200,000
per year. The cap for our executive officers’ base salaries has now been raised
to an annual amount not to exceed $300,000. Generally, we believe that our
executive officers’ base salaries are below base salaries for executives in
similar positions and with similar responsibilities at companies of comparable
size and scope, based upon independent salary surveys in which we
participate.
  Possible
Annual Cash Bonus (Non-Equity Cash Incentive)
  Our
possible annual cash bonuses are provided for under Kinder Morgan, Inc.’s Annual
Incentive Plan, which became effective January 18, 2005. The Annual
Incentive Plan ends after the 2009 bonus year; however, for the 2010 bonus year,
Kinder Morgan, Inc.’s and our Boards of Directors have approved a new Annual
Incentive Plan that mirrors the current plan. The overall purpose of the Annual
Incentive Plan is to increase our executive officers’ and our employees’
personal stake in the continued success of Kinder Morgan, Inc. and Kinder Morgan
Energy Partners by providing to them additional incentives through the possible
payment of annual cash bonuses. Under the plan, annual cash bonuses are budgeted
for at the beginning of each year and may be paid to our executive officers and
other employees depending on whether Kinder Morgan, Inc. and its subsidiaries
(including Kinder Morgan Energy Partners) meet certain performance objectives.
Assuming the performance objectives are met, the budgeted pool of bonus dollars
is further assessed and potentially decreased or increased based on our and our
subsidiaries’ overall performance in a variety of areas, including safety and
environmental goals and regulatory compliance.
  Once
the aggregate pool of bonus dollars is determined, further assessment is done at
the business segment level. Each business segment’s financial performance as
well as its safety and environmental goals and regulatory compliance are
assessed and factored, positively or negatively, into the amount of bonus
dollars allocated to that business segment. The business unit’s safety and
environmental goals and regulatory compliance are assessed against its
performance in these areas in previous years and industry benchmarks. These
assessments as well as individual performance factor into bonus awards at the
business segment level.
  Whether
Kinder Morgan, Inc. and its subsidiaries (including Kinder Morgan Energy
Partners) have met their overall performance objectives, as well as how they
have performed with respect to a variety of areas such as safety and
environmental goals and regulatory compliance, negatively or positively, impacts
the bonuses of our named executive officers. Individual performance also impacts
their bonuses. Our named executive officers have different areas of
responsibility that require different skill sets. Consequently, many of the
skills and aspects of performance taken into account in determining the bonus
awards for the respective named executive officers differ based on their areas
of responsibility. However, some skills, such as working within a budget, are
applicable for all of the executive officers. While no formula is used in
assessing individual performance, the process of assessing the performance of
each of the named executive officers is consistent, with each such officer being
assessed relative to the officer’s performance of his or her job in preceding
years as well as with respect to specific matters assigned to the officer over
the course of the year. Individual performance, as described above, as well as
safety and environmental goals and regulatory compliance were taken into account
with respect to the 2009 awards.
   38
 Item 11.Executive
      Compensation. (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  All
of Kinder Morgan, Inc.’s employees and the employees of its subsidiaries,
including KMGP Services Company, Inc., are eligible to participate in the plan,
except employees who are included in a unit of employees covered by a collective
bargaining agreement unless such agreement expressly provides for eligibility
under the plan. However, only eligible employees who are selected by our
compensation committee will actually participate in the plan and receive
bonuses.
  The
plan consists of two components: the executive plan component and the
non-executive plan component. Our Chairman and Chief Executive Officer and all
employees who report directly to the Chairman are eligible for the executive
plan component; however, as stated elsewhere in this “Compensation Discussion
and Analysis,” Mr. Richard D. Kinder, our Chairman and Chief Executive Officer,
has elected to not participate under the plan. As of December 31, 2009,
excluding Mr. Richard D. Kinder, eleven of our current officers were eligible to
participate in the executive plan component. All other U.S. and Canadian
eligible employees were eligible for the non-executive plan
component.
  Following
recommendations and determinations, our compensation committee establishes which
of our employees will be eligible to participate under the executive plan
component of the plan. At or before the start of each calendar year (or later,
to the extent allowed under Internal Revenue Code regulations), performance
objectives for that year are identified. The performance objectives are based on
one or more of the criteria set forth in the plan. A bonus opportunity is
established for each executive officer, which is the bonus the executive officer
could earn if the performance objectives are fully satisfied. A minimum
acceptable level of achievement of each performance objective may be set, below
which no bonus is payable with respect to that objective. Additional levels may
be set above the minimum (which may also be above the targeted performance
objective), with a formula to determine the percentage of the bonus opportunity
to be earned at each level of achievement above the minimum. Performance at a
level above the targeted performance objective may entitle the executive officer
to earn a bonus in excess of 100% of the bonus opportunity. However, the maximum
payout to any individual under the plan for any year is $2.0 million, and our
compensation committee has the discretion to reduce the bonus amounts payable by
Kinder Morgan Energy Partners in any performance period.
  Performance
objectives may be based on one or more of the following criteria:
  ·
              Kinder
      Morgan, Inc.’s EBITDA less capital spending, or the EBITDA less capital
      spending of one of its subsidiaries or business
  units;
 ·
              Kinder
      Morgan, Inc.’s free cash flow or the free cash flow of one of its
      subsidiaries or business units;
 ·
              Kinder
      Morgan, Inc.’s net income or the net income of one of its subsidiaries or
      business units;
 ·
              Kinder
      Morgan, Inc.’s revenues or the revenues of one of its subsidiaries or
      business units;
 ·
              Kinder
      Morgan, Inc.’s unit revenues minus unit variable costs or the unit
      revenues minus unit variable costs of one of its subsidiaries or business
      units;
 ·
              Kinder
      Morgan, Inc.’s return on capital, return on equity, return on assets, or
      return on invested capital, or the return on capital, return on equity,
      return on assets, or return on invested capital of one of its subsidiaries
      or business units;
 ·
              Kinder
      Morgan, Inc.’s free cash flow, cash flow return on assets or cash flows
      from operating activities, or the cash flow return on assets or cash flows
      from operating activities of one of its subsidiaries or business
      units;
 ·
              Kinder
      Morgan, Inc.’s capital expenditures or the capital expenditures of one of
      its subsidiaries or business units;
 ·
              Kinder
      Morgan, Inc.’s operations and maintenance expense or general and
      administrative expense, or the operations and maintenance expense or
      general and administrative expense of one of its subsidiaries or business
      units;
 ·
              Kinder
      Morgan, Inc.’s debt-equity ratios and key profitability ratios, or the
      debt-equity ratios and key profitability ratios of one of its subsidiaries
      or business units; or
 ·
              Kinder
      Morgan Energy Partners’ distribution per
unit.
  Two
financial performance objectives were set for 2009 under both the executive plan
component and the non-executive plan component. The 2009 financial performance
objectives were (i) $4.20 in cash distributions per common unit by Kinder Morgan
Energy Partners, (ii) $646 million of free cash flow by Kinder Morgan,
Inc., which are distributions received from Kinder Morgan Energy Partners
(including value received in the form of our units) and NGPL less cash taxes,
cash interest and general and administrative expenses, and (iii) improving our
environmental, health, and safety performance objectives by beating industry
average incident rates and improving our incident rates compared to our previous
three year averages Kinder Morgan Energy Partners’ targets were the same as its
previously disclosed 2009 budget expectations. At the end of 2009 the extent to
which the financial performance objectives had been attained and the extent to
which the bonus opportunity had been earned under the formula previously
established by our compensation committee was determined.
  The
2009 bonuses for our executive officers were overwhelmingly based on whether the
established financial performance objectives were met. Other factors, such as
individual over performance or under performance, were considered. With respect
to using these other factors in assessing performance, our compensation
committee did not find it practicable to, and did not, use a “score card”, or
quantify or assign relative weight to the specific criteria considered. The
amount of a downward or upward adjustment, subject to the maximum bonus
opportunity that was established at the beginning of the
   39
 Item 11.Executive
      Compensation. (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  year,
was not subject to a formula. Specific aspects of an individual’s performance
were not identified in advance. Rather, the adjustment was based on our
compensation committee’s judgment, giving consideration to the totality of the
record presented, including the individual’s performance, and the magnitude of
any positive or negative factors.
  The
table below sets forth the bonus opportunities that could have been payable by
Kinder Morgan Energy Partners and Kinder Morgan, Inc., collectively, to our
executive officers for 100% achievement of the performance objectives
established for 2009. The amount of the portion of the bonus actually paid by
Kinder Morgan Energy Partners to any executive officer under the plan may be
reduced from the amount of any bonus opportunity open to such executive officer.
Because payments under the plan for our executive officers are determined by
comparing actual performance to the performance objectives established each year
for eligible executive officers chosen to participate for that year, it is not
possible to accurately predict any amounts that will actually be paid under the
executive plan portion of the plan over the life of the plan. Our compensation
committee set bonus opportunities under the plan for 2009 for the executive
officers at dollar amounts in excess of that which were expected to actually be
paid under the plan. The actual payout amounts under the Non-Equity Incentive
Plan Awards made for 2009 (paid in 2010) are set forth in the Summary
Compensation Table included in this report in the column entitled “Non-Equity
Incentive Plan Compensation.”
  Kinder
Morgan, Inc. Annual Incentive Plan
 Bonus
Opportunities for 2009
  Name
      and Principal Position
              
              Dollar
      ValueRichard
      D. Kinder, Chairman and Chief Executive Officer
              
              $
              -
              (a)Kimberly
      A. Dang, Vice President and Chief Financial Officer
              
              
              1,000,000
              (b)Steven
      J. Kean, Executive Vice President and Chief Operating
    Officer
              
              
              1,500,000
              (c)Joseph
      Listengart, Vice President, General Counsel and Secretary
              
              
              1,000,000
              (b)C.
      Park Shaper, Director and President
              
              
              1,500,000
              (c)
 __________
 (a)
              Declined
      to participate.(b)
              Under
      the plan, for 2009, if neither of the targets was met, no bonus
      opportunities would have been provided; if one of the targets was met,
      $500,000 in bonus opportunities would have been available; if both of the
      targets had been exceeded by 10%, $1,500,000 in bonus opportunities would
      have been available. Our compensation committee, in its sole discretion,
      may reduce the award payable by Kinder Morgan Energy Partners to any
      participant for any reason.(c)
              Under
      the plan, for 2009, if neither of the targets was met, no bonus
      opportunities would have been provided; if one of the targets was met,
      $750,000 in bonus opportunities would have been available; if both of the
      targets had been exceeded by 10%, $2,000,000 in bonus opportunities would
      have been available. Our compensation committee, in its sole discretion,
      may reduce the award payable by Kinder Morgan Energy Partners to any
      participant for any reason.
 
