An evolving energy economy — Where does Alaska go from here?

By Marc Sherman    //    March 23, 2021

The Biden administration called for green energy on his campaign trail and has shown every indication that he intends to work toward that promise. He has signed executive orders that, among other things, paused new federal oil leases –halting the recent ANWR deals–, and committed to electrifying the government’s fleet of over 600,000 vehicles while installing the infrastructure to make electric vehicle travel feasible nationwide. He also inspires hope of creating more than 10-million well-paying jobs in reaction to climate change. His administration says that he plans to put the U.S. on a plan to lead a clean energy revolution that achieves a carbon pollution-free power sector by 2035, and a path to a net-zero economy by 2050.

Alaska State government’s perspective does not align with the president’s on climate change. Two years ago Alaska Republican Gov. Mike Dunleavy disbanded the climate change task force 

Dunleavy says that Biden’s decisions deny Alaskans the right to pursue opportunity. He also called Biden’s halt on oil and gas activities in the Arctic National Wildlife Reserve (ANWR) a “direct assault on Alaska’s very existence as a viable sovereign state. This attack will be countered at every level within my administration.”

Sen. Dan Sullivan (R-Alaska) and Sen. Lisa Murkowski (R-Alaska) have both denounced the Biden administration’s pause on new federal land oil and gas exploration. Murkowski said in January that while she supports clean, sustainable energy that “inhibiting Alaska’s resource development will only hamper our ability to recover” from the ongoing pandemic that has devastated the state.

As the price of oil has declined in recent years, so has Alaska’s budget surplus. As oil revenue has declined Alaska’s budget has been kept afloat from the 2018 bill creating an annual transfer from the Permanent Fund to the state treasury general fund, which covers expenses such as medical programs and healthcare, education and schools, roads and transportation 

A few years ago oil revenue was paying 95% of our state’s budget.  

In the upcoming fiscal year beginning in July, state revenue includes $800 million from oil and gas, 19% of its total revenue, which is the lowest figure in 61 years. The Alaska Permanent Fund annual transfer this year will account for 71% of the general fund, which provides hundreds of millions of dollars for education and schools as well as health care, roads and transportation, and other services. Alaska has shifted from an oil state to an investment state.  

On March 8, the Dunleavy administration announced that it would privatize DMV’s in 6 smaller communities around the state including Hains, Homer, Valdez, Tok, Delta Junction and Eagle River. The state will still collect fees but private companies will charge their own fees, more than doubling the cost of these services to their communities. Legislators say that some people could have to drive more than a hundred miles to the nearest DMV. Haines residents would have to fly or take a ferry to the closest DMV in Juneau. 

The Fair Share Act ballot that Alaskan voters did not pass last November, would have increased how much Alaska Taxes the oil industry. This wouldn’t have been enough to pull Alaska out of our deficit, but it would have helped. Proponents of the ballot said that Alaska is not taking enough of a share of their own resources. 

According to Ballot Pedia, OneAlaska, with contributions of nearly $21 million from five oil and gas companies, led the campaign in opposition to the ballot initiative, overshadowing the proponents $1.32 million. 

Larry Persily, a longtime observer of the oil and gas industry in Alaska, acknowledges that the oil and gas industry here is not what it once was and we’re not going to triple oil revenue. He says that if you’re going to diversify the economy it’s going to be by introducing a sales tax and income tax, which is a debate that has been part of legislative sessions for years. 

Alaska was the first state to ever repeal a personal income tax (in the 70s) after oil was found in Prudhoe Bay. It’s also the only state that doesn’t currently have a personal income tax or statewide general sales tax. 

President  Joe Biden plans to decarbonize the U.S. power sector by 2035 and zero emissions by 2050. Alaska already has a non-binding goal to generate 50% of its electricity from renewable and alternative energy sources by 2025 and renewable energy already accounts for about 30%. 

Many rural communities in Alaska rely primarily on diesel-electric generators. Natural gas currently supplies more than 50% of our state’s power, while 14% comes from petroleum and 11% comes from coal. 

Clean energy production in Alaska grew 15% between 2013-2018. Solar and wind make up a small portion of Alaskan’s energy sources but 22% is generated from seven hydroelectric plants. 

Alaska also has untapped potential to harness significant geothermal energy. The State is geothermally active with 97 known thermal springs. So far Chena Hot Springs is Alaska’s first and only geothermal power plant, which started operating in 2006. 

Within days of Biden’s inauguration, automaker GM was making big announcements about electric vehicle production with a focus on commercial vehicles. Ford, recently rolled out an electric Mustang, the Mach-E and  Porsche debuted their Tycan. Mercedes-Benz and Audi are also preparing to launch their electric cars. Volkswagen is still taking preorders for their ID.4, and their electric version of a VW Bus, the ID.BUZZ, is slated for production in 2022. 

Electric vehicle use has grown significantly in Alaska throughout the past few years. Alaska Energy Authority estimates about 1,000 electric vehicles currently in use in Alaska. But our long-distance highways and the lack of charging stations present challenges for travel between major cities within the state.
The Alaska Energy Authority aims to change that with a plan to install between 10-14 electric chargers (every 50-100miles) along the Railbailt that stretches from Homer and Seward, through Anchorage to Fairbanks. Others states are taking similar steps in the Lower 48.