Oil, gas big issues in race for governor

Posted: Monday, August 23, 2010

JUNEAU - The race to be Alaska's governor boils down to the economy and, in this state, that means revenue from oil and natural gas.

For Republicans, one of the biggest issues has been how best to go about building that long-hoped-for line to bring gas from the North Slope to market. For Democrats, it's been oil taxes.

Both issues are critical to Alaska's economy; oil is largely responsible for the running of state government, and it's anticipated production will keep declining. Gas, meanwhile, isn't expected to fully offset lost oil revenues, but the hope is that a major line would create jobs and provide a source for more reliable energy in the state.

There's a lot at stake, with nothing to be settled Tuesday or even in November; any change of course would need legislative approval, and lawmakers are just as varied in their opinions on the course to take.

For candidates not named Sean Parnell, the answer's clear: Vote Parnell out as governor and elect a strong leader who can bring his vision to fruition. GOP rivals Ralph Samuels' slogan is "Leadership NOW;" Bill Walker's is "BILL WILL," a nod to his promise to begin building an "all-Alaska" pipeline in three years.

"This is a state that wants someone who reflects its values and character more than Sean Parnell does," said Ethan Berkowitz, a Democrat who's set his sights squarely on Parnell though he faces his own primary challenge from state Sen. Hollis French.

"This is a state that prides itself on being independent, tough and self-reliant," Berkowitz said. "I've known Sean Parnell for a long time; he's a nice guy. But those aren't his character traits."

Parnell has stayed committed to the Alaska Gasline Inducement Act, saying it's working as intended to spur competition for a major line. But he's also said the state should not focus solely on that to the possible exclusion of a small-diameter bullet line, for example, that also could serve some of Alaska's more populous areas.

"I don't think politicians should pick a project; that's in the hands of a free market. As governor, I am creating that market for a pipeline," he said. "Alaska's gas, for Alaskans, in any way possible."

While he's generally focused on his record, and experience, both in the legislature and in the last year as governor - he took over for Sarah Palin when she resigned last summer - he's shot the occasional barb at Walker, an attorney who's put hundreds of thousands of his own money into an increasingly aggressive charge against Parnell.

Parnell's called him a one-issue candidate - that being for Walker's call to begin building a line to Valdez - and said being governor is about doing so much more. He's adopted the slogan: "Action, Not Words."

Walker contends that the wellbeing of the state, its economy, flows from the creation of jobs and opportunities - and that a pipeline that runs solely through the state would enhance that. He believes the state's already lost the market for gas to the Lower 48 and needs to act, quickly, on a line to capitalize on the overseas export market.

Projects proposed under the Inducement Act would run from the North Slope into Canada, though one proposal does include an all-Alaska option.

Such a proposal requires federal certification for a new liquefied natural gas terminal, and an export license. But Walker believes all the pieces are in place to have a line built in the state in seven years. Samuels says no way.

"Nothing is as simple as it is on a bumper sticker," Samuels said during a recent campaign swing through Ketchikan.

As a state representative, Samuels voted against the Inducement Act; he believes the state's no better off today than it was several years ago, still facing negotiations on tax issues with gas companies and at risk to get the raw end of the deal. (Parnell's administration considers that assessment overblown and wrong, and the legislature would have to support leaving the current process, and that could carry a financial penalty.)

"It's ludicrous to say that we can lay pipe in three years, and Parnell just puts his head in the sand," said Samuels, who's worked as a vice president for Holland America Line. "Lead forward, or get out of the way."

His call has been for greater restraint in government spending and growth, a view Parnell shares. Both say the state can't keep spending at the rate it is, given the declining production and volatility of oil prices.

On oil is where perhaps the sharpest division exists between Berkowitz and French.

French favors sticking with the current production tax scheme, passed in 2007 and also pushed by Palin. French says the system has worked "spectacularly," helping the state put aside money to pay for K-12 education in coming years and save money and allowing the industry to do well.

"In my view, it strikes the right balance," he said.

Berkowitz, a former state House minority leader, considers the tax system better than what existed before it but "just because you made progress doesn't mean you stop moving." He favors replacing it with a field-by-field system, saying a customized, "100 percent royalty" scheme recognizes "the unique costs and challenges of developing individual leases."

He said the biggest immediate problem facing the state is declining production of oil, and that completing a gas line is "completely aspirational."

"But we have to deal with declining oil production," he said.

Three lesser-known Republicans, who've raised little money or done little campaigning, are also running in Tuesday's primary: Gerald Heikes, Merica Hlatcu and Sam Little. Libertarian Billy Toien and Alaskan Independence Party candidate Donald Wright also are running.

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