 Kinder
Morgan, Inc. may amend the plan from time to time without our shareholder
approval except as required to satisfy the Internal Revenue Code or any
applicable securities exchange rules. The plan ended with the 2009 bonus , which
was paid in February 2010.
  Other
Compensation
  Kinder Morgan, Inc. Savings
Plan. The Kinder Morgan, Inc. Savings Plan is a defined contribution
401(k) plan. The plan permits all full-time employees of Kinder Morgan, Inc. and
KMGP Services Company, Inc., including the named executive officers, to
contribute between 1% and 50% of base compensation, on a pre-tax basis, into
participant accounts. For information on this plan, see Note 9 “Employee
Benefits—Kinder Morgan Savings Plan” to the Notes to the Consolidated Financial
Statements contained in Kinder Morgan Energy Partners’ Annual Report on Form
10-K for the year ended December 31, 2009, which is included in this filing as
Exhibit 99.1 and incorporated herein by reference. As a result of a cost savings
effort in 2009, all officers with the position of vice president or higher,
including our named executive officers, were suspended from receiving any
company contributions commencing February 15, 2009.  Company
contributions for these employees were reinstated effective February 1,
2010.
  Kinder Morgan, Inc. Cash Balance
Retirement Plan. Employees of KMGP Services Company, Inc. and Kinder
Morgan,  Inc., including the named executive officers, are also
eligible to participate in a Cash Balance Retirement Plan. For more information
on this plan, see Note 9 “Employee Benefits—Cash Balance Retirement Plan” to the
Notes to the Consolidated Financial Statements contained in Kinder Morgan Energy
Partners’ Annual Report on Form 10-K for the year ended December 31, 2009, which
is included in this filing as Exhibit 99.1 and incorporated herein by reference.
As a result of a cost savings effort in 2009, all company contributions to the
plan were suspended from April 12, 2009 through December 31,
2009.  Company contributions were reinstated effective January 1,
2010.
   40
 Item 11.Executive
      Compensation. (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  The
following table sets forth the estimated actuarial present value of each named
executive officer’s accumulated pension benefit as of December 31, 2009, under
the provisions of the Cash Balance Retirement Plan. With respect to our named
executive officers, the benefits were computed using the same assumptions used
for financial statement purposes, assuming current remuneration levels without
any salary projection, and assuming participation until normal retirement at age
sixty-five. These benefits are subject to federal and state income taxes, where
applicable, but are not subject to deduction for social security or other offset
amounts.
  Pension
      BenefitsName
              Plan
      Name
              Current
                Credited
      Yrs
                of
      Service
              Present Value of
                Accumulated
                Benefit(a)
              Contributions
                During
      2009(b)Richard
      D. Kinder
              Cash
      Balance
              9
              
              $
              -
              
              
              $
              -Kimberly
      A. Dang
              Cash
      Balance
              8
              
              
              43,936
              
              
              
              4,243Steven
      J. Kean
              Cash
      Balance
              8
              
              
              55,162
              
              
              
              4,683Joseph
      Listengart
              Cash
      Balance
              9
              
              
              65,349
              
              
              
              5,082C.
      Park Shaper
              Cash
      Balance
              9
              
              
              65,349
              
              
              
              5,082
 __________
 (a)
              The
      present values in the Pension Benefits table are based on certain
      assumptions, including a 6.0% discount rate, 5.0% cash balance interest
      crediting rate, and a lump sum calculated using the IRS 2010 Mortality
      Tables. We assumed benefits would commence at normal retirement age, which
      is 65. No death or turnover was assumed prior to retirement
      date.(b)
              Contributions
      were made from January 1, 2009 through April 12, 2009.  The plan
      suspended contributions for the remainder of 2009; however, individual
      accounts were credited with interest for the entire twelve month
      period.
 
 Kinder Morgan Holdco LLC
Units.  In connection with the Going Private transaction, some
of our directors and executive officers received Class A-1 and Class B units of
Kinder Morgan Holdco LLC, Kinder Morgan, Inc.’s parent company. None of our
independent directors, Messrs. Hultquist, Lawrence and Waughtal, received Kinder
Morgan Holdco LLC units. Generally, Kinder Morgan Holdco LLC has three classes
of units—Class A units, Class A-1 units, and Class B
units.
  The
Class B units were awarded by Kinder Morgan Holdco LLC to members of Kinder
Morgan, Inc.’s management in consideration of their services to or for the
benefit of Kinder Morgan Holdco LLC. The Class B units represent interests
in the profits of Kinder Morgan Holdco LLC following the return of capital for
the holders of Class A units and the achievement of predetermined
performance targets over time. The Class B units will performance vest in
increments of 5% of profits distributions up to a maximum of 20% of all profits
distributions that would otherwise be payable with respect to the Class A
units and Class A-1 units, based on the achievement of predetermined
performance targets. The Class B units are subject to time based vesting,
and with respect to any holder thereof, will vest 33 1/3% on each of the third,
fourth and fifth year anniversary of the issuance of such Class B
units to such holder. The amended and restated limited liability company
agreement of Kinder Morgan Holdco LLC also includes provisions with respect to
forfeiture of Class B units upon termination for cause, Kinder Morgan
Holdco LLC’s call rights upon termination and other related provisions relating
to an employee’s tenure. The allocation of the Class B units among Kinder
Morgan, Inc.’s management was determined prior to closing by Mr. Richard D.
Kinder, and approved by other, non-management investors in Kinder Morgan Holdco
LLC.
  The
Class A-1 units were awarded by Kinder Morgan Holdco LLC to members of
Kinder Morgan, Inc.’s management (other than Mr. Richard D. Kinder) who
reinvested their equity interests in Kinder Morgan Holdco LLC in connection with
the Going Private transaction in consideration of their services to or for the
benefit of Kinder Morgan Holdco LLC. Class A-1 units entitle a holder
thereof to receive distributions from Kinder Morgan Holdco LLC in an amount
equal to distributions paid on Class A units (other than distributions on
the Class A units that represent a return of the capital contributed in
respect of such Class A units), but only after the Class A units have
received aggregate distributions in an amount equal to the amount of capital
contributed in respect of the Class A units.
  Other Potential Post-Employment
Benefits.  On October 7, 1999, Mr. Richard D. Kinder entered
into an employment agreement with Kinder Morgan, Inc. pursuant to which he
agreed to serve as its Chairman and Chief Executive Officer. His employment
agreement provides for a term of three years and one year extensions on each
anniversary of October 7th. Mr.
Kinder, at his initiative, accepted an annual salary of $1 to demonstrate his
belief in Kinder Morgan Energy Partners’ and Kinder Morgan, Inc.’s long term
viability. Mr. Kinder continues to accept an annual salary of $1, and he
receives no other compensation from Kinder Morgan Energy Partners. Mr. Kinder
was awarded Class B units by and in Kinder Morgan Holdco LLC in connection with
Kinder Morgan, Inc.’s Going Private transaction, and while Kinder Morgan Energy
Partners, as a subsidiary of Kinder Morgan Holdco LLC, is allocated compensation
expense attributable to such Class B units, it has no obligation, nor does it
expect, to pay any amounts in connection with the Class B units.
  Kinder
Morgan, Inc. believes that Mr. Kinder’s employment agreement contains provisions
that are beneficial to Kinder Morgan, Inc. and its subsidiaries and accordingly,
Mr. Kinder’s employment agreement is extended annually at the request of Kinder
Morgan, Inc. and our board of directors. For example, with limited exceptions,
Mr. Kinder is prevented from competing in any manner with Kinder Morgan, Inc. or
any of its subsidiaries, while he is employed by Kinder Morgan,
Inc.
   41
 Item 11.Executive
      Compensation. (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  and
for 12 months following the termination of his employment with Kinder
Morgan, Inc. The agreement contains provisions that address termination with and
without cause, termination as a result of change in duties or disability, and
death. At his current compensation level, the maximum amount that would be paid
to Mr. Kinder or his estate in the event of his termination is three times
$750,000, or $2.25 million. This payment would be made if Mr. Kinder were
terminated by Kinder Morgan, Inc. without cause or if Mr. Kinder terminated his
employment with Kinder Morgan, Inc. as a result of a change in duties (as
defined in the employment agreement). There are no employment agreements or
change-in-control arrangements with any of our other executive
officers.
  Summary
Compensation Table
  The
following table shows compensation paid or otherwise awarded to our “named
executive officers” for services rendered to Kinder Morgan Energy Partners, its
subsidiaries or its affiliates, including Kinder Morgan, Inc. and Kinder Morgan
Holdco LLC (collectively referred to as the “Kinder Morgan, Inc. affiliated
entities”) during fiscal years 2009, 2008 and 2007.
  The
amounts in the columns below, except the column entitled “Unit Awards by Kinder
Morgan, Holdco LLC”, represent the total compensation paid or awarded to the
named executive officers by all the Kinder Morgan, Inc. affiliated entities, and
as a result the amounts are in excess of the compensation expense allocated,
recognized and paid by Kinder Morgan Energy Partners for services rendered to
it. The amounts in the column entitled “Unit Awards by Kinder Morgan Holdco LLC”
consist of the portion of the grant date fair value of the Kinder Morgan Holdco
LLC Class A-1 and Class B units received by our named executive officers that
was allocated to Kinder Morgan Energy Partners for financial reporting purposes.
As a subsidiary of Kinder Morgan Holdco LLC, Kinder Morgan Energy Partners is
allocated a portion of the compensation expense recognized by Kinder Morgan
Holdco LLC with respect to such units, although neither Kinder Morgan Energy
Partners or any of its subsidiaries have any obligation, nor does it expect, to
pay any amounts in respect of such units and none of our named executive
officers has received any payments in respect of such units.
 
