Russell Stigall

Written for Alaska’s 50th Anniversary celebration publication. An edited version of this story and others can be found in Alaska 50, at libraries in Anchorage and Seward.

 

 

Someday in the next few decades, the Trans-Alaska pipeline will deposit into the hold of a tanker ship in Valdez the final barrel of North Slope Crude.

The oil will complete its 800-mile journey in 9 days and its sale will deposit in Alaska’s coffers the last few of the billions of dollars the state has made from its oil during the pipeline’s decades of operation. Oil extracted from massive hydrocarbon deposits below the ice and permafrost of the North Slope and frozen Bearing and Arctic Seas have slipped down the long straw for 30 years.

Dozens of drill sites gulp hundreds of thousands of barrels of oil from North Slope reserves. The large reserves, Prudhoe Bay, Aurora, Midnight Sun, Orion, Polaris and Borealis provide the majority of North Slope crude. These are supplemented by other smaller sites. By far the largest reserve, Prudhoe Bay encompasses over 200,000 acres and produces on average half a million barrels of oil each day.

Alaska is a resource extraction state. Russia’s wooden ships filled with Sea Otter pelts left Alaska bound for women’s shoulders in Moscow and London.

Yukon gold swelled United States coffers in the late 1890s.

Today fishermen harvest the Bering Sea of three billion pounds of seafood each year.

And a new extraction, tourism’s extraction of Alaska’s mountains, glaciers, outdoor sports and charismatic mega-fauna.

Years ago a common saying in Seward went something like “you can’t eat all this pretty.” But today Alaska’s tourism industry, growing at an annual rate of 38 percent, brings in $1.6 billion each year. Tourism, it has been said, is Alaska’s 1,000 year industry.

Hunters, miners, fishermen, lumberjacks and oilmen, charter boat captains, tour guides and hospitality industries; Alaska’s resource extractors are a central theme to Alaska’s social mythology.

Natural resource extraction was even written into state constitution, Article 8.

Of all Alaska’s marketable resources, oil and gas are the giants.

But unlike Alaska’s many replenishable resources, extraction of North Slope oil will one day cease. How will Alaska, recipient of at least $70 billion in oil revenue since the pipeline’s first sip of Prudhoe Bay crude, cope with the decline and loss of this mainstay revenue?

By 2050, Alaska’s gas will be nearly gone or gone and its oil production less than half what it is today.

BP Pipelines owns the largest share of the Trans-Alaska Pipeline, a little less than half. ConocoPhillips Transportation owns about a third with lesser shares for Exxon Mobile, Koch Alaska, Unocal Pipleline and other smaller firms.

Alaska’s two largest oil producers employ 2,400 Alaskans directly. But the oil these companies extract fills the backbone of Alaska’s government, economy, national and international influence, the Trans-Alaska Pipeline.

The pipeline cost $8 billion in 1977. Since then Alaska has benefited over $100 billion in oil tax revenue.

The North Slope still contains at least 4 billion barrels of light oil, tens of trillions of cubic feet of natural gas and hundreds of millions of barrels of natural gas liquids, according to U.S. Geological Survey estimates.

However new technologies push this number higher at an impressive rate. The rapid rise in oil prices have also sparked interest and research dollars in reserves once deemed too expensive to develop.

This estimate does not take in to account the nearly 20 billion barrels of viscous and heavy oil, oils similar to the tar sands of Alberta Canada.

North Slope oil production has traditionally come from fluid, hot oils two miles beneath North Slope drill rigs. Light oil production has dropped off by over half its peak in the 1990s. To keep their pipelines full for more years, oil producers will rely more on viscous and heavy oil extraction. By 2030 viscous oil will account for half the oil flowing down the pipe.

Alaska’s natural gas reserves in the North Slope and Cook Inlet are estimated to be in the hundreds of trillions of cubic feet. Through exploration, extraction and marketing, natural gas will remain a part of the oil industry’s 50-year extraction plan for Alaska.

The state of Alaska does not have an income tax. It does not have a state sales tax. Some boroughs tax their residents. But a staggering portion of the state’s non-federal funding is paid by oil tax revenues.

