The viability of the last American frontier is threatened by a diminishing supply of oil and few prospects to generate economic growth. The state that has grown from literally nothing into one of the richest in the union now faces a questionable future, as oil reserves in the Prudhoe Bay region are severely depleted and alternative revenue generators like timber, mining, and fishing are not enough to support Alaska’s developed economy.
The state’s oil industry has critically diminished since peak production in the 1980s. As cheaper sources and alternatives sway market demand, industry leaders and local politicians struggle to adapt. Charles Homans, from the Atlantic, recently wrote an article explaining the conundrum Alaskans face with leadership their and attempts to turn the economy around. Most notably, he writes, “As Palin’s national ambitions eclipsed her concern for Alaskan affairs, the state lost the leadership and political momentum it needed.” Abandoned at the height of need, promising natural gas ventures that could have turned the economy around fell flat.
Today, hydraulic fracturing and other technological advances in extracting natural gas have led to more feasible projects being undertaken in the continental 48. Without needing to battle an inhospitable climate and unnecessarily investing to expand pipeline infrastructure, producers throughout the Midwest and Northeast are benefiting from US demand, cutting much of the need for local Alaskan nat-gas investment.
As a glimmer of hope, Alaska’s current governor, debuted a plan to build a $50B pipeline and export facility. Governor Parnell gave Exxon (XOM), BP (BP), and ConocoPhillips (COP) until the end of the month to show interest in the joint venture, driven by high demand and prices throughout Asia.
“Energy explorers and Alaska’s government are trying for the first time to market a resource that may generate as much as $20 billion in annual gas sales. Asian gas buyers as of July paid almost six times the futures price in the US, where it has been driven low by the shale boom.” (Bloomberg)
The production of Alaskan natural gas is unlikely to impact domestic markets, but the question remains whether such a costly project would stay within a profitable timeframe and provide the economic growth and resources necessary to sustain the states economy. Discussions of such export plans have circulated for the past three decades, but consistently failed to launch. Although the state is positioned in the best possible location for Asian exports along the west coast, will demand justify Alaskan supply by the time it actually reaches consumers?