 (a)
                
                
                (b)
                
                
                (c)
                
                
                (d)Name
      and
                  Principal Position
                Year
                
                Salary
                
                
                Bonus
                
                
                Non-Equity
                  Incentive Plan
                  Compensation
                
                
                Change
                  in Pension
                  Value
                
                
                All
      Other
                  Compensation
                
                
                Unit Awards
                  by
      Kinder
                  Morgan
                  Holdco LLC
                
                
                TotalRichard
      D. Kinder
                2009
                
                $
                1
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                -
                
                
                $
                1Director,
      Chairman and
                2008
                
                
                1
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                1Chief
      Executive Officer
                2007
                
                
                1
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                9,200,000
                
                
                
                9,200,001Kimberly
      A. Dang
                2009
                
                
                257,692
                
                
                
                -
                
                
                
                550,000
                
                
                
                4,243
                
                
                
                3,115
                
                
                
                -
                
                
                
                815,050Vice
      President and
                2008
                
                
                223,077
                
                
                
                -
                
                
                
                440,000
                
                
                
                8,285
                
                
                
                11,863
                
                
                
                -
                
                
                
                683,225Chief
      Financial Officer
                2007
                
                
                200,000
                
                
                
                -
                
                
                
                400,000
                
                
                
                7,294
                
                
                
                32,253
                
                
                
                672,409
                
                
                
                1,311,956Steven
      J. Kean
                2009
                
                
                257,692
                
                
                
                -
                
                
                
                1,250,000
                
                
                
                4,683
                
                
                
                4,251
                
                
                
                -
                
                
                
                1,516,626Executive
      Vice President
                2008
                
                
                223,077
                
                
                
                -
                
                
                
                1,150,000
                
                
                
                8,755
                
                
                
                13,007
                
                
                
                -
                
                
                
                1,394,839and
      Chief Operating Officer
                2007
                
                
                200,000
                
                
                
                -
                
                
                
                1,100,000
                
                
                
                7,767
                
                
                
                147,130
                
                
                
                2,708,095
                
                
                
                4,162,992Joseph
      Listengart
                2009
                
                
                257,692
                
                
                
                -
                
                
                
                925,000
                
                
                
                5,082
                
                
                
                2,866
                
                
                
                -
                
                
                
                1,190,640Vice
      President, General
                2008
                
                
                223,077
                
                
                
                -
                
                
                
                900,000
                
                
                
                9,188
                
                
                
                11,629
                
                
                
                -
                
                
                
                1,143,894Counsel
      and Secretary
                2007
                
                
                200,000
                
                
                
                -
                
                
                
                1,000,000
                
                
                
                8,194
                
                
                
                102,253
                
                
                
                1,706,963
                
                
                
                3,017,410C.
      Park Shaper
                2009
                
                
                257,692
                
                
                
                -
                
                
                
                1,300,000
                
                
                
                5,082
                
                
                
                3,971
                
                
                
                -
                
                
                
                1,566,745Director
      and President
                2008
                
                
                223,077
                
                
                
                -
                
                
                
                1,200,000
                
                
                
                9,188
                
                
                
                12,769
                
                
                
                -
                
                
                
                1,445,0342007
                
                
                200,000
                
                
                
                -
                
                
                
                1,200,000
                
                
                
                8,194
                
                
                
                155,953
                
                
                
                4,296,125
                
                
                
                5,860,272
 ____________
 (a)
              Represents
      amounts paid according to the provisions of the Kinder Morgan, Inc. Annual
      Incentive Plan.  Amounts were earned in the fiscal year
      indicated but were paid in the next fiscal year.(b)
              Represents
      the 2009, 2008 and 2007, as applicable, change in the actuarial present
      value of accumulated defined pension benefit (including unvested benefits)
      according to the provisions of KMI’s Cash Balance Retirement
      Plan.(c)
              Amounts
      include value of contributions to the Kinder Morgan, Inc. Savings Plan (a
      401(k) plan), value of group-term life insurance exceeding $50,000,
      taxable parking subsidy and, for 2007 only, dividends paid on unvested
      restricted stock awards.  Amounts in 2009, 2008 and 2007
      representing the value of contributions to the Kinder Morgan, Inc. Savings
      Plan are $2,308, $11,154 and $10,000, respectively.  For 2009,
      Mrs. Dang also has $226 in imputed income from a company provided cell
      phone.  Amounts in 2007 representing the value of dividends paid
      on unvested restricted stock awards are as follows: for Mrs. Dang $21,875;
      for Mr. Kean $136,500; for Mr. Listengart $91,875; and for Mr. Shaper
      $144,375.(d)
              Such
      amounts represent the grant date fair value of the Class A-1 and Class B
      units of Kinder Morgan Holdco LLC received by the named executive officers
      (a portion of which is allocated to us for financial reporting
      purposes).  None of our named executive officers has received
      any payments in connection with such units, and none of us or our
      subsidiaries are obligated, nor do we expect, to pay any amounts in
      respect of such units.  See “Elements of Compensation—Other
      Compensation—Kinder Morgan Holdco LLC Units” above for further discussion
      of these units.
 
  42
 Item 11.Executive
      Compensation. (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  Grants
of Plan-Based Awards
  The
following supplemental compensation table shows compensation details on the
value of all non-guaranteed and non-discretionary incentive awards granted
during 2009 to our named executive officers. The table includes awards made
during or for 2009. The information in the table titled “Estimated Future
Payouts Under Non-Equity Incentive Plan Awards” represents the threshold, target
and maximum amounts payable under the Kinder Morgan, Inc. Annual Incentive Plan
for performance in 2009. Amounts actually paid under that plan for 2009 are set
forth in the Summary Compensation Table (above) under the caption “Non-Equity
Incentive Plan Compensation.” There will not be any additional payouts under the
Annual Incentive Plan for 2009.
  Estimated
      Future Payouts Under
                Non-Equity Incentive Plan
      Awards(a)Name
              
              Threshold
              
              
              Target
              
              
              MaximumRichard
      D. Kinder
              
              $
              -
              
              
              $
              -
              
              
              $
              -Kimberly
      A. Dang
              
              
              500,000
              
              
              
              1,000,000
              
              
              
              1,500,000Steven
      J. Kean
              
              
              750,000
              
              
              
              1,500,000
              
              
              
              2,000,000Joseph
      Listengart
              
              
              500,000
              
              
              
              1,000,000
              
              
              
              1,500,000C.
      Park Shaper
              
              
              750,000
              
              
              
              1,500,000
              
              
              
              2,000,000
 ____________
 (a)
              See
      “Elements of Compensation—Possible Annual Cash Bonus (Non-Equity Cash
      Incentive)” above for further discussion of these
  awards.
 
 Outstanding
Equity Awards at Fiscal Year-End
  The
only unvested equity awards outstanding at the end of fiscal 2009 were the Class
B units of Kinder Morgan Holdco LLC awarded in 2007 by Kinder Morgan Holdco LLC
to the named executive officers. As a subsidiary of Kinder Morgan Holdco LLC,
Kinder Morgan Energy Partners is allocated a portion of the compensation expense
recognized by Kinder Morgan Holdco LLC with respect to such units, although
neither Kinder Morgan Energy Partners nor any of its subsidiaries have any
obligation, nor does Kinder Morgan Energy Partners expect, to pay any amounts in
respect of such units.
  Stock
      awardsName
              Type of units
              
              Number
      of
                units
      that
                have
      not vested
              
              
              Market value of
                units of stock that
                have not vested(a)Richard
      D. Kinder
              Class
      B units
              
              
              791,405,452
              
              
              
              N/AKimberly
      A. Dang
              Class
      B units
              
              
              49,462,841
              
              
              
              N/ASteven
      J. Kean
              Class
      B units
              
              
              158,281,090
              
              
              
              N/AJoseph
      Listengart
              Class
      B units
              
              
              79,140,545
              
              
              
              N/AC.
      Park Shaper
              Class
      B units
              
              
              217,636,499
              
              
              
              N/A
 __________
 (a)
              Because
      the Class B units are equity interests of Kinder Morgan Holdco LLC, a
      private limited liability company, the market value of such interests is
      not readily determinable. None of the named executive officers has
      received any payments in connection with such units, and neither Kinder
      Morgan Energy Partners nor its subsidiaries is obligated, nor does Kinder
      Morgan Energy Partners expect, to pay any amounts in respect of such
      units. See “Elements of Compensation—Other Compensation—Kinder Morgan
      Holdco LLC Units” above for further discussion of these
    units.
 
