By Liam Denning / Bloomberg Opinion
Alaska has never been short of energy resources, being home to the single biggest oil discovery in U.S. history, Prudhoe Bay. Getting those barrels pumped and sold, however, has always required a hefty push from politicians with their eye on more than just pump prices. A new blitz of energy endeavors in the 49th state by the Trump administration thus fits a longstanding tradition. In this case, however, President Trump is also working against himself.
Interior Secretary Doug Burgum announced this weekend that Trump will soon reverse restrictions on drilling across a swath of the National Petroleum Reserve-Alaska put in place last year by former President Joe Biden. Burgum was speaking at a town hall in Utqiagvik, seat of the North Slope Borough, which is home to Prudhoe. While Alaska’s Arctic is at the sharp edge of climate change, support for new drilling there is strong, since taxes on oil production fund the vast majority of local services. Trump carried Alaska’s House District 40, which covers the region, with 51 percent of the vote, 10 points more than former Vice President Kamala Harris. Burgum is visiting the state along with Energy Secretary Chris Wright and Environmental Protection Agency head Lee Zeldin for talks with potential foreign customers for a long-mooted project to liquefy North Slope gas and sell it in Asia. It all coincides with an annual “sustainable energy” conference put on by Gov. Mike Dunleavy in Anchorage, where Trump’s delegation is scheduled to speak.
It is, in short, Alaska energy week. Such political efforts are required because the scale of Alaska’s resources is matched only by their difficulties. I visited the North Slope oilfields in 2023 and found that, besides the wildly sub-zero temperatures and eight weeks of solid darkness every winter, sheer remoteness and environmental sensitivity make development an expensive and very time-consuming proposition. Alaska’s original oil boom required the impetus of the oil crises, manifested in enabling federal legislation such as the Trans-Alaska Pipeline Authorization Act. There is a reason why Alaska’s oil production has atrophied while onshore shale basins in the more hospitable, and road-connected, regions of Texas and New Mexico have become the engine of growth.
Biden’s ban on drilling across the NPR-A was itself a political sop to environmentalists angered by his authorizing the Willow project there. That project, being an extension of ConocoPhillips’ existing operations, is relatively easy in North Slope terms but, assuming it starts up in 2029, will still have taken 13 years from discovery to first production and more than $7 billion of investment. Trump’s reversal, along with his broader drill-baby-drill regulatory agenda, will at the margin make it easier for more Willows to be discovered and developed.
The biggest impediments would remain Alaska’s high costs and long lead times. An analogy can be found in the history of licensing rounds in federal waters elsewhere, where oil developers have long leased only a tiny fraction of the acreage on offer. Trump can’t simply will away factors like global oil pricing or geography. Indeed, his other actions work against an Alaskan revival.
Committing to spending billions over the course of one or two decades on an energy project, particularly in a controversial territory, requires a great deal of certainty. Historians will describe Trump with many words, but “certainty” is unlikely to feature among them. Indeed, oil executives who praised Trump’s election late last year in the Dallas Federal Reserve’s quarterly survey were within months lamenting the damage done to prices and economic confidence by his chaotic tariff war. The earnings season just gone was notable for exploration and production companies preemptively trimming investment budgets, not drill-baby-drilling.
Beyond economics, U.S. energy policy is becoming more volatile and declarative rather than legislative, exemplified by Biden’s and Trump’s freezing and unfreezing of the NPR-A. Proponents of fossil fuels may cheer Trump’s invocation of emergency powers and seeming willingness to abrogate existing permits on offshore wind projects. But emergencies set precedents, begetting future emergencies under differently-minded administrations.
The Alaska LNG project is similarly a creature as much of politics as economics. It has been discussed for decades as a way of monetizing the North Slope’s vast gas reserves, which lack a route to market. A new pipeline to bring gas to the south coast for liquefying would also help address another strategic problem, a looming shortage of gas to feed the Anchorage area. But the very length of that pipeline gets at the challenges involved: The gas for most LNG projects doesn’t have to travel 800-odd miles over mountains and tundra before it even reaches open water. Like the oil pipeline it would parallel, getting this done would require a hefty push from Washington, D.C., not just this week’s dog-and-pony show but multi-billion dollar federal loan guarantees.
Trump’s trade war provides prospective customers ample reason to show a willingness to consider signing up for Alaskan LNG. Japan, Taiwan and others can use such interest as a bargaining chip for tariff relief. We have been here before, however, with both China and Japan having previously agreed to back the project at various points only to later back out. Trump’s team may well return to Washington with preliminary agreements to buy LNG at some future date or even finance feasibility studies for the project. But they may be banking more on extracting concessions from a president known for his love of touting deals rather than extracting actual molecules of gas.
As with Alaska’s original oil boom, there is an argument to be made for LNG from the North Slope acting as an insurance policy for Asian buyers unsettled by the energy shock of the war in Ukraine. Buyers can be willing to pay a security premium for more expensive energy if it helps to settle their nerves. Yet here, again, Trump’s wider agenda poses a potential problem: How much equanimity do U.S. exports offer in his era of “energy dominance”?
Liam Denning is a Bloomberg Opinion columnist covering energy. A former banker, he edited the Wall Street Journal’s Heard on the Street column and wrote the Financial Times’s Lex column.
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