Gas Pipeline Dispute Fuels Wild Alaska Race

JUNEAU , Alaska — The wildest race for governor of Alaska in 20 years shares center stage with the state’s thorniest political issue over those same two decades: a proposed contract for a natural gas pipeline from Alaska’s North Slope through Canada to the Midwest.

The Republican primary race pits Gov. Frank Murkowski against two well-known challengers, one of whom would be Alaska’s first woman governor.

But even though Murkowski bears a name legendary in Alaska politics, having served 22 years as U.S. senator, his disapproval ratings have soared toward 75 percent, and a poll shows he would be the easiest Republican for Democrats to defeat in November.

Adding to the drama, another state political icon is almost certain to be the Democratic nominee, former two-term Gov. Tony Knowles, whose most recent try for public office was foiled by Murkowski’s daughter, Lisa, in the U.S. Senate race two years ago.

Need more political intrigue? Andrew Halcro, a wealthy businessman who used to be a Republican legislator, could be the spoiler – an independent candidate on the November ballot.

Murkowski and Knowles ended months of suspense and declared their candidacies just before the June 1 filing deadline – virtually simultaneously with a special legislative session Murkowski called to lay the groundwork for a deal to finally tap the state’s vast natural gas reserves.

But the natural gas pipeline issue is extremely controversial. Although there’s a legal dispute about whether the Legislature must approve, Murkowski wants lawmakers to sign off on a proposed contract he has negotiated over the past two years with the proposed pipeline developers: the three major oil producers on Alaska’s North Slope — BP, ExxonMobil and ConocoPhillips.

The contract sets fiscal terms for development of the project, although it does not actually commit the producers to construction, one of the most controversial elements of the package. Also, the state would be a 20 percent owner in the pipeline and take its royalty and production tax as gas, rather than cash — other positions that are being hotly debated.

Murkowski also wants to provide “fiscal certainty” for the project by fixing oil taxes for 30 years. On Thursday night (June 8), as the clocked ticked toward the midnight conclusion of the 30-day special session, the House of Representatives refused to pass a new profits-based production tax proposed by the governor, almost certainly setting up another special session this summer or fall.

The setback was another blow for Murkowski who, according to monthly tracking polls by the firm SurveyUSA , has been the second most unpopular governor over the past year, surpassed by only scandal-tainted Bob Taft (R) of Ohio.

Murkowski apparently will have a tough time surviving the GOP primary Aug. 22.

Ivan Moore Research of Anchorage released a poll June 5 that showed former Wasilla Mayor Sarah Palin leading the field with 43 percent, while former state Sen. John Binkley had 27 percent; and Murkowski trailed badly at 17 percent. Half of the 600 registered voters surveyed in the poll, conducted in mid-May, described “very negative” feelings about the governor.

The poll showed that if the election were held now, Knowles would edge Palin by 3 percentage points in a three-way race with Halcro, and Binkley by 9 points. But against Murkowski, Knowles would fare far better – 52 percent to 20 percent.

Murkowski’s political baggage includes:

• After being elected governor, he appointed his daughter to complete his unexpired Senate term. She subsequently defeated Knowles for a full six-year term.
• He vetoed a program called the longevity bonus, which provided $250 a month in cash payments to some senior citizens.
• After both the U.S. Department of Homeland Security and the Legislature refused to pay for a jet for the Alaska Department of Public Safety, he used administrative funds to purchase the plane, and has access to it when it is not in use by the department.
• His first attorney general, Republican Gregg Renkes, resigned after being accused of conflict of interest, in a case involving his stock portfolio and a trade deal he was promoting on the governor’s behalf.

Palin’s major beef with Murkowski involves ethics. Two years ago, she resigned as chairman of the Alaska Oil and Gas Conservation Commission, which regulates the petroleum industry, after discovering that fellow commissioner Randy Ruedrich, a controversial Murkowski appointee, was conducting party business on state time.

Ruedrich eventually paid a fine of $12,000 – the largest ethics penalty in state history – but kept his post as GOP state chairman.

Palin would be only the third woman elected statewide, and the first governor. She was also an outspoken critic as Renkes attempted unsuccessfully for several months to hang on to his job as attorney general, and jointly sponsored an ethics complaint against Renkes with state Rep. Eric Croft, now a Democratic gubernatorial candidate.

Binkley, once considered an ally of the governor, was believed to have been on the short list in 2002 of possible appointees for the unfinished Senate term. But these days he jokes, “I think there was only one list.”

The controversial billion-to–billion gas line, under discussion since a treaty with Canada was signed during the Carter administration three decades ago, often is described as the largest private construction project in North American history and widely is seen as Murkowski’s best chance for political redemption.

Various pipeline construction ideas have been floated over the years, but it was not until the price of natural gas spiked in the winter of 2000-2001 that planning became serious. Critics accuse the oil companies with leases on the natural gas of “warehousing” the gas, but they responded by saying such a vast project had not been economically feasible until gas prices increased.

All of the other candidates for governor have opposed Murkowski’s proposed gas line contract partly on grounds its terms tie the hands of legislatures for 30 years on oil and 45 years on gas taxes.

That is seen by many Alaskans as granting too much “fiscal certainty” to the big three petroleum developers. Producers declare that they need to know future legislatures will not increase oil taxes after the companies have committed to the pipeline, but critics say this would violate the state’s constitutional prohibition against surrendering taxing authority.

Croft, a 10-year state representative, is taking a different approach. He spearheaded a citizen’s initiative to tax the big three a collective $1 billion annually if they do not develop a pipeline project or sell the gas they have under lease.

The initiative has been certified for the November ballot, and it is expected to pass overwhelmingly. Murkowski’s proposed deal with the producers includes a clause that would commit the state to reimburse them for the gas reserves tax.

Murkowski and Croft debated the issue in a public radio debate in late May that had each thrusting his finger in the other’s face.

Bill McAllister is Capitol bureau chief for KTUU-TV, the NBC affiliate in Anchorage, and a board member of Capitolbeat, the Association of Capitol Reporters and Editors.