At a special legislative session in the fall of 2007, Alaska’s legislators served Alaska a thicker slice of the oil-revenue pie. With its contingencies and amendments, the tax, a new 25 percent Petroleum Production Tax, pumps billions of dollars of oil industry profits into state coffers.

 

Diversification

 

Alaska’s fortunes have ridden on the back of oil prices for that last 30 years. A glut in oil supplies drove oil prices below $10 per barrel in 1986. Alaska’s government cut back and schools started to drop electives and institute a “pay-to-play” sports program.

Though fishing, tourism, forestry and other resource extraction industries can pad the last frontier’s operational budget, as of the end of the first decade of the 21st Century Alaska is still predominantly oil-fired.

Relying on one industry, especially an extractive industry, to pay for much of the state’s government, education, public works is dangerous. One must look no further than the struggles of old coal towns and states in Eastern United States. Alaska will one day empty its hundred-million-year-old savings accounts and must have its next industries at speed when this day comes.

 

New Industries

 

At the same time Alaska disgorges the last of its hydrocarbons, the rest of the world will feel the pressures of a dwindled oil supply and accelerated demand. Alaska, through byproduct utilization and dedicated farming can meet the growing biofuels market. A biofuels industry could enhance profits from logging, fishing by marketing byproduct wood chips and oil. Farmers in the Matanuska Susitna Valley could grow willow trees in the rich glacial soil for use in cellulosic ethanol. 

New technology could allow the economic and environmentally sensitive chemical conversion of coal into a natural gas-like syngas or liquid synfuel.

Coal could spur economic growth in Alaska’s petrochemical industry, Agrium, the second largest fertilizer plant in the U.S., ceased operation at its Nikiski location due to a lack of natural gas feedstock. A coal-to-gas project proposed in Nikiski could give Agrium a new life.

Coal could also bring new options to the state’s electric generation industry.

High cost of coal-fired generator construction, due to demand from Asia, and almost certain offset tax on carbon dioxide will make coal a tough fuel to use domestically. However, Alaska’s oldest and largest coal mine, Usibelli Coal Mine has worked out the plans for a 500 megawatt mine-mouth coal-fired generator. The economies of scale and reduced fuel transportation costs make the project feasible. The plan would still need to dispose of the millions of tons of CO2 produced by the burning of coal.

Other carbon-based industries would not require the precious fuel be burned.

With abundant, inexpensive energy Alaska may be able to enter the upcoming hydrogen economy. Huge geothermal electric plants built along the volcanic Aleutian Chain could be used to electrolyze hydrogen from sea water. Alaskan scientists are studying how to use the carbon from natural gas to make carbon-fiber tanks filled with carbon nano-crystals in which to store hydrogen. Hydrogen stored in these tanks is denser than liquefied hydrogen, and without the need to keep the liquid so cold.

In certain forms carbon could overthrow silicon as the material of choice for electronics manufacture.

When its molecules form lattices of buckminsterfullerenes, buckyballs and buckytubes, carbon conducts electricity like copper and can simulate the functions of transistors and other silicon-based electronics with far greater durability at a much reduced size.

On a much larger scale, Alaska’s commercial electric utilities are finding cooperative ways to achieve economies of scale on capitol-intensive mega-projects. These big projects, like hydroelectric dams, geothermal wells and wind turbine farms, take massive up-front infusions of cash, but pay off with 100-year life-spans and cents-per-kilowatt energy output.

Cheap power attracts industry, especially fabrication, smelting and other high-energy-use industries. Australia ships its aluminum ore to Iceland for smelting, Iceland gets 99 percent of its energy from geothermal and hydroelectric sources.

To tap into Alaska’s renewable resource will require new technologies and trained professionals to install and operate. At a wind/diesel electric facility in Kotezube, technicians have mastered new ways to erect wind turbines on permafrost and to operate the machines in winds that propel blade tips to super-sonic speeds.

