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In oil-rich Alaska, an energy crunch

A shortage of natural gas besets the state's most populous area. In rural outposts, energy costs spike.

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Interest is finally perking up, with companies in recent years drilling specifically for natural gas. A new agreement among ConocoPhillips, Marathon, and the state should stimulate more exploration, officials say. The pact trades state backing of a renewed federal LNG export license for increased natural-gas searches and promises to give residential utilities first dibs on gas in times of shortages. "Hopefully the new development will ensure that there's no further decline in the reserve base," Marty Rutherford, Alaska's deputy natural resources commissioner, said at a recent news conference.

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In rural outposts, 'energy refugees'

While Anchorage residents fret about future energy supplies, rural Alaskans face a dire situation right now. Skyrocketing prices for diesel and other fuels, compounded by costly air and barge transport, have created "energy refugees."

"[Energy] is so expensive in the villages that people are being forced to leave, especially people with young families, because they cannot afford to make ends meet," says Meera Kohler, president of the Alaska Village Electric Cooperative, which provides electricity to 53 remote villages where electrical costs can be four times those in Anchorage.

Costs of electricity, heating, and transportation fuel can account for up to 40 percent of family expenses in rural Alaska, Ms. Kohler says.

Some pioneers are seeking long-term solutions in alternative energy.

Geothermal, wind, hydro, and tidal power may hold the most promise in a state dotted with volcanoes, scoured by stiff breezes, and surrounded by water. Alaska's Division of Oil and Gas is soliciting bids for leases to develop geothermal energy beneath Mount Spurr, a volcano on the Anchorage skyline. Fairbanks's Chena Hot Springs Resort is renown for putting the underground heat that warms its pools to a variety of other uses.

A handful of native villages have erected wind turbines, and Anchorage's electricity cooperative has wind-power plans. Solar energy – seemingly a long shot because of daylight-deprived winters – is getting a look, with panels installed in some communities. Even fish oil has fueled generators at Denali National Park.

Such small-scale projects face economic hurdles, however.

"Alternative energy is very expensive capital-wise," says Kohler, whose cooperative includes wind-powered villages. Federal grants have funded villages' alternative-energy projects, but prospects are dim for future aid, she says.

Another energy option is coal. Alaska is overflowing with it – from the Arctic, where the Inupiat Eskimo village of Atqasuk is named for "the place to dig the rock that burns," to the Kenai Peninsula's Kachemak Bay, where dark seams are exposed on coastal bluffs. Some officials tout coal gasification as an option to restart Agrium's operations.

Others consider coal a misstep. "Coal is the dirtiest fossil fuel out there," says Bob Shavelson of Cook Inlet Keeper, an environmental group. "We can go backward to coal and climate change ... and habitat destruction, or we can go forward to renewable energy and long-term jobs."