Arctic Alternatives

Multiple roads to Alaska's energy future

By Tara O’Hanley

“The only reason we’re an Arctic nation is because of Alaska,” observes Givey Kochanowski, senior advisor to the US Department of Energy’s Arctic Energy Office.

“Wherever you are with political ideology, there’s an argument why Alaska matters” in conversations about energy, he continues. “If you’re environmentally focused, climate change is happening twice as fast in the Arctic as the rest of the world. If you’re more focused on Alaska’s untapped resources for domestic energy supply, you’re thinking those resources would be tremendous for our national security, because energy security is national security.”

Since the ‘70s, conversations about US Arctic energy have been dominated by oil and gas. The importance, or even possibility, of diversification of energy sources often gets lost amid that noise at the state level. Whether due to a lack of motivation when Alaska’s petroleum revenues are fleetingly high or due to a crippling lack of agency when revenues drop, the net effect over time is that projects end up with a false start or—too often—no start at all.

In short, at the federal level it’s all too possible that the public doesn’t know what they’re missing when it comes to the Arctic, and at the state level, policymakers are so busy holding on to one cookie that they tend to neglect other items available at the buffet.

“These are tough issues,” Kochanowski says. “Energy cuts across every sector of the economy… and nobody has a 100 percent solution to what to do.”

What would a more diverse, multifaceted energy industry in Alaska look like? How can the state apply lessons learned from resource bonanzas in the past to properly seize opportunities in the future? What projects are worth risking investment? And how can Alaska stakeholders work with private industry to move projects forward in a way that will provide a more solid foundation to the state’s future, regardless of federal policy?

As is so often the case, the answers to these questions are, in a word, complicated.

Indian Country & Alaska Native Corporations

Carbon Monetization

A major pivot in Alaska’s resource policy occurred in December. Governor Mike Dunleavy, following up on discussions at his first annual Sustainable Energy Conference in May 2022, announced a bill to monetize the state’s capacity for carbon capture and sequestration. Instead of (or rather, in addition to) pulling carbon out of the ground in the form of fossil fuels, Alaska could see carbon dioxide reinjected into underground reservoirs, isolating the heat-trapping gas from the atmosphere. Or simply by leaving forest areas untouched, the plant biomass absorbs carbon dioxide.

Alaska Native corporations— including Ahtna, Chugach Alaska, and Sealaska—have been successfully developing carbon sequestration for several years, using forested tribal land as assets for carbon monetization. Federal incentives and growing corporate action on climate change are fueling major growth in carbon capture markets, and boatloads of private money are pouring in from tech companies seeking to help early-stage carbon capture and storage startups scale up and bring costs down.

Dunleavy sees an opportunity to raise hundreds of millions, if not billions, of dollars in revenue for the state within the next several years. According to Dunleavy, “Alaska probably has more capacity to sequester carbon underground than anywhere on the West Coast,” including a potential for 50 gigatons of carbon in Cook Inlet alone.

The scale of the carbon undertaking is enormous, with some experts predicting that meeting a goal of capturing 30 percent of emissions in 2050 would require building an industry three to five times the size of today’s global petrochemical industry. Companies such as Alphabet, Meta, Stripe, Shopify, and McKinsey are teaming up and launching initiatives to spur the market, to the tune of nearly

$1 billion, and Climeworks recently raised $650 million to launch a new direct air capture and storage plant in Iceland—the biggest funding round in the history of the carbon capture removal industry.

“With support from the legislature for our carbon management bill package, we’ll change the conversation about new revenue,” Dunleavy said in January upon the introduction of his legislation.

One bill would establish a statewide carbon offset program through forest sequestration. It would grant the Alaska Department of Natural Resources the ability to establish a carbon offset program, allowing private parties to lease state land for that purpose. A separate bill creates new authorities to license, lease, and administer subsurface “pore space” for geologic storage of carbon.

Commissioner of the Department of Natural Resources John Boyle says carbon management complements existing industries. “These bills do not lock up State land. Rather, they unleash new opportunities,” he says. “Carbon offset projects will not prevent mineral development, timber harvests, new oil and gas exploration, or infrastructure development. Land within the carbon offset program area will still be available for hunting, fishing, camping, and recreational activities for Alaskans and visitors.”

What sounds shiny and exciting in a press release, however, can pale when exposed to the sunlight of detailed evaluation. Despite the flood of capital being invested in the global carbon capture industry, questions remain about how these financing gymnastics might play out. With the opportunity to forge multigenerational contracts between the state and investors, the stakes are high, and ultimately the consequences are unknown.

Alaska at the Center

Inside the Joseph E. Usibelli Engineering Learning and Innovation Building on the UAF campus, the federal Arctic Energy Office shares close quarters with the Alaska Center for Energy and Power.

Kochanowski brings his experience as a US Air Force officer once stationed at Elmendorf and former manager of the US Forest Service’s Alaska fleet. He was working for the Department of Energy Office of Indian Energy when he was tapped to give the department a physical presence in Alaska. The Arctic Energy Office, previously working under the Office of Fossil Energy, was re-established in 2001, the new century bringing a new focus on science and national security in the Far North.

Comprising about 6 percent of the Earth’s surface area—approximately equal to Africa—the Arctic holds an estimated 22 percent of the world’s undiscovered, technically recoverable fossil fuel resources, according to the US Geological Survey (USGS). Over time, as global supplies dwindle, the prices for oil and gas will rise while the cost of Arctic exploration and production (currently, nearly double the cost of other areas) will fall, but those curves have not crossed yet. Instead, the main drivers of today’s Arctic resource rush are minerals.

