FAIRBANKS — While state leaders worry about Alaska’s declining oil production and what lower tax revenues will mean for the state’s finances, a new application of old technology has the potential to dramatically change the picture.

This summer, companies are beginning to explore tapping Alaska’s vast shale oil formations. Similar formations have spurred multi-billion-dollar oil booms in North Dakota and Texas. A conference in Anchorage Tuesday focused on the possibilities in Alaska.

Extracting shale oil is a relatively new process, where producers tap into what are called source rocks — rock formations that produce conventional oil reserves — using hydraulic fracturing and horizontal drilling. The process works by drilling one large well, drilling horizontal wells through formations of source rock and then pumping in water and sand to crack the rock, releasing previously unavailable oil and gas.

The leader in bringing the technology to Alaska is Great Bear Petroleum which started drilling test wells this summer to see if Alaska’s formations can be tapped economically. Patrick Galvin, the vice president of external affairs and deputy general counsel for Great Bear, said the company is excited about applying the technology to Alaska.

“Suffice it to say, the shale oil and gas development has revolutionized oil and gas over 5 or 10 years. The use of technologies that have been used in the field for a long time have advanced to a point where we could develop the oil from source rock itself,” he said. “Alaska has tremendous potential with regard to the source rock that we have here.”

The shale oil formations have caused a boom in North Dakota and Texas, where work camps are springing up rapidly and have caused natural gas prices to plummet, but they’re relatively small compared to the estimates of North Slope shale formations, which are not only bigger, but substantially thicker.

While the process is years from being proven to the point where it will start filling the pipeline, the potential, as outlined in an estimate from a recent report from the U.S. Geological Survey, could be up to as much as 2 billion barrels of oil and 80 trillion cubic square feet of natural gas.

It’s been a source of excitement and optimism for Senator Joe Paskvan (D-Fairbanks), who spoke at the conference and has been one of the strongest advocates for the technology.

“You’re talking about 100,000 of barrels of oil per day into the pipeline, and that could be decades and decades of production,” he said. “And in order to get to that resource it is manpower-intensive, so it’s likely to result in tens of thousands of Alaskans hopefully having full-time employment for generations.”

Galvin said it will be a few years before the company can definitively say that shale oil is practical on the North Slope.

“We have to justify the cost of drilling,” he said, “but our intention is to develop our leased acreage and develop the oil and gas.”