BP and ConocoPhillips launched Denali in 2008, making it a direct competitor to TransCanada, the Canadian firm currently pursuing a similar project in cooperation with ExxonMobil and the state under the Alaska Gasline Inducement Act.
Denali began by renting Anchorage office space in a high-profile new building at Northern Lights Boulevard and C Street. It then staged an open season to negotiate gas shipping contracts with producers, which ended in October.
Last September, however, ConocoPhillips head Jim Mulva told the London Financial Times his company was reconsidering its support for the project. His statements drew concern from state officials, two months after TransCanada reported receiving “multiple bids” at the conclusion of its open season.
In a state press release Tuesday, Gov. Sean Parnell expressed hope that TransCanada's former rivals would eventually cooperate with it to complete a gas line.
“While we dislike seeing the demise of any gas pipeline project before a gasline is underway, the silver lining here is that Denali’s announcement frees ConocoPhillips and BP to independently become partners in another Alaska gasline project,” Parnell said. “While the competition that drove progress on this important project has been welcome, it has always been universally understood that only one project would be built.”
The U.S. government’s federal gas line coordinator, Larry Persily, issued a statement praising Denali’s bid.
“The Denali partners should be commended for spending $165 million of their own money on the project over the past three years,” Persily said. “I hope that the partners in Denali -- BP and ConocoPhillips -- will someday find themselves at the table with ExxonMobil, TransCanada and the state to see if everyone can get together on this project that is so important to the state’s economy and the nation’s long-term energy supply.”
Alaska's congressional delegation noted the impact of market forces on both pipeline bids, but remained optimistic about the chances for a gas line to be built.
“Like many Alaskans, I am disappointed to hear today’s news that the Denali project is no longer pursuing the gas line. We’ve always known a gas line can only succeed if there is a market for the gas, and prices are low while supplies are plentiful in the lower 48 markets right now,” said Sen. Mark Begich. “I hope the State and the producers can all work together to move an Alaska gas line forward in the future.”
“While it’s disappointing that BP and ConocoPhillips have decided to shut down their Denali project, there remains a lot of interest in getting Alaska’s natural gas off the North Slope to Alaska households and bigger markets Outside,” said Sen. Lisa Murkowski. “Ultimately, it will be the market that determines how we monetize our gas resources. I do not believe, though, that this signals an end to those efforts. The good news is that there are still several proposals for both an out-of-state line and an in-state line that could deliver real benefits to Alaskans.”
“I commend ConocoPhillips and BP for taking the initiative to invest their resources in this project and for their interest in developing a gas pipeline," said Rep. Don Young. "While it is disappointing that they have decided not to pursue the project further, I can understand that these companies must make decisions based on economics and what can be profitable for them. I still believe that Alaskan gas can be developed and will do everything in my power at the federal level to help Alaska make it a reality.”
The state Legislature's House Majority Caucus, which backed a proposal by Gov. Sean Parnell to stimulate oil production with a $2 billion annual reduction in state taxes on oil companies, said it was disappointed by Tuesday's news. In a statement, it called for abandoning AGIA and instead developing an "all-Alaska" gas line to serve local customers.
“This news was not unexpected, but is disappointing just the same,” said House Speaker Mike Chenault. “Denali was the one fully private sector endeavor to link Alaska’s natural gas with the Lower 48. This is a clear signal that there is no room in North America’s flooded markets for Alaska gas, and that the state needs to put everything we’ve got toward developing our gas in-state.”
Denali says it will withdraw its applications for federal permits and pack up its offices over the next few months.
This is a developing story. Please check KTUU.com and the 5:00 Report for more details.
Contact Ted Land at tland@ktuu.com