In addition to ranking in the top ten deposits in the world for coal, copper, lead, zinc, and silver, Alaska is also particularly rich in rare earth elements (REEs). This section of the periodic table has found its way into nearly all major high-tech devices, including military, industrial, and energy applications. Since the ‘90s, China has accounted for, on average, 90 percent of global REE production, but recent work by the USGS and Alaska Division of Geological and Geophysical Surveys have identified large deposits across the state.

The growing demand for REEs has resulted in the USGS listing them among thirty-five minerals and metals considered critical to the economic wellbeing and security of the United States. REEs are responsible for the great sound in tiny earbuds, but elements such as neodymium, praseodymium, terbium, and dysprosium are key to the renewable energy revolution, underpinning the technology behind innovations including electric vehicles, solar, and wind.

In the meantime, as nations set goals to reduce carbon emissions, the very resource that powers Alaska’s economy—petroleum—is set to become less relevant on the world stage. But less relevant doesn’t mean gone.

“I don’t think rural Alaska’s going to be off fossil fuel anytime soon,” Kochanowski says. “However, the Department of Energy has helped many of those communities supplement their current fuel supplies with clean energy backed up by battery energy storage. No matter what, you want to be as efficient as possible with whatever fuel you’re bringing in at a premium to your community.” Pressure continues to build in these islanded communities to shift microgrid energy systems away from hydrocarbons to low-carbon sources. As a first step, significant efforts are being made to help villages burn less fuel through measures like heat recovery and weatherization of homes and buildings.

Furthermore, because operating diesel generators is so expensive, renewable sources are comparatively more economical. Technological advancements in wind, solar photovoltaic, and battery energy storage, among others, have transformed Arctic communities into a new frontier for clean energy. This also makes the region an attractive test bed for companies to try out new technologies before deploying them more broadly elsewhere. Green energy has a real potential to be a key economic driver for areas of Alaska that otherwise struggle to attract industry.

Micro Steps

Alaska is well suited as a technology testing ground and has acted as an energy laboratory for decades. “We like to say that if a technology works in Alaska, it’ll work anywhere because our conditions are so extreme,” says Arctic Energy Office Director Erin Whitney.

Case in point: The US Army Corps of Engineers built the SM-1A Nuclear Power Plant at Fort Greely to test a stationary medium-sized reactor in a cold climate. The reactor, with an output of 20 thermal megawatts, operated from 1962 to 1972. The building stood empty for fifty years while radiation dissipated. Last July, Westinghouse Government Services of South Carolina was awarded a $103 million contract to complete the decommissioning, dismantling, and disposal.

At the same time, 75 miles north on the Richardson Highway, Eielson Air Force Base is preparing to welcome Alaska’s second ever nuclear reactor.

“Energy is a critical asset to ensure mission continuity at our installations,” Deputy Assistant Secretary of the Air Force for Environment, Safety, and Infrastructure Mark Correll said in an October 2021 press release, announcing Eielson as the site of the Air Force’s first microreactor.

Since the days of SM-1A, the nuclear energy industry has invented a new generation of reactors. The forefront of today’s nuclear revolution looks strikingly different from the large, traditional nuclear power plants in Europe or California. Some are portable enough to be trucked to remote sites and plugged in like batteries. The Eielson microreactor is rated for 5 MW of electricity. Construction is scheduled to begin in 2025, and after a year of testing, the reactor could enter commercial operation in 2027.

Nuclear microreactors are attractive to military bases for many of the same reasons that renewables are attractive to rural villages: they eliminate reliance on the grid. Small installations are particularly well suited for powering and heating remote bases. According to a 2018 roadmap for micronuclear deployment by the Nuclear Energy Institute, which was supported by the US Air Force, the Department of Defense (DoD) sees its needs for electricity growing as it requires power to desalinate water, produce hydrogen, and support data processing hardware, as well as to power robots and directed-energy weapons such as lasers that might be fielded in the future. In the near term, according to the roadmap, “Most DoD installations will seek one or more microreactors in the 2 to 10 MW range.”

For civilian applications, Copper Valley Electric Association is exploring whether microreactors would be feasible. Governor Dunleavy signed legislation last May to simplify the regulatory process for microreactors in Alaska, recognizing the updates in technology.

“Alaska is very fortunate,” Kochanowski says. “Especially once Eielson Air Force Base gets its small reactor, we’re going to have every kind of technology up here. We’ve got river hydro technology in Igiugig. There’s a deployment coming to Port MacKenzie for tidal power. There’s geothermal here, being developed at Chena Hot Springs, which is a great test bed and proved that low-temperature geothermal works. There’s discussions and very heavy work being done to develop the Makushin Volcano Project in Unalaska, to power that community with renewable energy.”

Alaskans have long dreamed of a diverse energy portfolio, yet these are the handful of projects that are closest to reality. “What I challenge people to do is look behind the screen a little bit and say, who’s actually doing it? Not just talking, but asking,” Kochanowski says. “Who’s implementing it, who’s deploying technology, who’s convening and bringing people together, who’s coming up with sustainable solutions?”

In sum, he says, “There’s space and challenge enough in Alaska to solve our [national] energy crisis so that everybody has the potential to be at the table.”

$3 billion invested over 4 decades created