 Risks
Associated with Compensation Practices
  KMGP
Services Company, Inc., Kinder Morgan, Inc. and Kinder Morgan Canada Inc. employ
all persons necessary for the operation of our business, and in our opinion, our
compensation policies and practices for all persons necessary for the operation
of our business do not create risks that are reasonably likely to have a
material adverse effect on our business, financial position, results of
operations or cash flows.
  Director
Compensation
  Compensation Committee Interlocks
and Insider Participation. Our compensation committee, comprised of Mr.
Gary L. Hultquist, Mr. C. Berdon Lawrence (since January 21, 2009) and Mr. Perry
M. Waughtal, makes compensation decisions regarding our and Kinder Morgan G.P.,
Inc.’s executive officers. Mr. Richard D. Kinder, Mr. James E. Street, and
Messrs. Shaper and Kean, who are our executive officers, participate in the
deliberations of our compensation committee concerning executive officer
compensation. None of the members of our compensation committee is or has been
one of our officers or employees, and none of our executive officers served
during 2009 on a board of directors or compensation committee of another entity
which has employed any of the members of our board of directors or compensation
committee.
   43
 Item 11.Executive
      Compensation. (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  Directors Fees. Beginning in
2005, awards under Kinder Morgan Energy Partners’ Common Unit Compensation Plan
for Non-Employee Directors have served as compensation for each of our three
non-employee directors.  This plan is described in Note 12, “—Kinder
Morgan Energy Partners, L.P. Common Unit Compensation Plan for Non-Employee
Directors” of the Notes to the Consolidated Financial Statements contained in
Kinder Morgan Energy Partners’ Annual Report on Form 10-K for the year ended
December 31, 2009, which is included in this filing as Exhibit 99.1 and
incorporated herein by reference.  Our Directors who are also
employees of Kinder Morgan, Inc. (Messrs. Richard D. Kinder and C. Park Shaper)
do not receive compensation in their capacity as directors.
  On
April 1, 2003, our compensation committee established our Directors’ Unit
Appreciation Rights Plan, and pursuant to this plan, each of our then three
non-employee directors received common unit appreciation
rights.  During the first board meeting of 2005, the plan was
terminated and replaced by the Kinder Morgan Energy Partners Common Unit
Compensation Plan for Non-Employee Directors; however, all unexercised awards
made under the plan remain outstanding.  For more information on this
plan, see Note 12 “—Directors’ Unit Appreciation Rights Plan” of the Notes to
the Consolidated Financial Statements contained in Kinder Morgan Energy
Partners’ Annual Report on Form 10-K for the year ended December 31, 2009, which
is included in this filing as Exhibit 99.1 and incorporated herein by
reference.
  The
following table discloses the compensation earned by each of our three
non-employee directors for board service during fiscal year 2009. In addition,
directors are reimbursed for reasonable expenses in connection with board
meetings. Our directors who are also employees of Kinder Morgan, Inc. do not
receive compensation in their capacity as directors.
  Name
              
              Fees
      Earned or
                Paid
      in Cash
              
              
              Common
      Unit
                Awards(a)
              
              
              All
      Other
                Compensation(b)
              
              
              TotalGary
      L. Hultquist
              
              $
              160,000
              
              
              $
              -
              
              
              $
              -
              
              
              $
              160,000C.
      Berdon Lawrence
              
              
              864
              
              
              
              159,136
              
              
              
              6,720
              
              
              
              166,720Perry
      M. Waughtal
              
              
              160,000
              
              
              
              -
              
              
              
              243,925
              
              
              
              403,925
 __________
 (a)
              For
      Mr. Lawrence, represents the value of cash compensation received in the
      form of Kinder Morgan Energy Partners common units according to the
      provisions of the Kinder Morgan Energy Partners, L.P.  Common
      Unit Compensation Plan for Non-Employee Directors.  Value
      computed as the number of common units elected to be received in lieu of
      cash multiplied by the closing price on date of election.  For
      Mr. Lawrence, 3,200 units elected on January 28, 2009 multiplied by the
      closing price of $49.73.(b)
              For
      Mr. Lawrence, amount represents distributions paid on unvested common
      units awarded according to the provisions of the Kinder Morgan Energy
      Partners, L.P. Common Unit Compensation Plan for Non-Employee
      Directors.  For Mr. Waughtal, amount represents the unrealized
      value of common unit appreciation rights earned according to the
      provisions of The Kinder Morgan Energy Partners, L.P. Directors’ Unit
      Appreciation Rights Plan for Non-Employee Directors and determined
      according to the share-based payment provisions of generally accepted
      accounting principles— for 17,500 common unit appreciation rights, equal
      to the increase in value of a corresponding common unit from December 31,
      2008 ($45.75) to December 31, 2009 ($60.98).  Also, in 2009, Mr.
      Edward O. Gaylord’s estate exercised his remaining 17,500 unit
      appreciation rights at an aggregate fair value of $53.75 per unit and
      received a cash amount of $179,275.  Mr. Gaylord served as our
      director until his death on September 28, 2008, and the realized value of
      his unit appreciation rights earned for the year 2009 was
      $117,400.
 
 Compensation
Committee Report
  Throughout
fiscal 2009, the compensation committee of our board of directors was comprised
of two directors (Mr. Gary L. Hultquist and Mr. Perry M. Waughtal), and
effective January 28, 2009, a third director (Mr. C. Berdon Lawrence), each of
whom the board of directors has determined meets the criteria for independence
under our governance guidelines and the New York Stock Exchange
rules.
  The
compensation committee has discussed and reviewed the above Compensation
Discussion and Analysis for fiscal year 2009 with management. Based on this
review and discussion, the compensation committee recommended to our board of
directors that this Compensation Discussion and Analysis be included in this
annual report on Form 10-K for the fiscal year 2009.
  Compensation
Committee:
  Gary
L. Hultquist
 C.
Berdon Lawrence
 Perry
M. Waughtal
 
   44
 Kinder
      Morgan Management, LLC Form
10-K
  
 Item
      12.
              Security Ownership of Certain
      Beneficial Owners and Management and Related Stockholder
      Matters.
 
 The
following tables set forth information as of January 31, 2010, regarding (a) the
beneficial ownership of (i) Kinder Morgan Energy Partners’ common and Class B
units, (ii) our shares and (iii) Kinder Morgan Holdco LLC units by all our
directors and those of Kinder Morgan G.P., Inc., by each of the named executive
officers identified in Item 11 “Executive Compensation” and by all our directors
and executive officers as a group and (b) the beneficial ownership of Kinder
Morgan Energy Partners’ common and Class B units and our shares by all persons
known by us to own beneficially at least 5% of such shares. Unless otherwise
noted, the address of each person below is c/o Kinder Morgan Energy Partners,
500 Dallas Street, Suite 1000, Houston, Texas 77002.
  Amount
and Nature of Beneficial Ownership(a)
  Kinder
      Morgan Energy PartnersCommon Units
              
              Class B Units
              
              Kinder Morgan
                Management, LLC SharesName
              
              Number
                of Units(b)
              
              Percent
                of Class
              
              Number
                of Units(c)
              
              Percent
                of Class
              
              
              Number
                of Shares(d)
              
              Percent
                of ClassRichard
      D. Kinder (e)
              
              315,979
              
              *
              
              
              -
              
              -
              
              
              144,464
              
              *C.
      Park Shaper
              
              4,000
              
              *
              
              
              -
              
              -
              
              
              30,652
              
              *Gary
      L. Hultquist
              
              5,000
              
              *
              
              
              -
              
              -
              
              
              -
              
              -C
      Berdon Lawrence (f)
              
              5,650
              
              *
              
              
              -
              
              -
              
              
              -
              
              -Perry
      M. Waughtal
              
              46,918
              
              *
              
              
              -
              
              -
              
              
              54,531
              
              *Steven
      J. Kean
              
              1,780
              
              *
              
              
              -
              
              -
              
              
              2,118
              
              *Joseph
      Listengart
              
              5,498
              
              *
              
              
              -
              
              -
              
              
              1,414
              
              *Kimberly
      A. Dang
              
              121
              
              *
              
              
              -
              
              -
              
              
              519
              
              *Directors and Executive Officers as a
      group (14 persons) (g)
              
              398,225
              
              *
              
              
              -
              
              -
              
              
              258,120
              
              *Kinder
      Morgan, Inc. (h)
              
              16,370,428
              
              7.90
              %
              
              5,313,400
              
              100.00
              %
              
              12,204,691
              
              14.27
              %Kayne Anderson Capital Advisors, L.P.
      and Richard A. Kayne (i)
              
              -
              
              -
              
              
              -
              
              -
              
              
              6,087,460
              
              7.12
              %Janus
      Capital Management LLC (j)
              
              -
              
              -
              
              
              -
              
              -
              
              
              7,381,111
              
              8.63
              %
 __________
 *Less
than 1%.
 
