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Alaska’s Energy Future

Now is the time to move forward


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US domestic crude oil production by source, 1990-2040 in millions of barrels per day.

SOURCE: EIA

The rapid rise of shale energy production in the Lower 48 has broken records and shattered expectations of “peak oil.” Headlines frequently tout the new American energy powerhouse. Thanks to shale production, a country with a perceived shortage of domestic energy supply just a few years ago is now less dependent on imports and more energy self-sufficient—making the nation far more competitive on a global scale.

Accordingly, the United States is now the largest oil-and-gas producer in the world, and its resulting economic and employment contributions are being felt throughout the once-weakened US economy. Household incomes are up, as is trade, manufacturing output, and job creation.

Seemingly left behind in the midst of the record-breaking boom in the contiguous United States is Alaska, the once and future cornerstone of the US energy landscape. Whereas the Lower 48 has seen energy production shoot up 77 percent in the last five years, due largely to state and private ownership of mineral rights, Alaska’s oil production has plunged from more than 2 million barrels per day in the late 1980s to fewer than 400,000 today, dropping the state to No. 4 nationwide in oil production. Even California—the state has considered banning fracking and said “no” to offshore drilling—produces more oil than Alaska.

 

Alaska’s Resource Decline

Alaska’s numbers have dropped for various reasons, like years-long environmental reviews, excessive and unnecessary litigation, new management plans, and regulatory uncertainty. Because 62 percent of Alaska’s land is controlled by the federal government and all waters more than three nautical miles offshore are also federally owned and managed, our state’s energy development has been stymied by the federal government’s inability—or unwillingness—to lease and permit expanded development on federal lands. According to the Congressional Research Service, crude oil production on federal lands has slipped by more than 6 percent since 2009. In contrast, production on non-federal lands has grown by 60 percent.

As a result, Alaska’s competitiveness has drastically diminished, the Alaska Oil and Gas Association says. Alaska oil production, for instance, now accounts for less than 10 percent of US domestic production, a dramatic decline from the more than 20 percent the state accounted for between 1980 and 2000. Yet, Alaska’s abundant resource potential has never been greater.

The Obama Administration’s hesitation and unwillingness to allow greater development on federal lands has been especially devastating in Alaska where oil and natural gas development remains a vital component of Alaskan prosperity. The petroleum industry supports nearly one-third of the state’s jobs and 90 percent of the state’s discretionary spending, and increases in exploration of the Alaska Outer Continental Shelf could generate more than 35,000 Alaskan additional jobs, but only if the federal government would allow it.

The decline in Alaska’s North Slope oil fields is also troubling for the trans-Alaska oil pipeline, which is operating at only one-third of its capacity, due to a 39 percent decline in its carrying load in the past ten years. If production slows too much, it’ll be hard to keep oil moving, and the pipeline could be compromised.

 

Looking Offshore

In order to further the nation’s energy and national security objectives, exploration of Alaska and its Arctic waters must remain a dominant figure in the nation’s energy equation. The state’s vast deposits of natural resources enable economic growth, bolster trade, reduce the nation’s debt, lower consumer energy costs, and ensure safe, affordable energy for all Americans, even those in the Lower 48 states.

Alaska’s lands and waters hold tremendous opportunities for energy development. Three reserves—the Chukchi and Beaufort seas, the Arctic National Wildlife Refuge, and the National Petroleum Reserve-Alaska—collectively (and conservatively) hold 35.5 billion barrels of oil and more than 150 trillion cubic feet of natural gas in areas open to development. That’s enough oil to fuel California’s entire energy economy—the ninth largest economy in the world—every day for fifty-five years.

According to very conservative estimates by the US Energy Information Administration, Alaska has reserves of about 3.3 billion barrels of oil and 9 trillion cubic feet of natural gas onshore. Offshore, the possibilities are even more appealing. The Alaska Outer Continental Shelf, with an estimated 27 billion barrels of oil and 132 trillion cubic feet of natural gas, remains one of the world’s largest untapped reserves.

More onshore and offshore production, accompanied by the right balance of policies and regulations, could mean that new Alaska production might reach 1.6 million barrels of energy per day by 2030. Offshore development could also generate $193 billion in new revenue and fifty-five thousand jobs nationwide.

