Outdated Federal Law Prevents Alaskans from Accessing Rich Natural Gas Resources

Alaska is often viewed as a vast energy powerhouse, endowed with significant reserves of oil, natural gas, and coal. As of early 2022, it was reported that Alaska has approximately 3.2 billion barrels of proved crude oil reserves, making it the fourth-largest state in this regard. Additionally, the state boasts recoverable coal reserves estimated to be around 2.8 billion tons, constituting about 1% of the U.S. total. More notably, with roughly 100 trillion cubic feet of proved natural gas reserves, Alaska ranks third among all states. Notably, natural gas is vital for Alaska’s energy production, accounting for about 50% of its electricity. Despite its vast reserves, Alaska faces a significant natural gas shortage that poses serious implications for its residents, especially as the state’s largest gas utility warns of potential shortfalls in the impending future.

The current natural gas used by Alaskans primarily comes from the Cook Inlet region, which is an area under pressure due to aging wells and dwindling production. Hilcorp, a Texas-based company that acquired leases in the Cook Inlet over a decade ago, currently produces around 55 billion cubic feet of natural gas annually. However, production levels are forecasted to decline substantially to 32 billion cubic feet by 2029, as existing wells are forecasted to remain unproducible. Recognizing the limited potential of the Cook Inlet, Alaska’s decision-makers have considered tapping into the vast reserves located in the North Slope. In 2020, plans for a pipeline to transport North Slope gas to the Kenai Peninsula were approved, aiming for both local consumption and export. However, the substantial challenges of managing a project of such magnitude in rough terrain have hindered progress significantly, and its completion may be well off into the future.

Transporting natural gas by sea offers an alternative solution to the looming crisis, but there are major hurdles due to federal laws. Since the dawn of the 20th century, the Merchant Marine Act of 1920, commonly called the Jones Act, has mandated that shipping between U.S. ports must only be carried out by U.S.-flagged vessels that are constructed within the United States. Unfortunately, this requirement has resulted in a lack of American LNG carriers as the construction of such vessels ceased domestically over four decades ago, and there are currently none operating under a U.S. flag. U.S. Government Accountability Office reports corroborate this lack of available shipping capacity. Consequently, the absence of U.S.-registered LNG carriers poses a significant barrier to moving natural gas from the remote North Slope to populated regions within Alaska where it is urgently needed.

As it stands, the only feasible method for transporting natural gas from the North Slope to Alaska’s population centers would involve using foreign ships—a clear violation of the stringent guidelines laid out by the Jones Act, which the federal government rigorously enforces. This scenario paints a dire picture for the energy market in Alaska, where shipping natural gas internally could lead to severe spikes in energy prices for residents. Indeed, the consequences of the Jones Act stretch beyond just costs; they may even precipitate a full-blown crisis by effectively criminalizing the transfer of the state’s abundant natural gas to regions eager for supply. The restrictions serve as a detrimental barrier that pushes the state toward energy insecurity.

Calls for reform are growing louder as the Jones Act’s negative implications become clearer. Scholars and policy analysts, such as those from the Cato Institute, have pointed out that the law distorts market dynamics, leading to higher costs and a lack of viable solutions to Alaska’s pressing energy needs. Their research underscores the urgency for action, recommending either the outright repeal of the Jones Act or the provision of a permanent exemption for isolated regions, including Alaska, Hawaii, Puerto Rico, and Guam. Such exemptions would alleviate the shipping constraints, facilitating access to energy resources that remain unrealized for in-state consumers. However, until such reforms are enacted on a federal level, Alaskans may continue to grapple with the paradox of having ample natural gas reserves while facing the potential of an energy shortfall.

In conclusion, Alaska’s energy landscape is marked by staggering reserves of oil, natural gas, and coal, paired with an impending natural gas crisis that threatens its economic and energy stability. The challenges posed by geographical distance and federal shipping laws complicate the logistics of utilizing its vast resources effectively. Without decisive action to remedy the limitations imposed by outdated laws like the Jones Act, the state faces a precarious future in terms of its energy security and economic welfare. Motivation for reform is building, and Alaskans are left hoping for a solution that grants them access to their own natural gas reserves, encouraging sustainable policies that could ensure both their energy needs and economic growth.