Alaska, rich in petroleum, faces an energy shortage

Yahoo

24-04-2025

In the state with the fourth-largest proven reserves of oil and gas in the U.S., there is a looming energy shortage.
Above the Arctic Circle, oil producers on Alaska's North Slope send an average of 465,000 barrels of crude oil south each day for shipping to refineries and users around the country and the world.
But in south-central Alaska – Anchorage and the surrounding region, home to 63% of the state's population – utility companies are warning they may not have enough natural gas from current sources to keep the power and heat on without interruption.
As a professor at the University of Alaska Anchorage who studies the economics of natural resources, I can see this apparent contradiction has a straightforward cause but no simple solution.
The North Slope region once produced nearly 2 million barrels of oil per day at its peak in the 1980s. Every barrel is transported via the 800-mile Trans-Alaska Pipeline System to the port of Valdez, where it is loaded onto tanker ships.
The state government collects significant taxes and royalties on oil production. For decades, oil revenue allowed the state to fund all government spending without imposing broad-based income, sales or property taxes. At the height of the oil boom, there was so much money that Alaska established a wealth fund, now valued at over US$80 billion, and began distributing dividends to every resident.
But the Trans-Alaska Pipeline is designed to carry oil, not natural gas. A state law prevents producers from burning off excess gas, or flaring, as happens in many fields. With nowhere to send it, gas extracted from Alaska's oil fields is reinjected into the ground to boost well pressure and push more oil out.
Alaska's gas reserves are significant. State estimates suggest the North Slope has about 35 trillion cubic feet of proven reserves. That's almost as much natural gas as the U.S. as a whole produced in 2023.
But that is just the beginning: The North Slope also has the potential for another 200 trillion cubic feet that remains undiscovered. And improving technologies and techniques may be able to extract another 590 trillion cubic feet, according to the Alaska Gasline Development Corp., a company owned by the state of Alaska that is trying develop a project to extract and sell the state's natural gas.
As oil production declines and prices remain uncertain, selling gas could provide a different stream of revenue for the state, potentially providing billions of dollars.
For decades, there have been numerous proposals to develop Alaska's gas. State agencies and the petroleum industry have collectively spent hundreds of millions of dollars on this effort.
The concept that's closest to reality is Alaska Gasline Development Corp.'s proposal to build a plant on the North Slope to remove gas impurities, a liquefaction plant near Anchorage that could export 20 million tons of liquefied gas each year – around a trillion cubic feet – and an 807-mile pipeline to connect the two.
The cost is expected to be significant: The corporation's own estimate is that it would cost $44 billion. But that number was developed before the construction sector saw significant inflation in 2022. An engineering study due for release in late 2025 will provide a more updated figure. Alaskans remember that the Trans-Alaska Pipeline ended up costing 25% more than projected.
Since his first day in office, President Donald Trump has touted this pipeline as part of efforts to expand the nation's production of fossil fuels. He told a joint session of Congress it was a near-ready project, with Japan and South Korea ready to invest 'trillions of dollars each.' In February 2025, he stood alongside Japanese Prime Minister Shigeru Ishiba to announce a 'joint venture' to develop the pipeline project, but no specific details have been announced.
There is a growing need to address Alaska's domestic energy shortfall.
South-central Alaska relies on natural gas for more than 70% of its electric and heating needs. But the gas reserves closest to Anchorage, in the Cook Inlet, which have provided energy to the area since the 1960s, are dwindling, and prices are rising. In 2005, wholesale gas prices were $3.75 per 1,000 cubic feet of natural gas. By 2024, the price had more than doubled, to $8.75. By contrast, the rest of the U.S. has seen natural gas prices cut in half over that period, thanks in part to horizontal drilling and hydraulic fracturing, also known as fracking.
In 2022, Hilcorp, the company responsible for roughly 85% of the Cook Inlet gas production, reported that by 2027 it might not be able to supply enough gas for utilities that serve the region.
Solutions other than the pipeline are also slow and expensive. Local utilities estimate that improving energy efficiency and developing renewable power could reduce gas demand by around 10% over the next several years and by as much as 15% after a decade. But retrofitting the area's aging and energy-inefficient homes will not be fast or cheap.
What remains for Alaska are two main options: get gas from the North Slope to Anchorage, or import liquefied gas from the global market.
Building the pipeline could both meet the needs of Alaska's people and bring in money from global sales – though how much revenue depends on how global gas markets change over time and how competitive Alaska gas prices would be relative to other suppliers.
Any delays from financial, legal, technical or environmental challenges would balloon costs. But if it succeeded, Anchorage-area customers could see prices drop as low as $2.23 per 1,000 cubic feet – a 75% drop from current prices and 40% lower than in 2005. The savings could significantly bolster the region's economy.
Importing is a costly option. A study commissioned by the Alaska Legislature found that imported gas would cost $13.72 per 1,000 cubic feet. That's 60% more than current prices and especially burdensome for Alaska families and businesses, which already pay far higher energy bills than typical American customers.
Beyond the economic questions, there's something symbolic at stake: the state's identity. Could a state synonymous with energy production become an energy importer? Many Alaskans see the prospect as an embarrassing paradox – akin to Hawaii importing pineapples or New Mexico importing green chiles.
Alaska is not alone in grappling with the tension between energy self-sufficiency and economic efficiency.
Across the U.S., states rich in resources have wrestled with the question of whether to prioritize local production or integrate into global markets. Texas produces more oil than any other state, yet it continues to import crude oil due to mismatches between its production and refining capacity.
Shaped by globalization, few regions can truly isolate themselves from market forces. Energy production and consumption are increasingly interconnected, meaning pursuit of local self-sufficiency comes at a steep economic cost. That's the question facing Alaska: whether to invest in domestic infrastructure to maintain energy independence, or embrace the flexibility – and potentially lower cost – of global markets.
This article is republished from The Conversation, a nonprofit, independent news organization bringing you facts and trustworthy analysis to help you make sense of our complex world. It was written by: Brett Watson, University of Alaska Anchorage
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Brett Watson receives funding from First National Bank Alaska to conduct research on the Alaska economy, including energy issues. He has previously received funding from Power the Future for work on Alaska mineral issues.