Just days ago the "drill-baby-drill" chant of former Alaska Gov. Sarah Palin appeared to be rising triumphant in the 49th state -- and then the seas shifted more than 3,000 miles to the south in the Gulf of Mexico.

The oil rig Deepwater Horizon exploded, sank and left the hole it had punched five miles deep in the seabed spewing crude off the coast of Louisiana. The political shockwaves rippled north, rattling the Alaska oil industry just as proponents of offshore drilling were beginning to feel real hope that their efforts would reach fruition.

Alaska's major oil producers are increasingly looking offshore to supplement or overtake declining reserves at Prudhoe Bay and Kuparuk, the largest U.S. oil fields. Among them is BP, to which the Deepwater Horizon was leased. BP plans to begin directional drilling from land this fall to a prospect known as Liberty Field off the coast of Prudhoe Bay, with production slated to begin in 2011. Other offshore players include Royal Dutch Shell and ConocoPhillips, which together have spent billions of dollars for leases in the Chukchi and Beaufort seas off the state's northern coast.

Growing optimism that long-anticipated offshore drilling in the Arctic would move forward was suddenly replaced with jitteriness and concern about an environmental backlash spawned by the growing oil spill to the south, even as cleanup efforts began. A new demonstration of the problems associated with containing leaks and removing oil from water could only amplify persistent concerns about the difficulty of recovering oil from water full of shifting ice.

The spill came on the heels of an Obama administration mandate to hold off on future lease sales in federal waters off Alaska pending a more thorough review of the risks involved, including spills and threats to Arctic wildlife like fish, whales, seals, walruses and polar bears. While the Interior Department chose to honor existing leases in the Chukchi and Beaufort, where drilling is slated to begin later this summer, the Gulf of Mexico spill just reignited nervousness about whether offshore activity in the Arctic is worth the risk.

Shell, in particular, is gambling on the belief that there are major oil riches to be discovered in the Arctic Ocean. In early April, President Barack Obama gave the green light to plans by Shell's Alaska operations to drill three exploratory wells in the Chukchi. Environmental Protection Agency permits came a day later. Before the month was over, though, the Deepwater Horizon erupted in flames -- causing an underwater wellhead to leak an estimated 42,000 gallons per day -- underlining the fact that offshore drilling is not risk free.

"The lie was exposed,'' said George Edwardson, a trained geologist who serves as president of the Inupiat Community of the Arctic Slope, the local village council.

The group has fought offshore drilling in the past, and has ongoing questions about the thoroughness of government oversight, not to mention the oil industry's ability to prevent spills or clean them up when they happen.