A reinvigorated political leadership, aided by global energy trends, is moving the state to reach its full potential.
In 1959, years of devoted struggle by the people of Alaska came to fruition when more than 663,000 square miles of isolated wilderness on the lower fringe of the Arctic was integrated into the U.S. and became the 49th and largest state. Their struggle hinged on the argument that the development of Alaska's untapped natural resources would create an economic lifeline for its people. Fifty-two years later, their reasoning has proved to be well-founded. Home to North America's largest oilfields, Alaska has produced more than 15 billion barrels of oil, the revenues of which have helped the state achieve budget savings of over $15 billion and a permanent fund that topped $40 billion in June.
In recent years, however, a harsh truth has emerged. Production has hit a new low, and with 88% of the state's economy dependent on oil, Alaska now stands at a crossroads between painful decline or continued prosperity. Furthermore, as contention continues to heat up between nations over access to oil and gas plays in the Arctic Circle—estimated at 22% of global reserves—Alaska is eager to position itself on the front line. This report takes a look at a state facing an urgent choice, and how a reinvigorated political leadership, aided by global energy trends, is awakening Alaska to its full potential.
Land ownership
Alaska's largest landowner is the federal government, which owns 58.6% of state land, with the state itself in a distant second place, with 28.6%. Consisting of indigenous shareholders, Alaska's Native Corporations are the third-largest owner in the state, managing over 12.2% of state land. Each of the three landowners applies different rules and regulations to natural resource development. Unlike other states, in which oil development often occurs on private land, private ownership is almost nonexistent in Alaska (limited to 0.7%).
Size and resource estimates
One Alaskan anecdote states that when the tide recedes, it exposes more territory than the size of Texas. Dan Sullivan, Alaska's commissioner of natural resources, proffers figures that are equally astonishing, but true. "The Alaska Department of Natural Resources (DNR) manages one of the largest portfolios of resources in the world. Our state is twice the size of Texas and we are larger than all but 18 sovereign nations. We have more coastline in Alaska than the rest of the U.S. combined. We are the size of the United Kingdom, Germany, France and Italy combined, and we remain the least densely populated state in the U.S."
Within that immense territory, Alaska has two chief oil and gas-producing basins: the North Slope, a seemingly endless and flat swampy plateau on the state's most northerly shores, and Cook Inlet, a shallow but massive body of water next to Anchorage, the state's largest city.
Counting federal, state and native lands, most recent estimates put North Slope resources at 40 billion barrels of undiscovered and technically recoverable conventional oil and 236 trillion cubic feet (Tcf) of gas. For Cook Inlet, the U.S. Geological Survey recently elevated its estimates to 599 million barrels of oil and 19 Tcf of gas. Alaska is also home to a number of oil and gas basins that have remained unexploited.
Despite such positive resource estimates, there has been only one exploration well drilled on the North Slope this year. While investors may fret over the underlying causes of such a low number, it underscores Alaska's remaining immense E&P potential. And, recent events and activities indicate that a new chapter has opened for oil and gas development in the state. This was most recently demonstrated in June, when the most successful lease sale in recent years occurred in Cook Inlet, with 110 bids placed, compared to 37 bids placed in 2010. The upcoming North Slope lease sale, set for December this year, will offer an additional 14.7 million acres of onshore and offshore state territories. Companies are already getting ready to drill as many as 28 exploration wells in the 2011–2012 drilling season, making it Alaska's busiest in years.
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