888228--2/23/2009--KINDER_MORGAN_ENERGY_PARTNERS_L

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{debt, indebtedness, cash}

{gas, price, oil}

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{condition, economic, financial}

{cost, regulation, environmental}

{stock, price, operating}

{regulation, change, law}

{acquisition, growth, future}

{operation, natural, condition}

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{financial, litigation, operation}

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Our business is subject to extensive regulation that affects our operations and costs. Pending Federal Energy Regulatory Commission and California Public Utilities Commission proceedings seek substantial refunds and reductions in tariff rates on some of our pipelines. If the proceedings are determined adversely to us, they could have a material adverse impact on us. Rulemaking and oversight, as well as changes in regulations, by the Federal Energy Regulatory Commission or other regulatory agencies having jurisdiction over our operations could adversely impact our income and operations. Increased regulatory requirements relating to the integrity of our pipelines will require us to spend additional money to comply with these requirements. Environmental laws and regulations could expose us to significant costs and liabilities. Climate change regulation at the federal, state, provincial, or regional levels and/or new regulations issued by the Department of Homeland Security could result in increased operating and capital costs for us. Cost overruns and delays on our expansion and new build projects could adversely affect our business. Our rapid growth may cause difficulties integrating and constructing new operations, and we may not be able to achieve the expected benefits from any future acquisitions. Our acquisition strategy and expansion programs require access to new capital. Tightened capital markets or more expensive capital would impair our ability to grow. Energy commodity transportation and storage activities involve numerous risks that may result in accidents or otherwise adversely affect operations The development of oil and gas properties involves risks that may result in a total loss of investment. The volatility of natural gas and oil prices could have a material adverse effect on our business. Our use of hedging arrangements could result in financial losses or reduce our income. We must either obtain the right from landowners or exercise the power of eminent domain in order to use most of the land on which our pipelines are constructed, and we are subject to the possibility of increased costs to retain necessary land use. Our substantial debt could adversely affect our financial health and make us more vulnerable to adverse economic conditions. Our variable rate debt makes us vulnerable to increases in interest rates. Our debt instruments may limit our financial flexibility and increase our financing costs. Current or future distressed financial conditions of customers could have an adverse impact on us in the event these customers are unable to pay us for the products or services we provide. Current levels of market volatility are unprecedented. Our operating results may be adversely affected by unfavorable economic and market conditions. The recent downturn in the credit markets has increased the cost of borrowing and has made financing difficult to obtain, each of which may have a material adverse effect on our results of operations and business. The failure of any bank in which we deposit our funds could reduce the amount of cash we have available for operations, to pay distributions and to make additional investments. There can be no assurance as to the impact on the financial markets of the U.S. government s plans to purchase large amounts of illiquid, mortgage-backed and other securities from financial institutions. Knight s May 2007 going-private transaction resulted in a downgrade of the ratings of our debt securities, which has increased our cost of capital. The future success of our oil and gas development and production operations depends in part upon our ability to develop additional oil and gas reserves that are economically recoverable. Competition could ultimately lead to lower levels of profits and adversely impact our ability to recontract for expiring transportation capacity at favorable rates or maintain existing customers. Future business development of our products, crude oil and natural gas pipelines is dependent on the supply of, and demand for, those commodities. We are subject to U.S. dollar/Canadian dollar exchange rate fluctuations. Terrorist attacks, or the threat of them, may adversely affect our business. Hurricanes and other natural disasters could have a material adverse effect on our business, financial condition and results of operations. The interests of Knight may differ from our interests and the interests of our unitholders. Common unitholders have limited voting rights and limited control. A person or group owning 20% or more of the common units cannot vote. The general partner s liability to us and our unitholders may be limited. Unitholders may have liability to repay distributions. Unitholders may be liable if we have not complied with state partnership law. The general partner may buy out minority unitholders if it owns 80% of the units. We may sell additional limited partner interests, diluting existing interests of unitholders. The general partner can protect itself against dilution. Our partnership agreement and the KMR limited liability company agreement restrict or eliminate a number of the fiduciary duties that would otherwise be owed by our general partner and/or its delegate to our unitholders. We adopted certain valuation methodologies that may result in a shift of income, gain, loss and deduction between our general partner and our unitholders. The IRS may challenge this treatment, which could adversely affect the value of the common units. Our treatment of a purchaser of common units as having the same tax benefits as the seller could be challenged, resulting in a reduction in value of the common units. Our tax treatment depends on our status as a partnership for United States federal income tax purposes, as well as our not being subject to a material amount of entity-level taxation by individual states. If the Internal Revenue Service treats us as a corporation or if we become 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 our partners. The issuance of additional i-units may cause more taxable income to be allocated to the common units. We may have potential liability arising out of a possible dissemination of one or more prospectuses (in the form of Current Reports on Form 8-K and 8-K/A) not meeting the requirements of the Securities Act. Unitholders may have negative tax consequences if we default on our debt or sell assets. There is the potential for a change of control if Knight defaults on debt.

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888228--2/23/2009--KINDER_MORGAN_ENERGY_PARTNERS_L_P