Alaska is already one of the largest air cargo ports in the world, Alaskan goods could easily be exported from the state’s many deep water ports, its teaming international cargo airport, or other routes not yet built, like the flotilla of dirigibles espoused by the geothermal revolutionary, Bernie Karl of Chena Hot Springs. Karl’s dirigibles would carry Alaskan-made hydrogen, cracked from water or freed from natural gas, to Canada and the U.S. Alaska’s cheap renewable energy could make this possible.

Raw manufactured electricity could be exported by transmission line into Canada or, in the case of Southeast Alaska, into the Pacific Northwest grid. Tollhouse Energy and Katabatic Power have plans for a Banks Island Wind project near Petersburg, Alaska. The project will combine hundreds of wind turbines with lake-tap hydroelectric plants for a reliable system large enough to power 2 million homes.

If Agrium’s Blue Sky coal-to-gas project is successful, the Mat-Su Valley could benefit from a new railroad spurline from Willow to Port MacKinzie on the Knik Arm. The spur would transport Usibelli coal to Port Mac and there by barge to Nikiski.

Once Port Mac is connected by rail to interior Alaska, cement made from Fairbanks limestone could be shipped to the Outside states. Port Mac could be the largest exporter of American-made cement.

As fuel and transportation costs rise, local agriculture will become an economic necessity for Alaska. Alaska produces tens of millions of dollars worth of agricultural goods. Thick seams of rich glacial silt in the Matanuska Susitna Valley support farm families that raise meat, dairy, grain, grass, potatoes, vegetables, fruits and other specialty produce. The Tanana Valley and Kenai Peninsula grow acres of golden hay, for Alaska’s livestock and pets.

Grown far from traditional potato farms, Alaska’s potatoes are disease –free and eligible for export to Asia.

Health, food security and environmental issues have spurred a local foods movement in Alaska. Consumers search out food grown within 100 miles. Meeting this growing trend will require more, and more productive farms and the value added industries that accompany food production and processing.

 

Viscous Oil

Billions of barrels of thick, cold oil are saturated into a sand deposit several thousand feet above the Prudhoe Bay reserve. Extracting this molasses-like oil will require huge investments and technological advancements. However, if oil companies can remove only 10 percent of the heavy oil reserves, Alaska’s oil output could be extended by decades.

 

Natural Gas

Alaska has offered half a billion dollars to help the oil industry complete a 3,600-mile natural gas pipeline from North Slope, through Canada to the U.S. The international project could cost $20 billion. But with hundreds of trillions of cubic feet of natural gas and natural gas liquids trapped under North Slope permafrost, oil companies may take the risk.

 

Combustible ice

U.S. Energy Department has found frozen methane hydrates at the bottom of Alaska’s seas. The hydrocarbon is kept cryogenically stable by the immense weight of the world’s deep oceans. Estimates of world-wide methane hydrate deposits range from 100,000 trillion to 300 million trillion cubic feet, according to U.S. Geological Survey. U.S. coastal waters may harbor 200,000 trillion cubic feet of methane – enough for centuries. However, methane is a greenhouse gas many times more tenacious than carbon dioxide. Its extraction would have to be contingent on the assurance of containment. Hydrate research is still young, but in the coming decades Alaska may see a limited extraction of this valuable hydrocarbon.

 

Energy Efficiency

No matter the type of new industry, it will need to be efficient and environmentally sensitive industry. This new trend in efficiency is said to be the greatest opportunity in money savings through electricity- and fuel-use reduction. The cheapest kilowatt, it is said, is the kilowatt that needs not be generated. Alaska will enjoy its share of the projected trillion dollar energy efficiency industry.

 

 

Renewable Resources

 

Alaska has massive amounts of renewable resources.

With 44,000 miles of coastline for wave and tidal power, a chain of geothermal hot-spots bubbling up the Aleutians past Wasilla, biomass from fish oil, saw mills and landfill and Alaska’s largest source of renewable power today, hydroelectric. Alaska uses renewable sources for 24 percent of its total electricity produced.

 

Renewable Energy Technologies

 

Wind

The most advanced renewable resource technology is arguably wind power. Used for centuries, wind power has undergone huge refinements in the last 20 years. The Dutch have built singe wind turbines, larger than commercial aircraft, which power ten thousand homes each. However, most wind farms array large numbers of small, graceful turbines, about 2.5 megawatts in size. These farms usually pop up along ridge lines, wide-open prairie and farmland and off shore waters.

