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Vol. 13, No. 26 Week of June 29, 2008
Providing coverage of Alaska and northern Canada's oil and gas industry

Denali opens Tok office for summer work

Producer-backed company throws a party on the Alaska Highway to celebrate ‘boots on the ground’ in its effort to build a pipeline

Eric Lidji

Petroleum News

In a tight race, every inch counts.

As TransCanada inched through Alaska Gasline Inducement Act hearings in Anchorage on June 19, a producer-created company with a competing pipeline proposal also inched forward by opening a field office in Tok, a small, unincorporated community along the Alaska Highway.

Denali — The Alaska Gas Pipeline LLC, jointly owned by oil giants BP and ConocoPhillips, will use the office, renovated from an old hardware store, as a base for early data collection in support of the massive pipeline project, expected to carry 4 billion cubic feet of natural gas each day to markets in Canada and the Lower 48.

Denali paid for reporters to fly to Tok for the opening of the field office, as well as a short helicopter ride to showcase work being done around the Tanana River.

Under a large marquee tent decorated with blue and white Denali balloons, hundreds of residents from the area ate hamburgers and hotdogs from Fast Eddy’s, a local restaurant, while a local musician strummed on a guitar. Those who showed up could take home Denali hats, handkerchiefs, bug spray and even cookies emblazoned with the Denali logo, or have their picture taken with “the first foot of pipe.”

“We’re off and running. We’re moving. We’re going to bring energy to Alaska and the Lower 48,” Bud Fackrell, the new president of Denali, said to the crowd before cutting the ribbon to the field office.

In the world of pipeline design, though, being “off and running” is a relative term. The largest construction project in North America is a marathon, not a sprint.

While the Tok field office is the first “on the ground” effort of the most recent incarnation of a pipeline that has remained elusive for three decades, even Fackrell admits the summer work program might not seem particularly exciting.

“One thing I’ve learned in projects is you have to do the front end engineering design work first. And it’s very painful sometimes. You think you’re not going very fast, but sometimes you have to go slow to go fast later,” Fackrell said.

$40 million to be spent this year, $600 million through 2010

The $40-million workload planned for the remainder of this year involves gathering “front end” information about a segment of the proposed pipeline route roughly following the Alaska Highway and the path of the old Haines pipeline.

This early collection effort will focus on learning the hydrology of rivers and streams, digging for cultural artifacts, monitoring air and soil quality, and mapping the region both on the ground and through aerial photography.

The goal is to get a more accurate cost estimate for the pipeline — current estimates fluctuate between $26 billion and $41 billion — in order to hold a successful open season for the pipeline by 2010. Denali plans to spend $600 million toward that effort.

A “successful open season” would mean “We’ve done the work necessary to have a reasonable cost estimate that would convince the shippers of the gas to commit, and get financing and then file for a FERC permit,” Fackrell said, referring to the certification of the Federal Energy Regulatory Commission required for any project.

Preparing for an open season is Fackrell’s main priority, he said. When it comes to the larger questions surrounding the pipeline — like whether or not Denali would commit gas to a TransCanada pipeline, or whether Denali would consider a partnership with TransCanada — Fackrell deferred to his “owners,” BP and ConocoPhillips.

Denali hopes to employ 150 by year’s end

Flying over the murky Tanana River, Craig Dotson, a project manager for Denali, pointed out six men in orange jackets down below, four sitting in a motor boat and two working a leveling instrument on the riverbank.

The hydrology team is one of several gathering information about waterways along the pipeline route. Dotson said the Denali pipeline is expected to cross around 500 streams and rivers. The teams are examining the banks of each to decide where and how to cross.

Denali chose Tok for its first office because the community sits near the middle of a less-studied 200-mile stretch of Alaska between Delta Junction and the Canadian border.

Working with a security team from Doyon Ltd., the crews have set up repeater stations throughout the area to allow for radio contact along the pipeline route.

Denali currently has around 40 people, mostly contractors, working out of the Tok field office, and expects to staff as many as 60 as operations ramp up. The company also employs an equal number of people working temporary offices in Anchorage.

Denali hopes to have 150 people working on the project by the end of the year, as well as an executive team most likely culled from the ranks of BP and ConocoPhillips in Alaska.

The summer work program is set to run through September, when the early signs of winter will move most of the activities indoors. The Tok crews will study the data collected over the summer, conduct additional fieldwork related to wintertime conditions along the pipeline route and plan for the second summer work season.

Fackrell brushes aside timing questions

Gov. Sarah Palin, who created AGIA and is backing TransCanada in its effort to get a state license through the bill, expressed optimism for the Denali project, but accused BP and ConocoPhillips of not making commitments to build a pipeline.

AGIA would require TransCanada to commit to holding an open season and seeking certification with the Federal Energy Regulatory Commission.

Fackrell contends that Denali is making the same commitment as any other project.

“Today I can’t commit to building a pipeline, but no one can until you have a FERC certificate. But we’re committed to moving this project forward. And I think that’s what you’re going to see,” he said.

Fackrell dismissed the questions of timing raised about recent Denali announcements. BP and ConocoPhillips announced the Denali project in early April, as the administration prepared its finding of the TransCanada proposal.

Some people, including Palin, have suggested that AGIA forced the companies to act.

Fackrell disagrees.

“BP and ConocoPhillips have been working on trying to have a pipeline for many, many years,” Fackrell said. “We’re here today, now. What caused it is a number of different things, but we are here today.”

Fackrell also sloughed off another instance of similar timing: how word broke that Denali had pre-filed with FERC on the day FERC officials testified before state lawmakers.

“This is business as usual for us. It may have been spectacular in the press. For us, this is just business as usual,” Fackrell said.

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