Alaska, which has fallen behind North Dakota in oil output and whose Prudhoe Bay oil fields are waning, is exploring the possibility of extracting oil from the source rock on the state’s North Slope. (Dave Houseknecht/U.S. Geological Survey)

Canada may have its Albertan oil sands, and North Dakota has its Bakken oil formation. But don’t count Alaska out when it comes to producing unconventional oil.

Alaska, which has fallen behind North Dakota in oil output and whose Prudhoe Bay oil fields are waning, is exploring the possibility of extracting oil from the source rock on the state’s North Slope. The state has leased more than half a million acres of its land to exploration companies, and even some environmentalists believe that the shale oil development could be the best way to increase output with relatively modest damage to the environment.

As in shale developments in Texas, North Dakota and elsewhere in the lower 48 states, the key to unlocking Alaska’s shale oil is a combination of horizontal drilling and hydraulic fracturing, a method of injecting a mix of water, sand and chemicals at high pressure to free up captured oil and gas.

As in Canada and North Dakota, a pipeline is playing a key role in the public debate over this new technological frontier. But whereas a new pipeline — the Keystone XL extension — is needed to get oil to markets in the lower 48, the quandary in Alaska is how to fill the existing Trans-Alaska Pipeline System. That pipeline is operating at less than one-third of its total capacity, as the Prudhoe Bay fields decline.

“We’ve had a close eye on the unconventional play in Canada and North Dakota, and to some extent, we’ve been viewing it as competition,” said Dan Sullivan, Alaska’s Department of Natural Resources commissioner. “But we view it less as competition, and more as an opportunity.”

For the moment, it remains unclear whether Alaska can replicate the shale oil boom that is reshaping North Dakota and parts of Texas. The U.S. Geological Survey issued its first assessment of the North Slope’s shale rock resources in February, estimating that the region contained between zero and 2 billion barrels of technically recoverable oil, along with between zero and 80 trillion cubic feet of gas.

The wide range of uncertainty in the estimate stems from the fact that companies are just beginning to collect data on whether shale oil operations would be profitable.

“It is really an unknown whether that oil can be recovered from the source rock, and can that oil be recovered at a rate and volume per well that would be economically viable,” said David W. Houseknecht, the USGS project chief for petroleum studies in Alaska, who conducted the agency’s recent North Slope assessment.

Houseknecht added that while the region — particularly its Shublik Formation, which extends beyond state land into the National Petroleum Reserve in Alaska — has “good potential.” But it generally contains less organic matter than the Bakken and is not geologically overpressured like the North Dakota formation, which has more than three times more estimated recoverable oil per unit area.

However, Ed Duncan, the president of Great Bear Petroleum LLC, is optimistic that the same source rocks that helped make Prudhoe Bay oil-rich can generate oil if the shale is fractured. Duncan, whose company previously had leased nearly 498,000 acres of state land and expects the state to issue leases on 45,000 additional acres this fall, said it is just a matter of connecting the fact that the source rocks for the North Slope could produce oil.

“It’s bringing technology to Alaska to unlock the oil from the source rock,” Duncan said. ”We believe the stage is set to develop quickly, assuming the rocks will produce at adequate commercial rates.”

Great Bear is testing that theory in partnership with the oil services firm Halliburton. Last month the companies took core samples from one well, about 15 miles south of the Prudhoe Bay oil field, and they just started drilling another one last week. Duncan, some of whose leases abut the state’s pipeline, estimated they would have a sense of the rocks’ commercial potential by the end of fall.

Royale Energy, a California-based firm, was the high bidder on about 100,500 acres of state land on the North Slope for shale oil exploration in 2011, and is waiting for those leases to be issued.

If the firms are successful, it could provide an avenue of cooperation between environmentalists and the oil industry in Alaska, who have in recent years been fighting over whether Royal Dutch Shell should recommence offshore drilling in the Chukchi and Beaufort seas.

The Trans-Alaska Pipeline System has a maximum daily capacity of 2.1 million barrels, but is now shipping on average 560,320 barrels per day. Sullivan likes to talk about how the state has “a great pipeline that has a lot of spare capacity” that can ship shale oil, and Lois Epstein, Arctic program director for The Wilderness Society, largely agrees with that sentiment.

“It could be, if it’s done right, a great thing for Alaska,” said Epstein, an engineer by training. “Shale oil offers opportunities for Alaska to continue the flow through the pipeline without going into areas which are more sensitive, like the Arctic National Wildlife Refuge.”

While some of the source rocks are on federal land, the most oil-rich sections of shale are state land, which should make exploration less controversial.

This does not mean a shale oil boom wouldn’t pose challenges for Alaska: The state usually has about 15 exploration wells operating at one time, a number which would grow exponentially if shale development is successful.

Cathy Foerster, chair of the Alaska Oil and Gas Conservation Commission, said her agency lacks engineers, geologists and field inspectors because it’s hard to hire well-qualified people.

“How do we manage increased activity with restricted staffing? That’s our challenge,” she said.

At the moment, however, it’s a problem Alaskans — and some federal officials — appear eager to have. Houseknecht said he usually gives a general briefing to Capitol Hill staffers when he issues a resource assessment; in the case of the North Slope report, he briefed Interior Secretary Ken Salazar and Sen. Lisa Murkowski (R-Alaska) in separate meetings.

In an interview, Murkowski said she and others know there will be plenty of oil flowing down the Keystone XL pipeline if it gets built, and shale oil provides Alaska another way to remain competitive.

“For Alaska’s people, when they saw North Dakota had bumped us out of first place it was like, what are we doing, North Dakota? It’s a little bit of a wake-up call,” she said. “We can’t take the approach we’re the only game in town. We have to recognize we’re competing on a world scene.”

Researcher Eddy J. Palanzo contributed to this report.