 (a)
              Except
      as noted otherwise, each beneficial owner has sole voting power and sole
      investment power over the units and shares listed.  On January
      18, 2005, our board of directors initiated a rule requiring each director
      to own a minimum of 10,000 common units, Kinder Morgan Management shares,
      or a combination thereof by the sixth anniversary of the later to occur of
      (i) January 18, 2005 or (ii) the election date of the director to our
      board.(b)
              As
      of January 31, 2010, Kinder Morgan Energy Partners had 207,310,563 common
      units issued and outstanding.(c)
              As
      of January 31, 2010, Kinder Morgan Energy Partners had 5,313,400 Class B
      units issued and outstanding.(d)
              As
      of January 31, 2010, we had 85,538,263 shares issued and outstanding,
      including two voting shares owned by Kinder Morgan G.P.,
      Inc.  In all cases, Kinder Morgan Energy Partners’ i-units will
      be voted in proportion to the affirmative and negative votes, abstentions
      and non-votes of owners of our shares.  Through the provisions
      in Kinder Morgan Energy Partners’ partnership agreement and our limited
      liability company agreement, the number of our outstanding shares,
      including voting shares owned by Kinder Morgan G.P., Inc., and the number
      of Kinder Morgan Energy Partners’ i-units will at all times be
      equal.(e)
              Includes
      7,879 common units and 1,000 Kinder Morgan Management shares owned by Mr.
      Kinder’s spouse.  Mr. Kinder disclaims any and all beneficial or
      pecuniary interest in these common units and shares.(f)
              Includes
      2,450 restricted common units.(g)
              Includes
      2,450 restricted common units.  Also includes 7,879 common units
      and 1,000 Kinder Morgan Management shares owned by an executive’s spouse
      and 786 Kinder Morgan Management shares held by one of our executives for
      his children.  The respective executives disclaim any beneficial
      ownership in 7,879 common units and 1,786 Kinder Morgan Management
      shares.(h)
              Includes
      common units owned by Kinder Morgan, Inc. and its consolidated
      subsidiaries, including 1,724,000 common units owned by Kinder Morgan
      G.P., Inc.(i)
              As
      reported on the Schedule 13G/A filed February 10, 2010 by Kayne Anderson
      Capital Advisors, L.P. and Richard A. Kayne.  Kayne Anderson
      Capital Advisors, L.P. reported that in regard to Kinder Morgan Management
      shares, it had sole voting power over 0 shares, shared voting power over
      6,084,098 shares, sole disposition power over 0 shares and shared
      disposition power over 6,084,098  shares.  Mr. Kayne
      reports that in regard to Kinder Morgan Management shares, he had sole
      voting power over 3,362 shares, shared voting power over 6,084,098 shares,
      sole disposition power over 3,362 shares and shared disposition power over
      6,084,098 shares.  Kayne Anderson Capital Advisors, L.P.’s and
      Richard A. Kayne’s address is 1800 Avenue of the Stars, Second Floor, Los
      Angeles, California 90067.(j)
              As
      reported on the Schedule 13G/A filed February 16, 2010 by Janus Capital
      Management LLC.  Janus Capital Management reported that in
      regard to Kinder Morgan Management shares, it has sole voting power over
      7,322,993 shares, shared voting power over 58,118 shares, sole disposition
      power over 7,322,993 and shared disposition power over 58,118
      shares.  Janus Capital Management LLC’s address is 151 Detroit
      Street, Denver, Colorado, 80206.
 
  45
 Item
      12.
                    Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters. (continued)
                    Kinder
      Morgan Management, LLC Form 10-K
  Amount and Nature of Beneficial
Ownership(a)
  Name
              
              Kinder Morgan
                Holdco LLC
                Class A Units
              
              % of
                Class A
                Units(b)
              
              Kinder Morgan
                Holdco LLC
                Class A-1 Units
              
              % of
                Class
       A-1
                Units(c)
              
              Kinder Morgan
                Holdco LLC
                Class B Units
              
              % of
                Class
      B
                Units(d)Richard
      D. Kinder (e)
              
              2,424,000,000
              
              30.6%
              
              –
              
              –
              
              791,405,452
              
              40.0%C.
      Park Shaper (f)
              
              13,598,785
              
              *
              
              7,799,775
              
              28.3%
              
              217,636,499
              
              11.0%Gary
      L. Hultquist
              
              –
              
              –
              
              –
              
              –
              
              –
              
              –C.
      Berdon Lawrence
              
              –
              
              –
              
              –
              
              –
              
              –
              
              –Perry
      M. Waughtal
              
              –
              
              –
              
              –
              
              –
              
              –
              
              –Steven
      J. Kean
              
              6,684,149
              
              *
              
              3,833,788
              
              13.9%
              
              158,281,090
              
              8.0%Joseph
      Listengart
              
              6,059,449
              
              *
              
              3,475,483
              
              12.6%
              
              79,140,545
              
              4.0%Kimberly
      A. Dang (g)
              
              750,032
              
              *
              
              430,191
              
              1.6%
              
              49,462,841
              
              2.5%Directors and Executive Officers as a
      group (14 persons)
              
              2,460,763,539
              
              31.1%
              
              21,086,247
              
              76.5%
              
              1,626,338,205
              
              82.2%
 ____________
 *Less
      than 1%.
 (a)
              Except
      as noted otherwise, each beneficial owner has sole voting power and sole
      investment power over the units listed.(b)
              As
      of January 31, 2010, Kinder Morgan Holdco LLC had 7,914,367,913 Class A
      Units issued and outstanding.(c)
              As
      of January 31, 2010, Kinder Morgan Holdco LLC had 27,225,694 Class A-1
      Units issued and outstanding and 345,042 phantom Class A-1 Units issued
      and outstanding.  The phantom Class A-1 Units were issued to
      Canadian management employees.(d)
              As
      of January 31, 2010, Kinder Morgan Holdco LLC had 1,933,997,073 Class B
      Units issued and outstanding and 44,516,557 phantom Class B Units issued
      and outstanding.  The phantom Class B Units were issued to
      Canadian management employees.(e)
              Includes
      522,372 Class A units owned by Mr. Kinder's wife.  Mr. Kinder
      disclaims any and all beneficial or pecuniary interest in the Class A
      units held by his wife.  Also includes 263,801,817 Class B Units
      that Mr. Kinder transferred to a limited partnership.  Mr.
      Kinder may be deemed to be the beneficial owner of these transferred Class
      B Units, because Mr. Kinder controls the voting and disposition power of
      these Class B Units, but he disclaims ninety-nine percent of any
      beneficial and pecuniary interest in them.(f)
              Includes
      217,636,499 Class B Units that Mr. Shaper transferred to a limited
      partnership.  Mr. Shaper may be deemed to be the beneficial
      owner of these transferred Class B Units because he controls the voting
      and disposition power of these Class B Units, but he disclaims
      approximately twenty-two percent of any beneficial and pecuniary interest
      in them.(g)
              Includes
      49,462,841 Class B Units that Mrs. Dang transferred to a limited
      partnership.  Mrs. Dang may be deemed to be the beneficial owner
      of these transferred Class B Units because she has voting and disposition
      power of these Class B Units, but she disclaims ten percent of any
      beneficial and pecuniary interest in
them.
 
 Equity
Compensation Plan Information
  The
following table sets forth information regarding Kinder Morgan Energy
Partners’equity
compensation plans as of December 31, 2009. Specifically, the table provides
information regarding the Kinder Morgan Energy Partners, L.P. Common Unit
Compensation Plan for Non-Employee Directors, described in Item 11, “Executive
Compensation—Director Compensation—Directors Fees.”
  Plan
      category
              
              Number of securities
                remaining available for
                future issuance under equity
                compensation plansEquity compensation plans approved by security holders
              
              
              -Equity compensation plans not approved by security holders
              
              
              74,682Total
              
              
              74,682
 
 Item 13.
              Certain
      Relationships and Related Transactions, and Director
      Independence.
 
