Written by: Kéa Anderson
Edited by: Sunny Bell
Alaska is the largest US state, wide enough to stretch from the east to west coast of the Lower 48 states. It reaches north past the Arctic Circle and west across the Bering Sea. It is home to North America’s tallest mountain and has a coastline longer than the rest of the United States combined. It has the smallest population density of any state, with much of its lands left uninhabited. Since its statehood in 1959, Alaska has been one of the major oil producers for the US. As Capozzi (2018) claims, “Alaska still runs on oil”.
The North Slope, located on Alaska’s northern coast, is home to the state’s greatest oil production area, with the Trans-Alaska Pipeline System transporting over 470,000 barrels of oil south, daily (Alyeska Pipeline, 2024).
The oil industry is Alaska’s greatest economic driver, supplying thousands of jobs and funding over $180 billion in state revenue (Capozzi, 2018). It is one of three main pillars of the state economy, with revenue relying heavily on the status of oil in the global market. Rising oil prices therefore increase revenue, funding the majority of the state government. Consequently, Alaska does not impose a sales tax, and state residents receive an annual fund dividend based on the “value of oil royalty revenue in the Alaska Permanent Fund,” with a dividend range of $1,000 to $3,284 (U.S. Energy Information Administration [EIA], 2024).
Oil, though so integral to the state, does not come without its challenges.
Alaska, with its harsh winters, heating demands, transportation needs, and energy-intensive oil industries, has the highest per capita total energy consumption in the United States (U.S. EIA, 2024). This comes at an even greater cost to rural communities dependent on aviation for access to food, mail, medicine, and energy supply. 82% of Alaskan communities are not connected to the road system, the majority of these villages being Alaska Native (University of Alaska Fairbanks [UAF], 2025). Reducing rural energy costs is essential for enabling native communities to thrive, as opposed to moving to urban areas less conducive to traditional cultural lifestyles. Further, energy diversification is becoming increasingly important as communities raise concerns about health and environmental safety surrounding Alaska’s current petroleum reliance (UAF, 2025).
Despite its economic significance, Alaskan oil drilling has experienced a decline as reserves dwindle and climate change becomes considerably more dramatic in the North. Alaska’s Arctic is covered in permafrost, an essential carbon sink, and its coasts are bound by sea ice, a necessary component for ecosystem functions. These factors make this Arctic region incredibly vulnerable to climate change impacts. The North Slope has experienced the most severe warming in the state in the last 50 years, accompanied by a rapid decrease in both the duration and thickness of sea ice off the northern and western coasts (Rozell, 2024). In addition to destabilizing the Trans-Alaska Pipeline system—its northern parts built atop permafrost—this warming has detrimental impacts on local wildlife across the state. Yukon River Chinook and Chum salmon, for example, are essential to the prosperity and cultural survival of numerous Native Alaskan tribes and many fishers in the state (Rozell, 2024). With rising sea levels and water temperatures, annual salmon populations have severely declined. In urban areas of the state, the effects of climate change are being seen through extreme and abnormal weather events, including an elevated prevalence of wildfires and unprecedented warm winter storms.
The virtues of petroleum production are far from overlooked by Alaskans. The jobs, funds, and economic support it provides are immense. However, increasing energy costs, accessibility challenges, community risks, and environmental damage contribute to a growing insecurity surrounding Alaskan oil dependency. The state has previously declared a nonbinding goal to generate 50% of its electricity through renewable energy sources by 2025 (U.S. EIA, 2024). With the clock ticking by, what opportunities afford Alaska in reaching this goal?
The Railbelt Electric Grid is Alaska’s largest regional power grid, supplying energy to the most populated areas of the state. It services 484 miles of highway and railway, from Fairbanks to the Kenai Peninsula, and reaches nearly two-thirds of the population (UAF, 2025). However, the largely Native Alaskan communities not reached by the road system are serviced by microgrids, allowing rural areas to remain more independent. By 2015, the state of Alaska had invested over $250 million in integrating renewable energy resources into microgrid developments to assist communities in moving from diesel to cleaner energy (UAF, 2025). With Alaska’s many rivers and vast coastline, the potential for hydroelectric power and wind energy to service independent and urban microgrids is significant. Effecting these plans could give the state a promising outlook for renewable energy implementation.
With its southern coast and Aleutian Island chain located on the subduction zone of the Pacific tectonic plate, Alaska is a hotspot for volcanic activity. This signifies a capacity for geothermal energy, harnessing heat energy from the Earth’s interior. One roadblock to this renewable resource is the remoteness of the prospective locations. Nonetheless, Unalaska, a fishing town in the western Aleutians, is surveying a nearby volcano for a geothermal power plant (U.S. EIA, 2024). Looking elsewhere, geologists searching for a clean new economy for Alaska have begun to set course toward geologic hydrogen. Though it remains unclear whether natural hydrogen deposits are present or extractable, Alaska’s geologic conditions—and their similarities to productive natural hydrogen sites—raise the prospect of this clean energy source (Rozell, 2024).
Movement away from the oil and gas industry presents many challenges, economically and logistically, for Alaska. Even so, with decreasing oil production and increasing consequences, avenues for change are beginning to look more appealing.
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References:
Capozzi, K. (2018). Alaska’s Oil and Gas Industry. Akrdc.org. https://www.akrdc.org/oil-and-gas
Rozell, N. (2024a, November 8). Geologic hydrogen may be an answer to questions, both economic and environmental. Anchorage Daily News. https://www.adn.com/alaska-news/science/2024/11/08/geologic-hydrogen-may-be-an-answer-to-questions-both-economic-and-environmental/
Rozell, N. (2024b, December 7). Alaska’s climate and environment continue to change, including in some “astounding” ways. Anchorage Daily News. https://www.adn.com/alaska-news/science/2024/12/06/alaskas-climate-and-environment-continue-to-change-including-in-some-astounding-ways/
U.S. Energy Information Administration. (2024). Alaska Profile. Www.eia.gov. https://www.eia.gov/state/print.php?sid=AK
University of Alaska Fairbanks. (2025). Alaska’s Arctic Energy System | IARC. Uaf-Iarc.org. https://uaf-iarc.org/alaska-arctic-policy-trends/energy-issues/arctic-energy/
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