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Anchorage's powerful business community stands behind Parnell oil tax reform

Amanda CoyneThe New York Times
Amanda Coyne photo

More than a thousand people gathered at the Dena'ina Civic and Convention Center in downtown Anchorage on Wednesday to call for lower taxes on the oil industry. More than a thousand people munched on $40-a-plate chicken and vegetable mix, listening to like-minded people telling them things they already believe. Some in the crowd looked like "ordinary Alaskans." But you'd be hard-pressed in Alaska to find such a large group of people in the middle of the day wearing suits and ties, stilettos and little black business skirts. Prada purses and Lancôme lipstick and aftershave with hints of pine and snow.

Anywhere, that is, except for at an oil-industry rally in downtown Anchorage, just a few minutes from Nordstrom. Fairbanks also offered a rally on Wednesday but it was likely a much more subdued affair.

Likewise, you'd probably be hard pressed to find anywhere in the country that a two-term, former Democratic governor would be so willing, eager and ready to gush over the oil industry and to call on his party's lawmakers to change the tax structure. A tax structure that the former governor, Tony Knowles, says displays Alaska's "character."

The verdict on Alaska's character? Not good, and if oil companies don't get the "meaningful" tax reform they say they need to increase production, "life in the Great Land will be far more different that it is today," Knowles told the group.

This isn't a turn-around for Knowles. When he roared into the governor's mansion in 1995 after Wally Hickel gave up the fight with the industry and decided to be a one-term governor, Knowles announced that his plan was to "partner" with Big Oil. He set about doing just that. He gave industry tax breaks and industry gave back in campaign contributions.

Perhaps most telling, he instructed the commissioner of the Alaska Department of Natural Resources to hire John Kerrigan, the former son-in-law of former VECO Corp. CEO Bill Allen, to head DNR's Division of Oil and Gas -- a position that, among other things, oversees leasing lands for oil and gas development, as well as royalties collected from leases.

Allen, of course, is a felon today after being caught trying to bribe members of the 2006 Legislature to keep taxes low on the oil industry. He also claimed to give the late Sen. Ted Stevens a sweetheart deal on a remodel to his cabin, though who knows after federal prosecutors were found to have cut corners in their quest to take out the longest-serving Republican in Senate history.

Kerrigan’s prior employment before Knowles recommended him to DNR? A property manager for Century 21 real estate (as well as an employee for a Las Vegas bar, according to interviews with a former co-worker of Kerrigan's who recalled him bragging about his adventures in Sin City.)

Deputy DNR Director Marty Rutherford didn't give Kerrigan the job.

“I was extremely uncomfortable of putting him in charge of Oil and Gas,” Rutherford recalled in a 2008 interview with Alaska Dispatch editor Tony Hopfinger. “To me it is one of the most important jobs in state government. It has to be somebody who understands managing the state resources—the state’s oil wealth. I would have quit over that,” she said. 

But Rutherford did find him another job -- she made him the state's manager of the Joint Pipeline Office, a federal-state group of agencies regulating the biggest oil pipeline in the nation. Alyeska Pipeline Services Co. -- a consortium of oil producers, including BP, Exxon Mobil Corp. and ConocoPhillips -- own and operate the pipeline.

Until he resigned after being caught driving around in an Alyeska Pipeline truck during his off time, Kerrigan managed the state agency responsible for oversight of the 800-mile trans-Alaska pipeline until 2004.

There will be blood and orange cards

The "Rally for Reform," organizers called it, was sponsored by a variety of groups: Anchorage Chamber of Commerce, the Alaska Miners Association, the Alaska Crab Coalition, the Alaska Oil and Gas Association, to name a few. And of course, the Make Alaska Competitive Coalition -- the pro-industry group managed by the pro-industry advertising and public relations firm MSI Communications, whose commercials and ads are running across the state -- had a big presence at the rally. Knowles is on MACC's steering committee.

Whatever muscle Anchorage's business community wields in the state is power that Alaska residents have ceded it, over time, by allowing state government to become wholly dependent on one industry -- oil. And the dependence has only grown alongside state spending, which has tripled in the last seven years.

Muscles were on display at Anchorage's rally and the business community flexed.

Knowles spoke of the upcoming election -- virtually every state legislator is up for re-election due to redistricting -- and called it "serendipitous.

"We'll never have more people power than now," he said.

Gov. Sean Parnell was next. He said the only way to reach his goal of increasing North Slope oil production to 1 million barrels a day over the next decade (the trans-Alaska pipeline is today shipping around 617,000 barrels a day, down from a peak of more than 2.1 million barrels in the late 1980s) was "meaningful" tax reform. He recited much the same stump speech he's been recycling since his 2010 election. Prior to that, when Parnell was serving out the term of former Gov. Sarah Palin, he'd whispered that perhaps his former boss's landmark oil tax regime needed "tweaking." What a difference two years make. Now, Parnell says he'll settle for nothing other than "meaningful reform."

"Meaningful reform" for the governor means giving oil producers around $1.8 billion a year in tax breaks, so that the companies will produce the oil that is already profitable to produce, but not profitable enough, they say.

Parnell took jabs at those whom he accused of holding up such reform, taking direct aim at the bipartisan Alaska Senate, where lawmakers have crafted their own, less costly version of "meaningful reform."

Despite Wednesday's rallies, recent polls indicate Alaska voters prefer the Senate's incremental approach to Parnell's axe-wielding. Nonetheless, Parnell urged the convention center crowd to call and write their legislators, to publicly testify in support of his tax cut.

He went so far as to accuse at least one senator of discounting public testimony, while reassuring them that he believed their voices mattered.

"One senator said that your voice doesn't matter because you work … you work for businesses big and small," Parnell said. A few in the crowd booed and hissed.

"When did it become OK to smear people working in the private sector? When did it become OK to vilify Alaskans?" he asked.

According to his spokesperson, Parnell was referring to Senate Finance Committee co-chair Bert Stedman, who told the Anchorage Daily News that because some of those who testified appeared to be doing so at the behest of the oil industry, their testimony was "not as powerful as it would have been if people were coming forward on their own."

Stedman declined to comment on whether or not he intended his remarks to be interpreted as a vilification of Alaskans.

All of the speakers urged the diners to fill out orange cards on the table, urging for oil tax reform. At the end of the event, organizers were on hand to pick up the cards, which were to be reportedly delivered to Juneau on Thursday.

Parnell reminded the crowd that there's 18 days left in the regular legislative session, and 18 days, Parnell said, is a lifetime for a legislator. "If they feel the heat, they'll see the light. I say let's bring it on," he said.

In other words, before the legislative session ends, there will be blood, mixed with lots of orange cards. Just another tequila sunset in Juneau.

Contact Amanda Coyne at amanda(at)alaskadispatch.com