 Related
Transactions
  Our
policy is that (i) employees must obtain authorization from the appropriate
business unit president of the relevant company or head of corporate function
and (ii) directors, business unit presidents, executive officers and heads of
corporate functions must obtain authorization from the non-interested members of
the audit committee of the applicable board of directors, for any business
relationship or proposed business transaction in which they or an immediate
family member has a direct or indirect interest, or from which they or an
immediate family member may derive a personal benefit (a “related party
transaction”).  The maximum dollar amount of related party
transactions that may be approved as described above in this paragraph in any
calendar year is $1.0 million.  Any related party transactions that
would bring the total value of such transactions to greater than $1.0 million
must be referred to the audit committee of the appropriate board of directors
for approval or to determine the procedure for approval.
  46
 Item
      13.
                    Certain
      Relationships and Related Transactions, and Director Independence.
      (continued)
                    Kinder
      Morgan Management, LLC Form
10-K
  General
and Administrative Expenses
  KMGP
Services Company, Inc., a subsidiary of Kinder Morgan G.P., Inc., provides
employees, and Kinder Morgan Services LLC, our wholly owned subsidiary, provides
centralized payroll and employee benefits services to us, Kinder Morgan G.P.,
Inc., Kinder Morgan Energy Partners and Kinder Morgan Energy Partners’ operating
partnerships and subsidiaries (collectively, the “Group”). Employees of KMGP
Services Company, Inc. are assigned to work for one or more members of the
Group. The direct costs of all compensation, benefits expenses, employer taxes
and other employer expenses for these employees are allocated and charged by
Kinder Morgan Services LLC to the appropriate members of the Group, and the
members of the Group reimburse Kinder Morgan Services LLC for their allocated
shares of these direct costs. There is no profit or margin charged by Kinder
Morgan Services LLC to the members of the Group. The administrative support
necessary to implement these payroll and benefits services is provided by the
human resource department of Kinder Morgan,  Inc., and the related
administrative costs are allocated to members of the Group in accordance with
existing expense allocation procedures. The effect of these arrangements is that
each member of the Group bears the direct compensation and employee benefits
costs of its assigned or partially assigned employees, as the case may be, while
also bearing its allocable share of administrative costs. Pursuant to its
limited partnership agreement, Kinder Morgan Energy Partners provides
reimbursement for its share of these administrative costs and such
reimbursements will be accounted for as described
above.  Additionally, Kinder Morgan Energy Partners reimburses us with
respect to costs incurred or allocated to us in accordance with Kinder Morgan
Energy Partners’ limited partnership agreement, the delegation of control
agreement among Kinder Morgan G.P., Inc., Kinder Morgan Energy Partners, us and
others, and our limited liability company agreement.
  Our
named executive officers and other employees that provide management or services
to both Kinder Morgan, Inc. and the Group are employed by Kinder Morgan, Inc.
Additionally, other Kinder Morgan, Inc. employees assist in the operation of
Kinder Morgan Energy Partners’ Natural Gas Pipeline assets. These Kinder Morgan,
Inc. employees’ expenses are allocated without a profit component between Kinder
Morgan, Inc. and the appropriate members of the Group.
  Kinder
Morgan Energy Partners’ Distributions
  Kinder
Morgan G.P., Inc.
  Kinder
Morgan G.P., Inc. serves as the sole general partner of Kinder Morgan Energy
Partners. Pursuant to their partnership agreements, Kinder Morgan G.P., Inc.’s
general partner interests represent a 1% ownership interest in Kinder Morgan
Energy Partners, and a direct 1.0101% ownership interest in each of Kinder
Morgan Energy Partners’ five operating partnerships. Collectively, Kinder Morgan
G.P., Inc. owns an effective 2% interest in the operating partnerships,
excluding incentive distributions rights as follows:
  ·
              its
      1.0101% direct general partner ownership interest (accounted for as
      noncontrolling interests in the consolidated financial statements of
      Kinder Morgan Energy Partners); and
 ·
              its
      0.9899% ownership interest indirectly owned via its 1% ownership interest
      in Kinder Morgan Energy Partners. As of December 31, 2009, Kinder Morgan
      G.P., Inc. owned 1,724,000 common units, representing approximately 0.58%
      of Kinder Morgan Energy Partners’ outstanding limited partner
      units.
  Kinder
Morgan Energy Partners’ partnership agreement requires that it distribute 100%
of available cash, as defined in the partnership agreement, to its partners
within 45 days following the end of each calendar quarter in accordance with
their respective percentage interests. Available cash consists generally of all
of Kinder Morgan Energy Partners’ cash receipts, including cash received by its
operating partnerships and net reductions in reserves, less cash disbursements
and net additions to reserves and amounts payable to the former general partner
of SFPP, L.P. in respect of its remaining 0.5% interest in SFPP,
L.P.
  Kinder
Morgan G.P., Inc. is granted discretion by Kinder Morgan Energy Partners’
partnership agreement, which discretion has been delegated to us, subject to the
approval of Kinder Morgan G.P., Inc. in certain cases, to establish, maintain
and adjust reserves for the proper conduct of its business, which might include
reserves for matters such as future operating expenses, debt service,
maintenance capital expenditures and rate refunds and for distributions for the
next four quarters. These reserves are not restricted by magnitude, but only by
type of future cash requirements with which they can be associated. When we
determine Kinder Morgan Energy Partners’ quarterly distributions, we consider
current and expected reserve needs along with current and expected cash flows to
identify the appropriate sustainable distribution level.
  Kinder
Morgan G.P., Inc. and owners of Kinder Morgan Energy Partners’ common units and
Class B units receive distributions in cash, while we, the sole owner of Kinder
Morgan Energy Partners’ i-units, receive distributions in additional i-units.
Kinder Morgan Energy Partners does not distribute cash to i-unit owners but
retains the cash for use in its business. However, the cash equivalent of
distributions of i-units is treated as if it had actually been distributed for
purposes of determining the distributions to Kinder Morgan G.P., Inc. Each time
Kinder Morgan Energy Partners makes a distribution, the number of i-units owned
by us and the percentage of Kinder Morgan Energy Partners’ total units owned by
us increase automatically under the provisions of Kinder Morgan Energy Partners’
partnership agreement.
   47
 Item
      13.
                    Certain
      Relationships and Related Transactions, and Director Independence.
      (continued)
                    Kinder
      Morgan Management, LLC Form
10-K
  Kinder
Morgan, Inc.
  Kinder
Morgan, Inc. is the sole owner of all the common equity of Kinder Morgan G.P.,
Inc. Also, as of December 31, 2009, Kinder Morgan, Inc. directly owned
10,852,788 common units, indirectly owned 5,313,400 Class B units and 5,517,640
common units owned by its consolidated affiliates, including Kinder Morgan G.P.,
Inc., and owned 12,204,694 of our shares, representing an indirect ownership
interest of 12,204,694 Kinder Morgan Energy Partners’ i-units. Together, these
units represent approximately 11.4% of Kinder Morgan Energy Partners’
outstanding limited partner units. At the 2009 distribution level, Kinder
Morgan, Inc. received approximately 51% of all quarterly distributions from
Kinder Morgan Energy Partners, of which approximately 45% was attributable to
its general partner interest and the remaining 6% was attributable to its
limited partner interest. The actual level of distributions Kinder Morgan, Inc.
will receive in the future will vary with the level of distributions to the
limited partners determined in accordance with Kinder Morgan Energy Partners’
partnership agreement.
  Kinder
Morgan Management, LLC
  As
of December 31, 2009, we as Kinder Morgan G.P., Inc.’s delegate, were the sole
owner of Kinder Morgan Energy Partners’ 85,538,263 i-units.
  Operations
  Kinder
Morgan, Inc. or its subsidiaries operate and maintain for Kinder Morgan Energy
Partners the assets comprising Kinder Morgan Energy Partners’ Natural Gas
Pipelines business segment. Kinder Morgan, Inc. operates Trailblazer Pipeline
Company LLC’s assets under a long-term contract pursuant to which Trailblazer
Pipeline Company LLC incurs the costs and expenses related to Kinder Morgan,
Inc.’s operation and maintenance of the assets. Trailblazer Pipeline Company LLC
provides the funds for its own capital expenditures. Kinder Morgan, Inc. does
not profit from or suffer loss related to its operation of Trailblazer Pipeline
Company LLC’s assets.
  The
remaining assets comprising Kinder Morgan Energy Partners’ Natural Gas Pipelines
business segment as well as Kinder Morgan Energy Partners’ Cypress Pipeline (and
Kinder Morgan Energy Partners’ North System until its sale in October 2007),
which are part of Kinder Morgan Energy Partners’ Products Pipelines business
segment, are operated under other agreements between Kinder Morgan, Inc. and
Kinder Morgan Energy Partners. Pursuant to the applicable underlying agreements,
Kinder Morgan Energy Partners pays Kinder Morgan, Inc. either a fixed amount or
actual costs incurred as reimbursement for the corporate general and
administrative expenses incurred in connection with the operation of these
assets. The amounts paid to Kinder Morgan, Inc. for corporate general and
administrative costs, including amounts related to Trailblazer Pipeline Company
LLC, were $46.5 million of actual costs incurred for 2009 (and no fixed costs),
$45.0 million of actual costs incurred for 2008 (and no fixed costs) and $1.0
million of fixed costs and $48.1 million of actual costs incurred for
2007.
  Kinder
Morgan Energy Partners believes the amounts paid to Kinder Morgan, Inc. for the
services they provide each year fairly reflect the value of the services
performed. However, due to the nature of the allocations, these reimbursements
may not exactly match the actual time and overhead spent. Kinder Morgan Energy
Partners believes the fixed amounts that were agreed upon at the time the
contracts were entered into were reasonable estimates of the corporate general
and administrative expenses to be incurred by Kinder Morgan, Inc. and its
subsidiaries in performing such services. Kinder Morgan Energy Partners also
reimburses Kinder Morgan, Inc. and its subsidiaries for operating and
maintenance costs and capital expenditures incurred with respect to these
assets.
  Kinder
Morgan, Inc. or its subsidiaries operate and maintain for Kinder Morgan Energy
Partners the power plant Kinder Morgan Energy Partners constructed at the SACROC
oil field unit, located in the Permian Basin area of West Texas. The power plant
provides approximately half of SACROC’s current electricity needs. Kinder Morgan
Power Company, a subsidiary of Kinder Morgan, Inc., operates and maintains the
power plant under a five-year contract expiring in June 2010. Pursuant to the
contract, Kinder Morgan, Inc. incurs the costs and expenses related to operating
and maintaining the power plant for the production of electrical energy at the
SACROC field. Such costs include supervisory personnel and qualified operating
and maintenance personnel in sufficient numbers to accomplish the services
provided in accordance with good engineering, operating and maintenance
practices. Kinder Morgan Production Company fully reimburses Kinder
Morgan,  Inc.’s expenses, including all agreed upon labor
costs.
  In
addition, Kinder Morgan Production Company is responsible for processing and
directly paying invoices for fuels utilized by the plant. Other materials,
including but not limited to lubrication oil, hydraulic oils, chemicals, ammonia
and any catalyst are purchased by Kinder Morgan, Inc. and invoiced monthly as
provided by the contract, if not paid directly by Kinder Morgan Production
Company. The amounts paid to Kinder Morgan, Inc. in 2009, 2008 and 2007 for
operating and maintaining the power plant were $5.4 million, $3.1 million and
$3.1 million, respectively. Furthermore, Kinder Morgan Energy Partners believes
the amounts paid to Kinder Morgan, Inc. for the services it provides each year
fairly reflect the value of the services performed.
   48
 Item
      13.
                    Certain
      Relationships and Related Transactions, and Director Independence.
      (continued)
                    Kinder
      Morgan Management, LLC Form
10-K
  KM
Insurance, Ltd., referred to as KMIL, is a Bermuda insurance company and wholly
owned subsidiary of Kinder Morgan, Inc. KMIL was formed during 2005 as a Class 2
Bermuda insurance company, the sole business of which is to issue policies for
Kinder Morgan, Inc. and Kinder Morgan Energy Partners to secure the deductible
portion of Kinder Morgan Energy Partners’ workers compensation, automobile
liability, and general liability policies placed in the commercial insurance
market. Kinder Morgan Energy Partners accrues for the cost of insurance, which
is included in the related party general and administrative expenses and which
totaled approximately $8.4 million in 2009, $7.6 million in 2008 and $3.6
million in 2007.
  From
time to time in the ordinary course of business, Kinder Morgan Energy Partners
buys and sells pipeline and related services from Kinder Morgan, Inc. and its
subsidiaries. Such transactions are conducted in accordance with all applicable
laws and regulations and on an arms’ length basis consistent with Kinder Morgan
Energy Partners’ policies governing such transactions.  In conjunction
with Kinder Morgan Energy Partners’ acquisition of certain natural gas pipelines
from Kinder Morgan, Inc., it agreed to indemnify Kinder Morgan Energy Partners
with respect to approximately $733.5 million of its debt.  Kinder
Morgan, Inc. would be obligated to perform under this indemnity only if Kinder
Morgan Energy Partners’ assets were unable to satisfy its
obligations.
  As
discussed in Note 2 of the accompanying Notes to Consolidated Financial
Statements, as a result of the Going Private transaction, a number of
individuals and entities became significant investors in Kinder Morgan Holdco
LLC. By virtue of the size of their ownership interest inKinder Morgan Holdco
LLC, two of those investors became “related parties” to Kinder Morgan Energy
Partners (as that term is defined in authoritative accounting literature): (i)
American International Group, Inc. (“AIG”) and certain of its affiliates; and
(ii) Goldman Sachs Capital Partners (“Goldman Sachs”) and certain of its
affiliates. Kinder Morgan Energy Partners and/or its affiliates enter into
transactions with certain AIG affiliates in the ordinary course of their
conducting insurance and insurance-related activities, although no individual
transaction is, and all such transactions collectively are not, material to
Kinder Morgan Energy Partners’ consolidated financial statements.
  Kinder
Morgan Energy Partners also conducts commodity risk management activities in the
ordinary course of implementing its risk management strategies in which the
counterparty to certain of its derivative transactions is an affiliate of
Goldman Sachs. In conjunction with these activities, Kinder Morgan Energy
Partners is a party (through one of its subsidiaries engaged in the production
of crude oil) to a hedging facility with J. Aron & Company/Goldman Sachs
which requires Kinder Morgan Energy Partners to provide certain periodic
information, but does not require the posting of margin. As a result of changes
in the market value of Kinder Morgan Energy Partners’ derivative positions,
Kinder Morgan Energy Partners has created both amounts receivable from and
payable to Goldman Sachs affiliates.
  The
following table summarizes the fair values of these energy commodity derivative
contracts associated with Kinder Morgan Energy Partners’ commodity price risk
management activities with related parties and included on its consolidated
balance sheets as of December 31, 2009 and 2008 (in millions):
  December
      31,2009
              
