Bloomberg Tech Conference 2016

On an early morning in late March, a Beechcraft turboprop plane takes off from Juneau, Alaska, the only U.S. state capital not accessible by road. As the aircraft heads north over America’s largest national forest to Fairbanks, 700 miles away, Alaska Governor Bill Walker yawns and stretches his long legs. Across the aisle, wrapped in a fleece blanket, sits his wife and closest adviser, Donna. Easter is coming up, and the two discuss what to include in their grandchildren’s baskets. Donna suggests putting a $1 bill inside each plastic egg. “A dollar each?” the governor asks incredulously. “We’re in a budget crisis here.”

America’s Last Frontier is in trouble. The 40-year oil boom that turned Alaska from a frigid backwater into one of the nation’s richest states is over. Not only have petroleum prices crashed, but Alaska’s supply of crude is running out. Thirty years ago the state was pumping 2 million barrels a day, a quarter of all U.S. output. But over the past decade, the Prudhoe Bay oil field, once the largest in North America, has started to reach the end of its life. Alaska’s output has fallen to 500,000 barrels a day, enough to fill only one-quarter of the capacity of the state’s main economic artery, the 800-mile Trans-alaska Pipeline System.

With 90 percent of the general fund revenue tied to oil, the collapse has been devastating. Alaska, facing a $4 billion budget deficit, is one of four energy states that have slid into recession over the past year because of cheap oil. The state’s rainy day fund is burning through $11 million a day. If that keeps up, it will be out of