Several of Alaska’s electric utilities have plans for 100-megawatt-plus wind farms, in Healy, Cook Inlet and along the pan handle.

 

Solar

Though Alaska sees little sun at times of the year, solar power is a potential renewable energy source. Long summer days and the intense reflective power of snow make photo-voltaics economically feasible for the Lime Village PV Array near Kotzebue.

 

Hydroelectric

When it was built by the State of Alaska in the early 1990s, Bradley Lake’s 120 megawatt hydroelectric plant cost $328 million, too expensive for any one of Alaska’s small Railbelt electric utilities to fund. Now, after years of paying down debt on the project, the Railbelt utilities share in the cut-rate $0.04 cents per kilowatt hours, a half to a third of what power distributors can sell natural gas or coal power.

Much more of this cheap and adjustable power could come from the 300 megawatt Lake Chakachamna project, located near Mount. Spurr, or the proposed Giga-watt Susitna Dam project.

Other forms of hydroelectric can fill smaller energy niches.

Run of the river hydroelectric forgoes costly and environmentally questionable dams required by traditional hydro generators. To pull power out of free-flowing rivers, run of the river generators employ various types of paddle-wheel to spin a shaft and dynamo.

 

Geothermal

Cook Inlet is surrounded by volcanic peaks, belying the hot, geothermal potential of the area. Mount Spurr has enough estimated geothermal heat to power 50,000 homes. Geothermal generators produce base load power, consistent power needed to meet an energy provider’s typical daily demand. Wind, tidal, wave and sun power sources are not base-load and must have back-up generation to smooth variable output.

A new geothermal technology, hot, dry rock geothermal uses the earth’s molten interior to heat water injected into 15,000-feet-deep wells. The steam from these wells spin turbines for electricity.

Electricity can even be made from cooler geothermal resources.

At the Chena Hot Springs resort near Fairbanks, owner Bernie Karl has reversed the output of a refrigeration system to produce hundreds of kilowatts of power. Karl uses the temperature difference between warm water from hot springs under the resort and cold interior Alaska air and river water to make electricity.

 

Wave

Alaska’s estimated 44,000 miles of coastline and near-shore waters represent an enormous and productive wave energy resource.

Wave-powered electric generators work like a string of barges coupled at the joints by pumps that squeeze hydraulic fluid through dynamos as the barges flex up and down and snake side to side in the swells and currents.

 

Tidal

Fast-moving tides sweep through the narrow passages of Southeast Alaska and pile up into towering walls in shallow Cook Inlet. These tides can be captured like wind, with turbines.

Chris Sauer, president and CEO of Ocean Renewable Power Company has plans for a commercial tidal power plant installed in Knik Arm between Port MacKenzie and the Port of Anchorage. Sauer said his tidal generators, called OCGen modules, could produce enough electricity enough electricity to power tens of thousands of homes. Tidal power is predictable. Also, since water is 1,000 times more dense than air, it provides more torque. Three 10-foot-by-48-foot OCGen modules can produce the same power as a wind 236-foot diameter wind turbine mounted on a 230-foot tall tower - a structure roughly the size of a 747 aircraft.

 

Biofuels

Alaska’s most important biomass fuels are wood, sawmill wastes, fish byproducts, and municipal landfill waste. The bountiful Matanuska-Susitna Valley, Tanana Valley and Kenai Peninsula could farm willow trees for biodiesel. Petrochemical industries can feed off of biofuel’s byproducts.

A waste-stream of fish processing, fish oil can offset the costs and carbon emissions of traditional hydrocarbons.

Unisea Inc. mixed over half a million gallons of fish oil with diesel to fuel electric generators in Unalaska.

 

Nuclear

Though not a renewable resource, nuclear energy is an alternative energy to Alaska’s hydrocarbon base.