              
              2008Derivatives-net
      Asset/(Liability)Other
      current assets
              
              $
              4.3
              
              
              $
              60.4Deferred
      charges and other assets
              
              $
              18.4
              
              
              $
              20.1Accrued
      other current liabilities
              
              $
              (96.8
              )
              
              $
              (13.2
              )Other long-term liabilities and deferred credits
              
              $
              (190.8
              )
              
              $
              (24.1
              )
 
 Transactions
with Kirby Corporation
  Mr.
C. Berdon Lawrence, a director on our board and on Kinder Morgan G.P.’s board of
directors, is Chairman of the Board of Kirby Corporation.  In 2009 and
2008, Kirby Corporation received payments from Kinder Morgan Energy Partners’
subsidiaries totaling $18,878 and $430,835, respectively, and made payments to
these subsidiaries totaling $144,300 in 2008 for services in the ordinary course
of Kirby Corporation’s and Kinder Morgan Energy Partners’ Terminals segment’s
businesses.
  Other
  Generally,
we make all decisions relating to the management and control of Kinder Morgan
Energy Partners’ business. Kinder Morgan G.P., Inc. owns all of our voting
securities. Kinder Morgan, Inc., through its wholly owned and controlled
subsidiary Kinder Morgan (Delaware), Inc., owns all the common stock of Kinder
Morgan G.P., Inc. Certain conflicts of interest could arise as a result of the
relationships among Kinder Morgan Energy Partners, Kinder Morgan G.P., Inc.,
Kinder Morgan, Inc. and us. The officers of Kinder Morgan, Inc. have fiduciary
duties to manage Kinder Morgan, Inc., including selection and management of its
investments in its subsidiaries and affiliates, in a manner beneficial to
themselves. In general, we have a fiduciary duty to manage Kinder Morgan Energy
Partners in a manner beneficial to Kinder Morgan Energy Partners’ unitholders.
The partnership agreements for Kinder Morgan Energy Partners and its operating
partnerships
   49
 Item
      13.
                    Certain
      Relationships and Related Transactions, and Director Independence.
      (continued)
                    Kinder
      Morgan Management, LLC Form
10-K
  contain
provisions that allow us to take into account the interests of parties in
addition to Kinder Morgan Energy Partners in resolving conflicts of interest,
thereby limiting our fiduciary duty to Kinder Morgan Energy Partners’
unitholders, as well as provisions that may restrict the remedies available to
Kinder Morgan Energy Partners’ unitholders for actions taken that might, without
such limitations, constitute breaches of fiduciary duty.
  The
partnership agreements provide that in the absence of bad faith by us, the
resolution of a conflict by us will not be a breach of any duties. The duty of
the officers of Kinder Morgan, Inc. may, therefore, come into conflict with our
duties and the duties of our directors and officers to Kinder Morgan Energy
Partners’ unitholders. The audit committee of our board of directors will, at
our request, review (and is one of the means for resolving) conflicts of
interest that may arise between Kinder Morgan, Inc. or its subsidiaries, on the
one hand, and Kinder Morgan Energy Partners, on the other hand.
  Our
policy is that (i) employees must obtain authorization from the appropriate
business unit president of the relevant company or head of corporate function,
and (ii) directors, business unit presidents, executive officers and heads of
corporate functions must obtain authorization from the non-interested members of
the audit committee of the applicable board of directors for any business
relationship or proposed business transaction in which they or an immediate
family member has a direct or indirect interest, or from which they or an
immediate family member may derive a personal benefit (a “related party
transaction”). The maximum dollar amount of related party transactions that may
be approved as described above in this paragraph in any calendar year is $1.0
million. Any related party transactions that would bring the total value of such
transactions to greater than $1.0 million must be referred to the audit
committee of the appropriate board of directors for approval or to determine the
procedure for approval.
  For
more information regarding other related party transactions, see Note 4 of the
accompanying Notes to Consolidated Financial Statements.
  Director
Independence
  Pursuant
to a delegation of control agreement among Kinder Morgan Energy Partners, its
general partner, us and others, we manage and control the business and affairs
of Kinder Morgan Energy Partners, except that we cannot take certain specified
actions without the approval of Kinder Morgan Energy Partners’ general partner.
The limited partnership agreement of Kinder Morgan Energy Partners provides for
a general partner of the Partnership rather than a board of directors. Through
the operation of Kinder Morgan Energy Partners’ limited partnership agreement
and the delegation of control agreement, our board of directors performs the
functions of and is the equivalent of a board of directors of Kinder Morgan
Energy Partners. Similarly, the standing committees of our board function as
standing committees of the board of Kinder Morgan Energy Partners. Our board of
directors is comprised of the same persons who comprise Kinder Morgan Energy
Partners’ general partner’s board of directors. References in this report to the
board mean our board acting as the delegate of and as the board of directors of
Kinder Morgan Energy Partners’ general partner, and references to committees
mean committees of the board acting as the delegate of and as the committees of
the board of directors of Kinder Morgan Energy Partners’ general
partner.
  The
board has adopted governance guidelines for the board and charters for the audit
committee, nominating and governance committee and compensation committee. The
governance guidelines and the rules of the New York Stock Exchange require that
a majority of the directors be independent, as described in those guidelines,
the committee charters and rules, respectively. Copies of the guidelines and
committee charters are available on our internet website at
www.kindermorgan.com. To assist in making determinations of independence, the
board has determined that the following categories of relationships are not
material relationships that would cause the affected director not to be
independent:
  ·
              If
      the director was an employee, or had an immediate family member who was an
      executive officer, of us or Kinder Morgan Energy Partners or any of our or
      its affiliates, but the employment relationship ended more than three
      years prior to the date of determination (or, in the case of employment of
      a director as an interim chairman, interim chief executive officer or
      interim executive officer, such employment relationship ended by the date
      of determination);
 ·
              If
      during any twelve month period within the three years prior to the
      determination the director received no more than, and has no immediate
      family member that received more than, $100,000 in direct compensation
      from Kinder Morgan Energy Partners or its affiliates, other than
      (i) director and committee fees and pension or other forms of
      deferred compensation for prior service (provided such compensation is not
      contingent in any way on continued service), (ii) compensation
      received by a director for former service as an interim chairman, interim
      chief executive officer or interim executive officer, and
      (iii) compensation received by an immediate family member for service
      as an employee (other than an executive
  officer);
 ·
              If
      the director is at the date of determination a current employee, or has an
      immediate family member that is at the date of determination a current
      executive officer, of another company that has made payments to, or
      received payments from, Kinder Morgan Energy Partners and its affiliates
      for property or services in an amount which, in each of the three fiscal
      years prior to the date of determination, was less than the greater of
      $1.0 million or 2% of such other company’s annual consolidated gross
      revenues. Contributions to tax-exempt organizations are not considered
      payments for purposes of this
determination;
  50
 Item
      13.
                    Certain
      Relationships and Related Transactions, and Director Independence.
      (continued)
                    Kinder
      Morgan Management, LLC Form
10-K
  ·
              If
      the director is also a director, but is not an employee or executive
      officer, of Kinder Morgan Energy Partners’ general partner or another
      affiliate or affiliates of us or Kinder Morgan Energy Partners, so long as
      such director is otherwise independent;
and
 ·
              If
      the director beneficially owns less than 10% of each class of voting
      securities of us, Kinder Morgan Energy Partners or its general
      partner.
  The
board has affirmatively determined that Messrs. Hultquist, Lawrence and
Waughtal, who constitute a majority of the directors, are independent as
described in our governance guidelines and the New York Stock Exchange rules.
Each of them meets the standards above and has no other relationship with us. In
conjunction with all regular quarterly and certain special board meetings, these
three non-management directors also meet in executive session without members of
management. In January 2010, Mr. Waughtal was elected for a one year term to
serve as lead director to develop the agendas for and preside at these executive
sessions of independent directors.
  The
governance guidelines and our audit committee charter, as well as the rules of
the New York Stock Exchange and the Securities and Exchange Commission, require
that members of the audit committee satisfy independence requirements in
addition to those above. The board has determined that all of the members of the
audit committee are independent as described under the relevant
standards.
  Item 14.
              Principal
      Accounting Fees and
Services.
 
