Current estimates of discovered viscous and heavy oil in Alaska’s North Slope are 12 billion barrels of oil-in-place and 12–18 billion barrels of oil-in-place, respectively (see Appendix 1 for conversion to SI units). Since the early 1990s to the end of 2010, cumulative viscous oil production has amounted to 150 million barrels, and there has been no commercial production of heavy oil. During the last three decades, the industry has been challenged to develop technologies to commercially produce these untapped oil resources in this Arctic environment. In this paper, the general locations and geologic properties of the viscous oil-bearing West Sak/Schrader Bluff and heavy oil-bearing Ugnu stratigraphic intervals are described first. The geologic variability within these deposits and the evolution of technology have forced an incremental development approach, requiring costly field testing at the pilot scale of innovative extraction techniques. Although viscous oil is currently produced, its development is not mature, and firms appear to be still spending large sums on new approaches to improve recovery. The analysis specifies a representative viscous oil project and then applies a “real options” framework using simulation to determine whether the risked expected project value is sufficient to fund required expenditures on extraction process research and field testing. Computations show available field test funds to be highly sensitive to the operator’s hurdle rate of return as well as the range in magnitude of potential State revenues. The contribution of the paper is solving this problem using an approach where the extreme low return and high scenarios need only be specified, and where the uncertainties are modeled with beta distributions based on historical data or expert opinion.