The Wall Street Journal published a terrifying story, datelined in Soldotna, about Alaska’s economy headlined, “In U.S. Energy Boom, Alaska Is Unlikely Loser.” As it points out, Alaska used to be the second highest oil-producing state in the country. Now we’re fourth, behind Texas, North Dakota, and California. Production has dropped 75 percent since its peak of 2 million barrels a day in 1989. The state’s gross domestic product decreased by 2.5 percent in 2013, while every other state increased its GDP. And the state’s unemployment rate in 2013 was 6.4 percent—eclipsing the national average. More people left Alaska than settled in the state between 2012 and 2013, while North Dakota added residents, the WSJ reports.
Here’s a chart that the newspaper put together to go with its story:
It gets worse:
Oil from the U.S. shale boom is making the state’s problems worse. North Dakota is producing so much crude from shale formations that its price has tumbled to about $90 a barrel. Oil from Alaska has been far more expensive, changing hands at about $104.But that premium is already starting to shrink as Alaska is being forced to lower prices. Energy-industry companies and analysts expect prices to further dwindle no matter what happens to the overall price of oil. That means that even if crude prices in the rest of the country remain flat, the value of Alaska’s oil will decrease.
The Wall Street Journal doesn’t get into this, but according to the Energy Information Agency, the state still has about 3.3 billion barrels of “proved reserves,” meaning oil that’s been discovered, is technically possible and economically feasible to get out of the ground. Good news? Not really.
Generally speaking and up to a point, the more activity in an area, the greater increase in proved reserves. Of the four states in the country producing more oil than here, Alaska and California are the the only states where proven reserves declined in recent years. (Though Calfornia’s reserves are widely expected to increase significantly soon, given that state’s vast shale deposits.) Alaska’s proved reserves went from 4.2 billion barrels to 3.3 billion between 2007 and 2012, decreasing 13 percent alone between 2011 and 2012.
In North Dakota, the reserves doubled between 2010 and 2012 to 3.8 billion barrels. That’s not so surprising, given how relatively virginal that state’s oil reservoirs are. Texas, however–a state that’s been punched and punched again with holes–is surprising.
That state’s proved reserves went from 5.1 billion barrels a day in 2007 to 9.6 billion barrels in 2012.
Some of that increase is from new, shale oil finds, but a whopping 3.6 billion barrels are from existing drilling sites. In 2012 in Texas, there were 23 new oil discoveries and 57 reservoir discoveries in existing fields.
Alaska had zero of both in 2012.
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