The town of Galena accepted a proposal from Toshiba to test the company’s Super Safe, Small and Simple “nuclear battery” reactor. The reactor requires minimal staff and may run for 30 years without refueling.

Alaska could attract industry with its cheap, clean renewable energy. Alaska renewable energy could offset carbon emissions and, if transmission lines are strung into Canada, supply many hundreds of megawatts to renewable energy portfolios of West-coast electric power providers.

Investment capital, flowing into renewable energy, climbed to a record $100 billion in 2006. Large corporations such as BP, GE, Google, Sharp, and Shell are investing in renewable energy.

While some renewable energy sources like wind and hydroelectric have been tapped for centuries, some are untested or in various prototype stages. Renewable energy systems can be expensive to build, with high up-front capitol costs and the probability that in Alaska the generation sites may be remote. Though maintenance costs can be high, they were not prohibitive for Kotzebue’s wind/diesel system.

Wave, tidal and large-scale wind are typically anchored off shore to avoid viewshed obstruction and to harness the best resources. These offshore installations require expensive underwater power lines to deliver electricity. The lines, $1.5 million to $2 million per mile, are two to three times as expensive as over-land lines.

 

 

Resource Development and Environmental, Wildlife Protection

 

Alaska’s Arctic National Wildlife Refuge is home to two, seemingly opposing natural resources, oil and caribou. Oil supports Alaska’s cities, schools and government. Wildlife Refuge caribou are the life blood of many of Alaska’s and Canada’s traditional cultures. These two resources have caused strife between the oil industry that wants drilling rights inside the Refuge and the many conservation organizations trying to protect the Wildlife Refuge and the animals and cultures it supports. As of yet, ANWAR remains untapped. No matter a resource’s abundance nor the profits it promises to bring, if it can not be brought to market in an environmentally and culturally sensitive way citizen opposition may be to great.

Many environmental groups maintain that they are not opposed to development, just opposed to destructive development. If a project needs to be done, do it right, they would say.

Cook Inletkeepers and other groups keep vigilant eye on resource extractors around the forked tongue of the Cook Inlet. Mat-Su Valley Borough passed one of the strictest Coal Bed Methane regulatory ordinances in the U.S. and recently passed regulations for electric power plants that requires detailed accounts of the power plant’s effect on the air, water, view-shed and human history and culture nearby.

Citizen groups step in where gaps are left by the slim funds of state and federal regulatory agencies, the Environmental Protection Agency and the Alaska Department of Environmental Conservation.

No matter the business nor the jobs and revenue it may create, all new industry will have to leave little or no impact on Alaska’s sensitive and valuable habitats.

 

50 years from now?

In Anchorage, Alaska’s population center, many of the most prominent buildings are occupied with oil and gas extraction companies, BP, ExxonMobil, ConocoPhillips.

By 2050, BP expects Alaska gas to be gone or nearly gone and oil production to be less than half what it is today.

In 50 years, will new tenants occupy Anchorage’s oil industry buildings?

If current oil industry practice continues here in Alaska, Anchorage could be home to the big three for many decades to come.

BP is already a huge investor in wind, solar and biofuels. BP recently began a wind power project in Texas, large enough to power 24,000 homes. It is not hard to imagine free-market corporations taking full advantage of Alaska’s potential renewable energy market.

To extend the future of fossil fuels, ConocoPhillips is researching carbon sequestration and coal-to-gas technologies. The oil giant could be a valuable partner for Alaska’s coal extraction industry.

And why should Alaskan’s care about all the new industries and technologies? They will make Alaska a place of great opportunity and lifestyle satisfaction, to create jobs and wealth.

Some of Alaska’s future wealth will come from prudent investments today.

Today, the oil-funded Alaska Permanent Fund holds about $40 billion, about $60,000 per Alaskan. With billions of dollars in new income from a re-vamped Petroleum Profits Tax, Alaska has to opportunity to invest huge sums of money into funds that can buffer the state’s governance, operation and education as oil production declines.

Fifty years is an excruciatingly long time for technology advancements, in 1959 wind power was only being used to draw water on farms. What new technologies and industries will be spurred by the challenges Alaskans face in the next 50 years?

 

 

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