Gubernatorial candidates argue 'carrots and sticks' for Big Oil

Posted: Sunday, August 20, 2006

Whether Big Oil should be handled with a big carrot or a big stick depends on which gubernatorial candidate you're talking to.

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Democrat Tony Knowles and incumbent Frank Murkowski are often thought of as friends of the oil industry, whereas Knowles' challenger Eric Croft openly advocates the "big stick" approach. Republican Sarah Palin has tried to establish herself as independent of special interests and John Binkley, also a Republican, has chastised the governor for not being tough enough on the industry when restructuring the state's oil tax system.

Candidates' relationships to the oil industry are a critical issue to voters in Tuesday's primary election, particularly since BP's pipelines were shut down on the North Slope this month due to questionable maintenance and the state has yet to finalize a deal on construction of a $25 billion natural gas pipeline. Millions of dollars in state revenue are tied to the pipeline shutdown and the building of the gas line, so how Alaska's next governor deals with the industry could make a huge difference to the state's coffers.

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It's no surprise then that some gubernatorial hopefuls are defining their campaign based on their relationships, or lack of them, with the oil industry. The winner of the governor's office in November will inherit the historic opportunity to put together a contract to build a natural gas pipeline.

Murkowski is now turning to voters for a mandate on his efforts to launch construction of the gas pipeline, after the Alaska Legislature this month refused to give him the green light.

Murkowski favors a partnership with ConocoPhillips, BP and Exxon Mobil in building a gas line that would stretch from the North Slope through Canada and into the American Midwest. This project would earn the state billions more in revenue and extend the life of Alaska's petroleum fields for several generations, according to the governor.

Murkowski has been in third place in most polls taken this summer, hinting that he will be unseated and thus his contract proposal would die.

Binkley's resume boasts of a career in tourism and transportation. His brushes with the oil industry mainly came while serving as a state legislator, and in 1989, he was involved in putting in place the former oil tax system, known as the Economic Limit Factor, which was based on production, said Binkley, of Fairbanks.

The former senator said Murkowski wasn't tough enough when negotiating his deal with the producers.

"He was willing to give up too much at the table to have an agreement before he filed for governor two days later," Binkley said.

As bargaining chips, Binkley said he would try to force Exxon to pump oil on the North Slope's Point Thompson, consider proposals from pipeline builders MidAmerica and TransCanada, or just build a line to send gas to Alaska communities suffering from high prices.

A rival proposal to Murkowski's deal, an all-Alaska pipeline, would run gas from the North Slope to a liquefaction facility in Valdez, where the resource would be shipped to a pipeline in British Columbia.

Palin, of Wasilla, has vocalized her support for the in-state route. She has appeared in advertisements for the proposal's sponsor, the Alaska Gasline Port Authority, and received campaign contributions from members of that group.

Binkley supporters say Palin, if elected, may already be committed to that option and not others that could earn the state more money.

"When people look at Palin and the Port Authority, there's a lot of question marks," said Russ Kelly, campaign coordinator for Binkley.

The former Wasilla mayor is not against the Canadian line, but favors "parallel paths of planning," said Palin spokesman Frank Bailey.

Palin leads the Republicans in several polls.

"Voters are so thirsty for a candidate who is not tied to one special interest group," Bailey said.

Reports from the Alaska Public Offices Commission show Murkowski has received the lion's share of the oil industry's political donations so far in the form of individual contributions from executives.

Critics are calling former Gov. Tony Knowles, of Anchorage, a "friend" of the oil industry, while his campaign says that's not a stigma, but shows he can resolve deals with producers.

Knowles has yet to see oil money flow in to his war chest, unlike other campaigns he has run. That's not surprising since oil money usually does not surface until after the primary, said Knowles campaign spokeswoman Patty Ginsburg.

"There's nothing wrong with being on John Browne's (BP group chief executive) Christmas card list," said Mike Doogan, former newspaper columnist and candidate for an Anchorage House seat. But often oil companies contributing to campaigns will expect "more than good government," he added.

Challenger Croft, of Anchorage, is not afraid to try a "stick" approach, rather than a "carrot," to force producers into building a pipeline. Croft wrote and collected many of the 40,000-plus signatures required for a initiative set to be on the ballots in November that would tax the major producers until they begin construction.

Knowles does not support the initiative, saying it could face legal challenges for being a punitive tax and would disrupt progress towards striking a deal with the companies, Ginsburg said.

• Andrew Petty can be reached at andrew.petty@juneauempire.com



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