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.

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 in-state, 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 Haul Road, and by air, except for a narrow summer window that allows for barge travel along the Beaufort Sea coast.

North Slope workers typically work shifts of two weeks on, two weeks off and are sequestered in company-provided housing on the North Slope. Most workers in the Lower 48 can commute from home. If they are housed at the site, they can generally drive their pickup trucks to the next town, if necessary.

On the North Slope, temperatures can drop to -100°F with wind chill, and the area is also grizzly and polar bear habitat. Going for a long walk on the tundra in February generally isn’t an option. But Alaska’s Arctic region is also one of the fastest-warming regions on the globe. Climate change has shortened the window in which companies can build ice roads and do exploration work on the fragile landscape. None of those are issues in Texas or even North Dakota, though it has its own extreme winter weather.

One of the biggest impacts on oil production in the past decade or so is technology. The Bakken shale formation that drove production in North Dakota and Wyoming was discovered in the ‘50s, but it wasn’t until horizontal drilling and hydraulic fracturing techniques were developed that the fields became commercially feasible. Some of those techniques are now being used to boost production at Alaska sites.

Alaska’s production topped out at about 2 million barrels of oil daily in the ‘80s, putting it nearly even with Texas.

Alaska was the second largest producer for quite a while, Moriarty says, until the Bakken Formation in North Dakota came online.

“Right now, both North Dakota and New Mexico have quite a bit more production than we do,” Moriarty says. “And then, of course, there’s Texas, the ultimate behemoth of production.”

Texas produces about 4.6 million barrels per day, while both North Dakota and New Mexico produce more than 1 million barrels per day.

Alaska is on par with Colorado, Oklahoma, and California. Between August 2020 and January 2021, Alaska had a six-month average of 445,000 barrels of oil. Oklahoma was at 440,000 and Colorado at 401,000.

“Right now we make up about 4 to 5 percent of the total production in the United States,” Moriarty adds. “It’s a lot less than it certainly used to be.”

It’s important to note that while Alaska’s North Slope dominates the state’s oil production, Cook Inlet is also an important source of natural gas, as well as oil. It’s an important hub for in-state manufacturing and refining, as well as a source of jet fuel and gasoline in Southcentral Alaska, Moriarty says.

The entire industry was hit hard in 2020 by a price war between Russia and Saudi Arabia, resulting in the benchmark price for crude oil falling well below zero in April. The global COVID-19 pandemic further impacted production. By the time production started recovering, the policy effects of the 2020 presidential election came into play, which could have a big impact on Alaska’s oil future.

If Alaska’s production continues on a downward trend, it won’t be for a lack of resource. “We have some amazing prospects,” Moriarty says. “We know that there are several billion barrels of oil remaining in the existing legacy fields [on the North Slope].”

Hilcorp Energy, a privately held exploration and production company, last year completed its $5.6 billion acquisition of BP’s oil and gas interests in Alaska, including a 26 percent interest in the giant Prudhoe Bay field. It has built its business on taking over older assets and improving production by streamlining and updating technology. It has already doubled production at Milne Point since taking over operations on the field. Production at Prudhoe Bay also is picking up.

According to the EIA, Alaska’s production in April averaged about 480,000 barrels per day, which is above the previous six-month estimate.

There are other signs of optimism on the North Slope, Moriarty says.

“We know that Oil Search and Repsol are working toward a final investment decision later this year on the Pikka Unit, which once it reaches its full potential, could be 100,000 barrels a day,” she says. Prospects at Willow and in the National Petroleum Reserve-Alaska have similar production estimates.

“So the prospects for Alaska remain promising, if policy allows us to continue to move forward with these projects,” Moriarty says.

The bulk of Alaska’s oil and gas production is on federal land, while much of the development in Texas and North Dakota is on private land, which means federal policy can play a big role in what, and how, some prospects get developed. In 2018, ConocoPhillips Alaska president Joe Marushack touted a “North Slope Renaissance.”

But while the Trump Administration proved to be friendly to the oil and gas industry, approving major North Slope projects and opening more areas for drilling, so far the Biden Administration has been moving much more cautiously, rolling back many of the previous administration’s policies. Moriarty says Senator Lisa Murkowski describes the state’s current relationship with the Department of Interior as a landlord/tenant relationship, but under Trump, it was more of a partnership.

That could have a big impact on Alaska development, because the state’s greatest near-term potential development is on federal lands, she says. In February, the federal government halted all work at ConocoPhillips’ Willow development in NPR-A, one of Alaska’s biggest proposed fields on the North Slope.

“We know that the Department of the Interior is looking at a full review of oil and gas leasing and permitting on federal lands,” Moriarty says. It is also looking at limiting carbon emissions and has issued a temporary moratorium on lease activity in the Arctic National Wildlife Refuge.

“I think, so far, even though there hasn’t been an absolute, immediate impact on production or permitting, the signals that the department is sending are certainly not very welcoming or in a partnership-type manner,” Moriarty says. “We’ll just have to wait—when this review is completed, which we’re expecting sometime this summer—[to know] what the new rules might be to really understand if we’re ever going to get back to a partnership-type relationship with the Department of Interior.”

However, Moriarty says the differences in how Alaska’s permitting process works compared to similar processes in the Lower 48 are likely to result in less of an impact on development than for states such as Wyoming, which have a relatively large percentage of development on federal lands, but which also have Bureau of Land Management permitting requirements.

One advantage Alaska has is a robust infrastructure, centered on TAPS, Moriarty says.

“If you look at the history of the pipeline, the reliability is extremely high,” she says. “Alyeska [Pipeline Service Company] does an amazing job of making sure it’s operational 24/7, 365 days a year.”

The Biden Administration has shut down development of the Keystone XL Pipeline and Moriarty notes the general lack of appetite for new pipelines Outside.

“At least we have a very reliable, environmentally safe pipeline that is safely transporting oil today and has the capacity to obviously transport more,” she says. “Infrastructure on the North Slope constantly changes, evolves, and gets better and more efficient, cleaner and with less of a footprint every time there’s a new development.”

Even with recent downturns and the pandemic, the oil and gas industry is Alaska’s largest economic driver in the private sector. Although there are fewer direct jobs than even five years ago, there’s no other industry that generates the level of economic activity, Moriarty says. Twenty-five percent of all Alaska jobs are tied to oil and gas.

“While there is a desire to continue to find more efficient and potentially cleaner sources of energy, there’s still a need from an economic standpoint to continue to have a strong and vital oil and gas industry in Alaska,” she says. “Frankly, demand will still remain high globally for at least the next thirty years for oil and gas. And that’s good for Alaska because we have a lot of it here.”