Murkowski seeks solutions in oil drilling

Posted: Monday, October 28, 2002

Frank Murkowski thinks a little belt-tightening and a lot more oil could plug the nation's largest state budget gap.

Republican Murkowski says his plan could spare Alaskans from opening their pocketbooks after a generation of not paying a statewide income tax. But Murkowski's approach has its detractors, and a state oil regulator says, while possible, it would be a Herculean feat.

"It's like a moon shot," said Mark Myers, director of the state's Division of Oil and Gas. "Everything has to fall in line perfectly."

For more Juneau Empire coverage of the November 5 general election, please visit the Juneau Empire Elections Guide.

Murkowski hopes to turn around the decline in oil production in an effort to close a budget gap projected to reach $1 billion within the next governor's first term. Last year's $750 million gap ranked highest among states by the National Conference of State Legislatures.

After months of being dogged by reporters and Democratic gubernatorial candidate Fran Ulmer for specifics, Murkowski unveiled his fiscal plan this month in a speech at the Petroleum Club in Anchorage.

He wants to implement state policies and regulations to invigorate the oil and gas industry in Alaska and boost oil production by 3 percent each year starting in 2005.

Such an increase would mean about $30 million annually to state coffers and would - along with growth in other industries and restrained state spending - extend the state's budget reserve, Murkowski said.

If that doesn't work?

"If Plan A doesn't work, we will address with the Legislature what the other alternatives are," Murkowski said. "I will address Plan B when we get there."

In recent debates, Murkowski and Ulmer have traded barbs about their fiscal plans and have not agreed on what the state's fiscal situation is.

Sen. Frank Murkowski


Fairbanks resident Frank H. Murkowski was born in Seattle March 28, 1933. He graduated Ketchikan High School in 1951, attended the University of Santa Clara, 1951-53 and graduated from Seattle University in 1955 with a bachelor's degree in economics.


Murkowski served in the Coast Guard, 1955-56. He worked as a banker and was president of Alaska National Bank of the North, 1971-80. He was Alaska's commissioner of economic development, 1966-1970, and president of the Alaska Bankers Association in 1972. He was president of the Alaska Chamber of Commerce in 1977.

Murkowski was elected to the U.S. Senate in 1980 and has been re-elected ever since.

Murkowski had used his position as chairman of the Senate Energy and Natural Resources Committee to push for development of Alaska's untapped resources. With his term as committee chairman ending, Murkowski decided to run for governor. A Republican has not been governor in Alaska since Jay Hammond, who served from 1974-1982.

As a gubernatorial candidate, Murkowski is pushing for more resource development to bridge a chronic budget shortfall, expected to top $1 billion within three years.


Murkowski and his wife, Nancy, have six children. Daughter Lisa Murkowski serves as a Republican state representative from Anchorage.

Murkowski has a passion for trains. He and his wife live in a converted Pullman rail car and answer a phone that goes "chucka, chucka, chucka." On his desk at his Washington Senate office sits a plastic train. When he's ready to leave on a trip, he sets it in motion. The chugging and whistles mean he's ready to go.


Murkowski lost a 1970 House race to Democrat Nick Begich. Murkowski was first elected to the U.S. Senate in 1980 with 54 percent of the vote, defeating Democrat Clark S. Gruening, a former member of the Alaska House. His widest margin of victory came in 1998, defeating Democrat Joseph Sonneman with 75 percent of the vote.

Ulmer has maintained that without new revenues Alaska's $2.2 billion Constitutional Budget Reserve will soon be depleted, the Legislature will be faced with Draconian cuts to maintain state services and state jobs, and permanent fund dividends will disappear.

Murkowski has been quick to point to past "doom and gloom" predictions in 1987 and 1992, and has insisted the state's fiscal situation is not so dire.

North Slope crude has averaged $6 per barrel more than earlier estimates, trimming millions from the deficit forecasts. If prices remain at current levels, the $826 million shortfall expected at the end of this fiscal year would be about $400 million.

"Let's keep this thing in perspective. The sky is not falling down," Murkowski said in one of the debates.

Calling it essential that the next governor act, Ulmer proposes a "parachute plan" in which taxes automatically kick in when the budget reserve falls below $1 billion. The governor and the Legislature would determine what taxes would be used, she said. Ulmer has refused to state which tax she would favor, but the Murkowski campaign has criticized her for supporting income tax proposals while in the Legislature.

Alaska relies on oil royalties and taxes for 80 percent of its $2.3 billion general fund budget. But the trans-Alaska oil pipeline now carries only about 1 million barrels per day, half of its peak 14 years ago. New fields are ramping up as Prudhoe Bay declines, but they generally provide less revenue to the state for each barrel.

But Murkowski said the state could do a better job of spurring development on the more than 4 million acres of idle leased state land. Among his proposals to stimulate growth on the North Slope:

• Increase the window for winter exploration and offer exploration incentives.

• Make more land available for leasing and demand development of known commercial oil reserves currently under lease and that new leases are developed in a timely manner.

• Speed the permitting process and begin an expedited leasing schedule on state land and smaller tracts to encourage development by smaller independents.

• Bring North Slope gas to market by 2010 through incentives that include a deadline for production.

Myers of the state's Division of Oil and Gas said it is possible to reach Murkowski's 3 percent grown goal, but it takes a strong effort and luck. The state's two giant fields, Prudhoe Bay and Kuparak, would have to reverse their production decline and new oil finds and aggressive development of satellite fields would be needed, he said.

Ulmer said 25 percent of the oil flowing in the pipeline has come online under the Knowles administration, but that still has not been enough to close the budget gap.

Gubernatorial running mates

• Fran Ulmer/Ernie Hall Democrat

• Frank Murkowski/Loren Leman Republican

• Don Wright/Daniel DeNardo Alaskan Independence

• Diane Benson/Della Coburn Green

• Billy Toien/Al Anders Libertarian

• Raymond Vinzant Sr./Dawn Mendias Republican Moderate

Editor's note: The Empire will take a look at the other four gubernatorial candidates on Tuesday.

"The numbers don't add up when you compare them," Ulmer said during a debate. "He's asking you to simply trust him and (the deficit) will somehow magically go away."

Murkowski recently returned from Washington, D.C., where lawmakers met on an energy bill vital to his fiscal plan. He acknowledged a proposal to open the Arctic National Wildlife Refuge's coastal plain to drilling is dead. Incentives such as price supports for a natural gas pipeline face an uncertain future when Congress resumes work after the election.

It is unclear how that will affect a now-tight gubernatorial race. Last year, polls showed Murkowski had a strong advantage over Ulmer. An independent poll released by KTUU-TV in Anchorage showed the candidates to be statistically even. The Murkowski campaign has disputed the poll.

In any case, Murkowski maintains Alaska is an oil state and that's where the solution to its budget problems lie. The half-filled pipeline should be full again, he said.

"Alaska's environment is no longer competitive and we don't seem to understand it," Murkow-ski said.

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