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Company cancels work on Alaska gas pipeline project

By the CNN Wire Staff
  • NEW: Alaskan officials say they remain committed to a natural gas pipeline project
  • NEW: TransCanada says it has had "good discussions with potential customers"
  • Denali's president says the company will stop work due to "lack of customer support"
  • Former Alaska Gov. Sarah Palin drew criticism for the pipeline project

(CNN) -- One company behind a controversial proposal to build a $35 billion natural gas pipeline in Alaska said Tuesday it was stopping work on the project, but state officials said they were committed to their plan to pump gas to the lower 48 states.

The president of Denali, owned by subsidiaries of BP and ConocoPhillips, said the company would stop working on its Alaska gas pipeline project due to "lack of customer support."

"Denali is a market-driven company. As such, we cannot spend the billions of dollars necessary to advance the project unless we have binding agreements with shippers," President Bud Fackrell said in a statement. "Although we have been in discussions with potential shippers for nearly a year and half, we have been unable to secure the financial commitments necessary to advance the project."

Denali said it had spent more than $165 million and invested 760,000 employee hours in its work consulting with stakeholders, meeting with potential customers and submitting public filings on the proposal.

Alaska Gov. Sean Parnell said Denali's announcement could allow BP and ConocoPhillips to become partners in another pipeline project.

TransCanada and ExxonMobil have been working on a competing Alaska natural gas pipeline project, which has secured state funding and state government approval.

"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," Parnell said in a statement after Denali's announcement Tuesday.

Tony Palmer, vice president of Alaska development for TransCanada, said his company would be open to expanding its partnership on the project.

"They were out competing with us. ... We thought that there would be, at some point, a winner. We'd be pleased to have BP and Conoco join us if they wish to," he said.

Parnell and other Alaska officials said the state remains committed to a pipeline that would pump gas from Alaska's North Slope to the lower 48 states.

"Alaska has tremendous gas resources on the North Slope that need to get to market," said Dan Sullivan, the state's natural resources commissioner.

Former Alaska Gov. Sarah Palin drew criticism for the pipeline project while she was in office.

Critics questioned whether there was an adequate demand for natural gas to justify the spending on the pipeline.

In 2009, Palin told CNN those views were shortsighted and said the project was "right for our nation's security and for our environment, for our economy."

"By probably 2030, we'll see about a 40% increase in demand for natural gas," she said. "Domestically, we have the supply. The resources are up there in Alaska, and it's time that we build this infrastructure and flow that very valuable resource into hungry markets throughout the U.S."

Palmer said TransCanada is still moving forward on its pipeline project and has had "good discussions with our potential customers." But he noted that regulatory hurdles and issues between the state of Alaska and gas producers remain.

"We continue to advance to try to get customers to commit to our project. We've said clearly for years that we'll do our part, but other stakeholders, like the state of Alaska, have to do their part for the project," he said.

CNN's Catherine E. Shoichet, Tracy Sabo and Amanda Watts contributed to this report.