First the good news: Domestic oil production last year increased for the first time since 1991.  For folks who tend to be amazed by how time flies, that’s almost 20 years: clearly reason to celebrate. The not-so-good news? Oil production declined in Alaska last year: The latest report from the U.S. Energy Information Administration shows that increased production in the Gulf of Mexico and in North Dakota helped offset declining production from several other states, most notably Alaska, where oil production has been on a pretty much steady decline since 1988.

While it’s encouraging to see improved drilling technology produce increased yields from North Dakota to the Gulf of Mexico, it is a little hard to envision a strong and enduring domestic oil sector without a thriving Alaskan oil sector. Even with so much of the state off limits to drilling, even after a 22-year decline in production, Alaska accounts for almost 15% of total U.S. production – a testament to the vast stores of reserves the state holds. One study by the University of Alaska estimated that Alaska’s outer continental shelf could produce an additional 1.8 million barrels per day, or 300,000 barrels per day more than we currently import from Saudi Arabia.

But in recent years, there have been some troubling signs that, the decline in Alaska’s oil sector could be accelerating. Last year, ConocoPhillips announced that for the first time it 40 years, it has not plans to drill new exploratory wells in Alaska. BP cut its 2010 development budget for Alaska by 15%. And volume on the trans-Alaska pipeline has dropped so dramatically that the 800-mile-long system is facing an early demise. All these distress signals for the state’s critical industry fly in the face of the fact that estimates for oil reserves in the state continue to grow.

For all the challenges Alaska faces, there are some reasons for encouragement. BP this spring is beginning production of a grade of heavy crude oil that has long been considered off limits because of its thick consistency.

And last year the Interior Department ruled that Shell Oil could drill three wells in the Chukchi Sea, considered one of the most underdeveloped sources of oil in the U.S. – although today Shell is still waiting for all the permits needed to go forward.

Finally some context: While oil production did increase last year, the 5.32 million barrels per day produced are still well below the 1991 average of 7.42 million barrels per day.

We have a lot of ground to make up. In order to maintain a truly strong domestic oil sector, the U.S. must grow production significantly, from all our key sources, including Alaska.