THE ASSOCIATED PRESS, New York Times, May 17, 2011
JUNEAU, Alaska (AP) — One of two companies planning to build major natural gas pipelines in Alaska has dropped its bid, saying Tuesday that it had not obtained the agreements necessary to justify going forward.
The announcement, by Denali - the Alaska Gas Pipeline company, raised questions about the prospects for building a long-sought line in Alaska. Denali, a joint venture of BP and ConocoPhillips, had estimated its project would have cost $35 billion.
Denali needed firm transportation agreements in excess of $100 billion and transportation commitments of at least 20 years for a line that would not be in service until at least 2020, said Scott Jepsen, vice president for business services at Denali.
It had been competing to build a line with TransCanada Corporation, though lawmakers had expressed frustration with the pace. TransCanada has been moving forward with state financial support, something Denali never received. It was working with Exxon Mobil to advance its project.
Like TransCanada, Denali has been working since last year to secure shipping agreements necessary to move its project forward.
In a statement, Denali’s president, Bud E. Fackrell, said that the company could not spend the billions of dollars necessary to advance the project without binding agreements with shippers. Denali reported spending more than $165 million in pursuing the project.
Both Denali and TransCanada had proposed plans to be in service by about 2020 and deliver about 4.5 billion cubic feet of gas a day from Alaska’s North Slope to North American markets by larger lines to Canada.
For years, Alaskans have thought of a gas line as a way to help shore up revenue as oil production declines, create jobs and provide a more reliable source of energy.
TransCanada won the exclusive license to pursue a project, meaning it got the pledge of up to $500 million in state aid but also had to meet certain benchmarks.
Tony Palmer, a TransCanada executive, said the company was making progress and had resolved nearly all the issues it had with customers. He said some of the others — including resolution on disputed leases and long-term certainty on royalty and tax issues — were out of its control and needed to be dealt with by the state and the gas companies.