Palin earns rep­u­ta­tion for putting Alaskans ahead of Big Oil, greens

The Washington Times Weekly - - Politics - BY PA­TRICE HILL

Repub­li­can vice-pres­i­den­tial nom­i­nee Sarah Palin, now thrust into the heart of Amer­ica’s en­ergy de­bate, has man­aged as Alaska gov­er­nor to con­found ma­jor oil com­pa­nies and frus­trate en­vi­ron­men­tal­ists with pro-drilling poli­cies that put the in­ter­ests of the state and its 670,000 cit­i­zens ahead of ei­ther pow­er­ful spe­cial in­ter­est.

Mrs. Palin is vil­i­fied by en­vi­ron­men­tal­ists for want­ing to open up the pris­tine Arc­tic Na­tional Wildlife Refuge to drilling. But last year, some right-wing crit­ics ac­cused her of ri­val­ing the spreadthe-oil-wealth phi­los­o­phy of Venezue­lan Pres­i­dent Hugo Chavez when she slapped a big tax in­crease on oil com­pa­nies op­er­at­ing in the state and used the pro­ceeds to send a $1,200 check to help cover the en­ergy costs of ev­ery Alaska res­i­dent.

As if that weren’t enough to sting the oil ma­jors, one of Mrs. Palin’s first acts in of­fice was to tear up a deal ne­go­ti­ated be­tween for­mer Gov. Frank Murkowski, a fel­low Repub­li­can, and Alaska’s big three oil com­pa­nies — Exxon Mo­bil, BP and Cono­coPhillips — to build a 1,715-mile-long pipe­line to carry nat­u­ral gas from Alaska to the lower 48 states. She re­placed Mr. Murkowski’s back­room deal with an open bid­ding process that awarded the state’s pipe­line li­cense to TransCanada Alaska, a Cana­dian out­sider.

Alaska’s Leg­is­la­ture last month deemed the TransCanada deal to be more fa­vor­able in pre­serv­ing the state’s right to raise taxes on oil com­pa­nies. The Leg­is­la­ture ap­proved it over­whelm­ingly af­ter hav­ing given a thumbs-down to the Murkowski deal and its guar­an­teed low tax rates on oil com­pa­nies.

Repub­li­can pres­i­den­tial nom­i­nee Sen. John McCain is said to see a kin­dred spirit in Mrs. Palin, who has a strong in­de­pen­dent streak that was on dis­play when she ap­pointed Tom Ir­win as Alaska’s nat­u­ral re­sources com­mis­sioner dur­ing her first weeks in of­fice. Mrs. Palin’s pre­de­ces­sor had fired Mr. Ir­win in 2005 for writ­ing a memo say­ing Mr. Murkowski went too easy on oil com­pa­nies in ear­lier pipe­line ne­go­ti­a­tions.

“She is not pro- or con- big com­pa­nies,” Mr. Ir­win told re­porters two weeks ago. “Gov­er­nor Palin didn’t sub­mit to the force and con­trol of the large com­pa­nies. She forced [them] into a fair, open com­pet­i­tive process.”

Mrs. Palin also took Exxon Mo­bil to task for fail­ing to de­velop one of Alaska’s big­gest un­tapped oil and gas fields at Point Thom­son in Alaska’s far north, threat­en­ing to re­voke a de­vel­op­ment per­mit granted decades ago. The move prompted Exxon Mo­bil to an­nounce in Fe­bru­ary that it is beginning a phased-in de­vel­op­ment of the fields with an eye to­ward even­tu­ally ship­ping the gas through the new TransCanada pipe­line. Exxon Mo­bil also took pains to show that it is striv­ing to find cus­tomers for the gas within Alaska.

“Exxon Mo­bil is com­mit­ted to de­vel­op­ing North Slope gas re­sources, and we are ready to work with the state of Alaska,” said com­pany spokes­woman Mar­garet A. Ross.

In an­other con­cil­ia­tory ges­ture to­ward the Palin ad­min­is­tra­tion, Exxon Mo­bil dropped out of the con­sor­tium of oil com­pa­nies that ne­go­ti­ated a pipe­line deal with Mr. Murkowski and said it is pre­pared to work with TransCanada as well as the other oil com­pa­nies on get- ting the pipe­line com­pleted. ExxonMo­bil said its Point Thom­son project will pro­vide about 8 per­cent of the gas go­ing through the pipe­line and its par­tic­i­pa­tion will be crit­i­cal for the project to suc­ceed fi­nan­cially.

BP and Conoco re­fused to bow to the new gov­er­nor, how­ever, and have not dropped their plans for a pipe­line that would com­pete with Mrs. Palin’s TransCanada deal.

The com­pa­nies dubbed their al­ter­na­tive pipe­line “De­nali” this spring and plan to spend $600 mil­lion in the next three years con­duct­ing sci­en­tific stud­ies and sub­mit­ting reg­u­la­tory applications to the fed­eral gov­ern­ment with an eye to­ward beat­ing out the TransCanada pro­posal by winning over more cus­tomers. The Fed­eral En­ergy Reg­u­la­tory Com­mis­sion ul­ti­mately could be the ar­biter of who builds the pipe­line.

“We felt [Mrs. Palin’s plan] was not the best pact to get a pipe­line built. We think De­nali is the best way to get a pipe­line built,” said one oil com­pany of­fi­cial who asked to re­main anony­mous.

BP and Conoco con­tinue to have dif­fer­ences with Mrs. Palin over the state’s con­tri­bu­tion to fi­nanc­ing the pipe­line. They say they never wanted the $500 mil­lion in seed money that the state is of­fer­ing to get the pipe­line started. But they con­tinue to in­sist that state tax con­ces­sions will be needed to en­sure com­ple­tion of what is ex­pected to be the largest and most ex­pen­sive in­fra­struc­ture project in North Amer­i­can his­tory.

The pos­si­bil­ity of Alaska im­pos­ing higher taxes years down the road un­der the Palin plan poses risks that could make it dif­fi­cult to ob­tain fi­nanc­ing from Wall Street, jeop­ar­diz­ing the vi­a­bil­ity of the project, oil of­fi­cials con­tend.

“The real stick­ing point seems to be that Gov­er­nor Palin re­fuses to make a long-term com­mit­ment on the tax rates for the project,” said Robert Rapier, a for­mer Conoco em­ployee.

“For a $30 bil­lion project, it is pretty im­por­tant to un­der­stand the eco­nomics of the project pretty far in ad­vance,” he said. “It should be rea­son­able to at least agree in ad­vance not to change the rules dur­ing the game. That is, af­ter all, what Hugo Chavez has be­come fa­mous for. And Palin’s threats to tear up ex­ist­ing con­tracts with Exxon do pro­vide a cause for con­cern.”

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