Alaska, a state known for its vast proven reserves of oil and gas, is grappling with an unexpected energy shortage.
This paradox exists even though Alaska ranks fourth in the U.S. for natural resources, with crude oil production flowing continually from the North Slope.
Currently, oil producers on the North Slope send an average of 465,000 barrels of crude oil south each day, which is then shipped to refineries for use across the country and beyond.
However, in south-central Alaska, particularly in Anchorage and its surrounding areas, where 63% of the state’s population resides, major utility companies are sounding the alarm about a possible lack of natural gas to meet heating and power demands.
As a professor at the University of Alaska Anchorage focused on natural resource economics, I understand that this contradiction has a clear cause but lacks an easy solution.
Declining oil production on the North Slope, which once flourished at nearly 2 million barrels per day during its peak in the 1980s, is a significant factor.
The oil is transported via the 800-mile Trans-Alaska Pipeline System, which extends to the port of Valdez.
For decades, revenues from oil production have supported state funding without the need for broad-based taxes, contributing to a wealth fund currently valued at over $80 billion through distributions to residents.
However, the pipeline is designed specifically for oil, not natural gas.
Due to a law preventing flaring, or burning off excess gas, extracted natural gas is reinjected into the ground to increase oil production.
Despite this predicament, Alaska possesses substantial natural gas reserves.
State estimates indicate that the North Slope contains approximately 35 trillion cubic feet of proven reserves, nearly equivalent to the volume of natural gas produced by the entire U.S. in 2023.
This figure is only a glimpse of the potential reserves; Alaska could host another 200 trillion cubic feet of yet-undiscovered gas, and advancements in extraction techniques could yield an additional 590 trillion cubic feet, according to the Alaska Gasline Development Corp.
With oil production on a decline and market prices unstable, tapping into natural gas could create a crucial revenue stream for the state, possibly reaching billions of dollars.
Nevertheless, the challenge remains: transporting gas from the North Slope to Anchorage.
Countless proposals to develop Alaska’s gas reserves have emerged over decades, with state agencies and companies spending hundreds of millions of dollars in the effort.
One notable project under consideration is proposed by the Alaska Gasline Development Corp.
This project envisions building a facility on the North Slope to treat gas impurities, a liquefaction plant near Anchorage capable of exporting 20 million tons of liquefied gas annually, and an 807-mile pipeline connecting the two.
However, the estimated cost for this undertaking is around $44 billion—a figure that predates the significant inflation in the construction sector observed in 2022.
A comprehensive engineering study scheduled for late 2025 will provide updated cost projections, as past major projects like the Trans-Alaska Pipeline ultimately exceeded initial budget estimates by 25%.
In the background, previous political efforts to expedite gas pipeline construction have included promises from President Donald Trump, who voiced strong support for the project.
In February 2025, he announced a “joint venture” with Japan’s Prime Minister Shigeru Ishiba for developing the pipeline, although details of this partnership remain sparse.
The immediate need is to remedy the energy shortfall faced in south-central Alaska.
Natural gas supplies over 70% of the region’s electric and heating needs, yet the reserves in the Cook Inlet—the primary supply source since the 1960s—are dwindling, leading to rising prices.
The wholesale price of natural gas has more than doubled since 2005, significantly affecting resident and business costs, while the rest of the U.S. has seen substantial decreases in natural gas prices.
By 2027, Hilcorp, which produces about 85% of the gas in Cook Inlet, predicts it will struggle to meet local utility demands.
Alternative solutions, such as enhancing energy efficiency and advancing renewable resources, may yield a modest reduction in gas demand over time but come with significant retrofitting costs and protracted timelines.
Alaska faces a defining crossroads: either transport gas from its North Slope or rely on imported liquefied gas from global markets.
If the pipeline is successfully built, it could address local energy needs and simultaneously generate revenue through global sales, though the fluctuating global gas market may impact profitability and pricing competitiveness.
Should the pipeline project face delays—whether financial, legal, technical, or environmental—costs will inevitably increase.
Yet, the rewards could be substantial, with local consumers potentially enjoying a 75% decrease in current gas prices, thus invigorating the Anchorage economy.
In contrast, importing gas poses its own set of challenges.
Legislative studies have projected that imported gas could rise to around $13.72 per 1,000 cubic feet, significantly exceeding current prices and impacting the financial stability of Alaska’s families and businesses, already burdened with higher-than-average energy expenses.
Beyond economic ramifications, there’s a deeper, symbolic concern: the identity of Alaska as an energy-rich state could face scrutiny should it transition into an energy importer.
The notion of Alaska—synonymous with energy production—importing gas resonates poorly with many residents, paralleling the absurdity of Hawaii importing pineapples.
This dilemma isn’t unique to Alaska; many resource-rich states in the U.S. wrestle with policy decisions balancing local production against the flexibility of global supply chains.
For example, Texas, despite being the leading oil producer, continues to import crude oil due to disparities between its extraction capabilities and refineries.
Ultimately, rising globalization means that few regions can fully insulate themselves from market dynamics, leading to complex choices between investing in domestic infrastructure for energy independence or leveraging the advantages offered by global markets.
This is Alaska’s predicament: finding a way forward in a landscape shaped by both abundant natural resources and the complex realities of modern energy economics.
image source from：https://theconversation.com/alaska-rich-in-petroleum-faces-an-energy-shortage-254903
