Is Alaska Oil Measuring Up? How our oil industry compares to other oil-producing states.

• Author: Stricker, Julie
• Position: OIL & GAS

For decades Alaska's economy has been defined by the oil and gas industry.

Even though production peaked in the '80s and has been declining ever since, the industry is still the 49th State's largest economic driver in the private sector, says Kara Moriarty, president and CEO of Alaska Oil & Gas Association. The industry funds the bulk of the state budget, and Alaska residents get an annual dividend from the state's oil royalty revenue in the Alaska Permanent Fund.

That's a more direct impact than any other oil-producing state, such as Texas, New Mexico, North Dakota, California, or Colorado, which all have much more diversified economies. Those five states also all have some combination of state income and sales taxes, which Alaska lacks.

And while 6 of the top 100 largest oilfields are found in Alaska, according to the US Energy Information Administration (EIA), the state's remoteness and distance from markets, as well as its extreme climate, set it apart from other oil producers. There are also vast differences in transportation, costs, and technology between Alaska and the Lower 48 oil producing states.

Logistics and Politics

Darren Prokop, a professor of logistics in the College of Business and Public Policy at UAA, sums up the differences in Alaska and the Lower 48 oil states in two words: logistics and politics.

In a 2020 column on FreightWaves.com, Prokop says the size of the oil and gas deposits in Alaska offer many opportunities. But that oil must be able to reach the market in order to generate revenues, and Alaska's oil industry has the longest domestic supply chain in the industry.

Getting Alaska's oil to market requires "arguably the most intricate and costly example of crude oil logistics in the world," Prokop writes. It takes a combination of pipelines, ocean-going tankers, trucks, rail, and air travel to produce Alaska oil and get it to market. Prokop estimates that about a quarter of the cost of oil production in Alaska is due to transportation costs.

Alaska has limited refining available, so four-fifths of the state's oil is offloaded into tankers at the trans-Alaska pipeline's terminal in Valdez and taken to refineries in Washington and California. The rest is refined instate, shipped to Hawaii, or exported, according to the EIA.

In the Lower 48, oil reserves are closer to markets and there are multiple avenues of transportation to get it there. Alaska's North Slope is accessible only by the two-lane Dalton Highway, or...