The Denali natural gas pipeline consortium said it has received "significant" bids from customers hoping to ship gas through its planned $35 billion pipeline from the Alaska North Slope to Alberta.
As expected, those bids came with unspecified conditions.
Denali Monday concluded its "open season," the highly formalized process during which prospective pipeline developers seek offers from shippers to buy space on the pipeline.
Last month in Juneau, Denali spokesman Dave MacDowell offered a hint at what those conditions may be: Favorable tax rates set by the Alaska Legislature when it meets next January.
Denali, owned by ConocoPhillips Co. and BP PLC, is the second pipeline consortium to conclude an open season. Earlier this summer a TransCanada Corp.-led project backed by the state of Alaska said it to had received significant, conditional bids for pipeline space.
That pipeline, being developed under the Alaska Gasline Inducement Act with a state subsidy and state conditions, would run to Alberta as does Denali's, but would also have a liquid natural gas export option through Valdez.
MacDowell said the open season bids are important to the project's success.
"Those commitments are important, because they indicate that the market supports what we are trying to do," he said.
Denali Monday emphasized the difference between Denali's project and the AGIA-backed pipeline being developed by TransCanada and partner ExxonMobil Corp.
"Denali is a market-based project, and the next steps will be determined by the commitments our customers are willing to make," said Bud Fackrell, Denali President, in a statement released after the conclusion of the open season.
Senate Energy Committee Co-chairman Bill Wielechowski, D-Anchorage, called the conclusion of two open seasons "the most tangible progress we've seen to date" on developing the state's huge but long-untapped North Slope natural gas reserves.
The two competing projects show that the state is on the way to hopefully getting a pipeline by 2020, he said.
"This is what we hoped for when we passed AGIA," he said.
Monday, Denali said that many of the conditions sought by prospective shippers were outside its control. That may include tax rates set by the state, including both rates and guarantees that they won't be changed.
Shippers need a "clear and predictable fiscal framework," MacDowell said.
For such a long term project, long term guarantees are necessary for shippers, he said.
What's important is "having the confidence that those rules will be in place for the project term," he said. "Right now, that's doesn't exist."
Also important, he said will be resolving issues surrounding Point Thomson, a North Slope gas field controlled by ExxonMobil, which has been a point of contention between the state and its owners for decades.
It holds volumes of gas crucial to a pipeline deal, but four years ago the state moved to take it back for failure of its leaseholders to develop it. A settlement is in the works.
Other issues Denali will examine, it said, are Lower 48 gas markets and the impact of new shale gas reserves on the profitability of a pipeline.
Contact Pat Forgey at 523-2250 or email@example.com.
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