Denali Scraps Natural Gas Pipeline Project

Today, the company announced it will pull out of Alaska’s North Slope over the coming months due to a “lack of customer support.”

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By Bill McAllister
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Story Created: May 17, 2011 at 11:28 AM AKDT

Story Updated: May 17, 2011 at 8:50 PM AKDT

Denali, the firm created by ConocoPhillips and BP to explore a natural gas pipeline, announced today that the project will not be built... And the company will shut down.

 Officials of Denali says they're not in denial... And have come to the conclusion that the project is just not economic.
 
Denali says it couldn't get the firm shipping commitments from North Slope producers required to move the project ahead.
 
And that could call into question the viability of the parallel, state-government-backed project of Transcanada's.
 
Denali President Bud Fackrell says there wasn't any specific moment that signaled the end of his firm's effort to build a natural gas pipeline.
 
"It's been more of a process,” he said. “Because our intent was to make the project go. And we've tried to turn over every rock we can to make a viable project. In the end, we just didn't get the support we needed from potential customers to move to the next stage."
 
At one point, Denali had hundreds of employees, with offices in Anchorage; Calgary, Alberta; Houston, Texas; and Long Beach, California.
 
Fackrell says the rapid development of shale gas in the Lower 48 changed the economics of the project considerably since Denali was created three years ago. "And I think that is an overwhelming issue on this project now."
 
From the state's perspective, the end of Denali is not the end of planning for a gas line.
 
"There's ever only going to be one project that does move forward, and we need to get everybody into the same boat,” said Joe Balash, deputy commissioner of the Department of Natural Resources.
 
Transcanada, the firm that has the state license under the Alaska Gasline Inducement Act, is continuing to move forward.
 
"The important thing for Alaska is that we get transportation infrastructure in place that can deliver an incredible North Slope resource, and that's going to unlock all kinds of opportunities for additional exploration and development -- not just for gas, but also for oil," Balash said. "Under the AGIA license, Transcanada has an obligation to keep going."
 
Critics of the Denali project say it was nothing more than a distraction from the beginning.
 
"So their announcement today that they're not serious any more -- well, they were never serious in the first place,” said Rep. Les Gara, D-Anchorage. “It was an effort to kill the gasline in the first place."
 
But Denali's exit could change the political discussion about natural gas.
 
"Certainly it allows Alaskans to focus on the in-state line, which is what I've been focused on for the last couple of years," said Sen. Lesil McGuire, R-Anchorage. "I still believe it's where we need to direct our focus."
 
The future of natural gas is still open for debate -- but with one fewer player.
 
Fackrell says Denali did generate a great deal of useful information that will be archived and available should a pipeline project ever get off the ground.
 
He says the company will wind down its operations over the next few months.

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