 The
following sets forth fees billed for the audit and other services provided by
PricewaterhouseCoopers LLP for the fiscal years ended December 31, 2009 and
2008:
  Year
      Ended December 31,2009
              
              
              2008Audit
      fees (a)
              
              $
              262,139
              
              
              $
              226,000Total
              
              $
              262,139
              
              
              $
              226,000
 __________
 (a)
              Includes
      fees for integrated audit of annual financial statements and internal
      control over financial reporting, reviews of the related quarterly
      financial statements and reviews of documents filed with the Securities
      and Exchange Commission.
 
 All
services rendered by PricewaterhouseCoopers LLP are permissible under applicable
laws and regulations, and were pre-approved by our audit committee and our
general partner.  Pursuant to the charter of our audit committee, the
delegate of our general partner, the committee’s primary purposes include the
following: (i) to select, appoint, engage, oversee, retain, evaluate and
terminate our external auditors, (ii) to pre-approve all audit and non-audit
services, including tax services, to be provided, consistent with all applicable
laws, to us by our external auditors and (iii) to establish the fees and other
compensation to be paid to our external auditors.  The audit committee
has reviewed the external auditors’ fees for audit and non audit services for
fiscal year 2009.  The audit committee has also considered whether
such non audit services are compatible with maintaining the external auditors’
independence and has concluded that they are compatible at this
time.
  Furthermore,
the audit committee will review the external auditors’ proposed audit scope and
approach as well as the performance of the external auditors.  It also
has direct responsibility for and sole authority to resolve any disagreements
between our management and our external auditors regarding financial reporting,
will regularly review with the external auditors any problems or difficulties
the auditors encountered in the course of their audit work, and will, at least
annually, use its reasonable efforts to obtain and review a report from the
external auditors addressing the following (among other items): (i) the
auditors’ internal quality-control procedures, (ii) any material issues raised
by the most recent internal quality-control review, or peer review, of the
external auditors, (iii) the independence of the external auditors and (iv) the
aggregate fees billed by our external auditors for each of the previous two
fiscal years.
   51
 Kinder
Morgan Management, LLC Form 10-K
  PART IV
  Item 15.
              Exhibits
      and Financial Statement Schedules.
 
 (a)
      1.
              Financial
      Statements
 
 Reference
is made to the index of financial statements and supplementary data under Item 8
in Part II.
  2.
              Financial
      Statement Schedules
 
 The
financial statements of Kinder Morgan Energy Partners, L.P., our equity method
investee, are incorporated herein by reference from pages 112 through 195 of
Kinder Morgan Energy Partners L.P.’s Annual Report on Form 10-K for the year
ended December 31, 2009, which is included in this filing as Exhibit 99.1 and
incorporated herein by reference.
 KINDER
MORGAN MANAGEMENT, LLC AND SUBSIDIARY
  SCHEDULE
II — VALUATION AND QUALIFYING ACCOUNTS
  We
have no valuation or qualifying accounts subject to disclosure in Schedule
II.
  Exhibit
 Number                                                                     Description
  3.1
              —
              Form
      of Certificate of Formation of the Company (filed as Exhibit 3.1 to the
      Company’s Registration Statement on Form S-1 (Registration No. 333-55868)
      and incorporated by reference herein).3.2
              —
              Second
      Amended and Restated Limited Liability Company Agreement of the Company,
      as amended (filed as Exhibit 3.1 to the Company’s Current Report on Form
      8-K filed on May 30, 2007 and incorporated by reference
      herein).3.3
              —
              Amendment
      No. 1, dated as of July 20, 2007, to Delegation of Control Agreement dated
      May 18, 2001, among Kinder Morgan Management, LLC, Kinder Morgan G.P.,
      Inc., and Kinder Morgan Energy Partners and its operating limited
      partnership subsidiaries, attached as Annex C to the Second Amended and
      Restated Limited Liability Company Agreement of Kinder Morgan Management,
      LLC, as amended (filed as Exhibit 3.1 to the Company’s Current Report on
      Form 8-K filed on July 20, 2007 and incorporated by reference
      herein).4.1
              —
              Form
      of certificate representing shares of the Company (filed as Exhibit 4.3 to
      the Company’s Registration Statement on Form 8-A/A filed on July 24, 2002
      (Commission File No. 1-16459) and incorporated by reference
      herein).4.2
              —
              Form
      of Purchase Provisions between the Company and Kinder Morgan, Inc.
      (included as Annex B to the Second Amended and Restated Limited Liability
      Company Agreement filed as Exhibit 3.2 hereto and incorporated by
      reference herein).4.3
              —
              Registration
      Rights Agreement dated May 18, 2001 among the Company, Kinder Morgan
      Energy Partners and Kinder Morgan, Inc. (filed as Exhibit 4.3 to the
      Company’s Annual Report on Form 10-K for the year ended December 31, 2002
      (Commission File No. 1-16459) and incorporated by reference
      herein).10.1
              —
              Form
      of Tax Indemnity Agreement between the Company and Kinder Morgan, Inc.
      (filed as Exhibit 10.1 to the Company’s Registration Statement on Form S-1
      (Registration No. 333-55868) and incorporated by reference
      herein).10.2
              —
              Delegation
      of Control Agreement among Kinder Morgan Management, LLC, Kinder Morgan
      G.P., Inc. and Kinder Morgan Energy Partners and its operating
      partnerships (filed as Exhibit 10.1 to the Kinder Morgan Energy Partners
      June 30, 2001 Form 10-Q (Commission File No. 1-11234) and incorporated by
      reference herein).10.3
              —
              Amendment
      No. 1, dated as of July 20, 2007, to Delegation of Control Agreement dated
      May 18, 2001, among Kinder Morgan Management, LLC, Kinder Morgan G.P.,
      Inc., and Kinder Morgan Energy Partners and its operating limited
      partnership subsidiaries (filed as Exhibit 10.1 to the Company’s Current
      Report on Form 8-K filed on July 20, 2007 and incorporated by reference
      herein).10.4
              —
              2005
      Annual Incentive Plan of Kinder Morgan, Inc. (filed as Appendix D to
      Kinder Morgan, Inc.’s 2006 Proxy Statement on Schedule 14A and
      incorporated by reference herein).
 
  52
 Kinder
Morgan Management, LLC Form 10-K
  Exhibit
 Number                                                                     Description
  21.1*
              —
              List
      of Subsidiaries.23.1*
              —
              Consent
      of PricewaterhouseCoopers LLP.31.1*
              —
              Certification
      of Chief Executive Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.31.2*
              —
              Certification
      of Chief Financial Officer pursuant to Rule 13a-14(a) or 15d-14(a) of the
      Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the
      Sarbanes-Oxley Act of 2002.32.1*
              —
              Certification
      of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.32.2*
              —
              Certification
      of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted
      pursuant to Section 906 of the Sarbanes-Oxley Act of
  2002.99.1*
              —
              Kinder
      Morgan Energy Partners, L.P. Annual Report on Form 10-K for the year ended
      December 31, 2009.
 __________
 *
Filed herewith.
 
  53
 Kinder
Morgan Management, LLC Form 10-K
  SIGNATURES
  Pursuant
to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
  KINDER
      MORGAN MANAGEMENT, LLC
                (Registrant)By
              /s/
      Kimberly A. DangKimberly
      A. Dang
                Vice
      President and Chief Financial OfficerDate:
      February 25, 2010
 
 Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the Registrant and in the
capacities set forth below and as of the date set forth above.
  /s/
      Richard D. Kinder
              
              Director,
      Chairman and Chief Executive OfficerRichard
      D. Kinder
              
              (Principal
      Executive Officer)/s/
      Kimberly A. Dang
              
              Vice
      President and Chief Financial Officer (PrincipalKimberly
      A. Dang
              
              Financial
      Officer and Principal Accounting Officer)/s/
      Gary L. Hultquist
              
              DirectorGary
      L. Hultquist/s/
      C. Berdon Lawrence
              
              DirectorC.
      Berdon Lawrence/s/
      C. Park Shaper
              
              Director
      and PresidentC.
      Park Shaper/s/
      Perry M. Waughtal
              
              DirectorPerry
      M. Waughtal
 
 
  54