To illustrate the magnitude of these resources, consider this: 30 billion barrels of Alaska oil could fuel every domestic flight for more than 120 years. And 141 trillion cubic feet of natural gas could heat every American house for 34 years. Simply put, American consumers need Alaska.

Given these abundant resources, it’s disappointing that the United States continues to import about 40 percent of its crude oil. Meanwhile, the Obama Administration has moved forward on new plans and regulations that could limit or prevent energy development in the Arctic National Wildlife Reserve, the National Petroleum Reserve-Alaska, and the Chukchi and Beaufort seas. And when it isn’t additional red-tape cutting off access, opposition groups are increasingly utilizing litigation to seek to stall or derail development plans.

 

Impacts for Alaska and the Lower 48

However you look at it, the United States will continue to consume about 18 million barrels of oil per day—even while making laudable strides to develop alternative fuels and utilize energy more efficiently. As a result, if these limitations continue to stifle development for Alaska, millions of consumers in the Lower 48, particularly those on the West Coast, could lose a reliable source of American energy.

Take Oregon for example. Unlike other Western states, Oregon lacks refineries and crude oil resources and imports 100 percent of its petroleum. More than 80 percent of the oil eventually used in Oregon originates in the Alaska North Slope oil fields.

Yet, as Alaska production has dwindled, so has the amount of oil the trans-Alaska oil pipeline supplies to refineries in western states. West Coast imports of crude oil have more than tripled since the early 1990s, and increasingly a share of these imports comes from unstable countries. Notably, imports from Russia and OPEC (Organization of the Petroleum Exporting Countries) nations to western states have increased fivefold, from 11.2 percent in 1988 to 42.1 percent in 2012, despite a reduction in overall consumption.

In 2011, a brief closure of the Alaska pipeline scuttled shipments of Alaska crude to refineries in Washington and California. How did refineries make up the difference? They imported Russian crude oil. In a span of less than twenty years, the West Coast has changed from being a region of the country that exported oil to the rest of the United States to a region that depends on OPEC for a quarter of its demand.

 

Working Together for Our Energy Future

While most Alaskans have been up-in-arms about the Alaska energy shutout, the rest of the United States has remained either silent or unaware. As an organization with chapters in Alaska and across the Lower 48, Consumer Energy Alliance (CEA) believes that we must educate all US consumers on the benefits of Alaska energy and motivate them to advocate for a sound, “all-of-the-above” energy policy that includes Alaska. Consumers must lead the conversation with our policymakers on the importance of Alaska to our energy future. That’s why CEA, in conjunction with its Alaska chapter and its nationwide network of consumer-advocates, has continually championed Alaska energy, emphasizing the role these resources play in providing affordable energy to consumers.

CEA recently announced that it submitted more than 128,000 letters from consumers to the Bureau of Ocean Energy Management, or BOEM, calling for an expansive 2017-2022 Outer Continental Shelf Oil & Gas Leasing Program that includes leasing opportunities in the Atlantic, Western, Central and Eastern Gulf of Mexico, and off of Alaska. CEA President David Holt remarked, “We urge the BOEM to listen to the more than 128,000 consumers and 150 companies and organizations who have joined CEA in calling on the federal government to allow access to our resources. We can protect our environment and develop our domestic energy resources.”

CEA has long said, “The road to US energy security runs through Alaska!” That has never been truer than it is today. Let’s develop our potential, make our nation more secure, and develop jobs and economic prosperity through a sensible, sustainable energy policy. Alaska’s natural resources and pristine environment are a great benefit to the entire nation. We can have a secure environment AND responsible production. Alaska stands ready. Let’s go to work!

Anne Seneca is the Executive Director of Consumer Energy Alliance (CEA)-Alaska. An Alaskan for almost twenty-five years, Seneca has a passion for safe and economical energy development both within Alaska and nationally. With experience in marketing and public relations, Seneca serves as the key liaison in reaching out to large groups of Alaskans with a strong, succinct message of the benefits of responsible resource development and consumer advocacy.

This first appeared in the November 2014 print edition of Alaska Business Monthly magazine.
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