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New book chronicles the crude relationship of oil and politics in Alaska

Amanda CoyneThe New York Times,Tony Hopfinger

Three years ago, we set out to tell the story of oil and politics in Alaska. At the time, then-Sen. Ted Stevens had just been convicted of failing to disclose renovations to his Girdwood cabin by friend and oilman Bill Allen. Then-Gov. Sarah Palin was crisscrossing the country as GOP presidential candidate John McCain's running-mate. And as always in the state, the future was uncertain. The oil fields were in decline and there were no guarantees that Alaska would land a multibillion-dollar natural gas pipeline.

Those events from the fall of 2008 provided the basis for a story we had reported and long wanted to write. On Tuesday, Nov. 8, the result -- "Crude Awakening: Money, Mavericks, and Mayhem in Alaska" -- will be released in book stores across the country.

The following is the prologue to "Crude Awakening," what we hope is a rollicking, or at least informational, story of politics in America’s last frontier and oil province:

Late on the evening of May 7, 2006, Alaska state representative Pete Kott left the Capitol building and strolled a few blocks through downtown Juneau to the Baranof Hotel. He rode the elevator to the sixth floor and knocked on the door of Suite 604. Kott was anxious to tell his friends the good news.

A retired Air Force captain with a graduate degree in public administration, Kott had served as a Republican representative in the state House for fourteen years. Along the way, in addition to considerable legislative expertise, he’d acquired a drinking problem. After a couple of good gulps of wine, Kott, his eyes twinkling as he smiled, described to his friends—two executives and a consultant for Alaska’s largest oil contractor, VECO Corporation—how his strategy to kill a bill that would raise state taxes on oil companies was coming together. Kott spent the next half-hour bragging about his performance earlier that day. He said he’d “outsmarted the fox” and delivered a “sucker punch.”

“I use ’em and abuse ’em,” Kott said. “Fuck ’em.”

“That was like watching a maestro at work,” one of the men in the room said of Kott’s handiwork on the House floor.

“That’s exactly right,” said Rick Smith, a VECO vice president. “This guy’s pretty good, right? Boy, I’ll tell you what, it’s every, every year, I mean, I’ve been with Pete and coming down to crunch time, he, he makes this shit happen.”

Also present in Suite 604 was VECO founder Bill Allen. An oilman most of his life, Allen was a godfather character in Alaska’s oil patch. Politically connected, he was in Juneau in 2006 buying influence in the legislature to keep oil taxes favorable for his clients, “the three big boys,” as he referred to them: Exxon Mobil, BP, and Conoco Phillips. Part of that effort involved laying the groundwork in the legislature for an upcoming bill that would lock in taxes for decades on the oil companies in exchange for their promise to build a 3,500-mile natural gas pipeline, estimated to be one of the most expensive private energy projects in U.S. history. The gas pipeline was to be Alaska’s next boom. The state needed it more than ever now that its oil reserves were running dry. Allen needed the pipeline and lower taxes for his clients so that his oil-contracting firm would continue to prosper. Now 70, he wanted to sell the company. A pipeline project on the horizon would boost VECO’s price tag. Allen had the ear of the Alaska oil executives. Some of them rooted him on, turning a blind eye to the bribery.

Allen booked Suite 604 for the 2006 legislative session. It was known as “Animal House” among legislators, oil lobbyists, and the governor’s top aides, who all routinely dropped in to visit Allen and his sidekick Rick Smith. They called themselves the “Corrupt Bastards Club” after a newspaper column that had accused them of corruption. And like many Republican lawmakers, Kott revered Allen, calling him “Uncle Bill.”

“I had to get ’er done, so I [could] come back here and face this man right here,” said Kott, pointing at Allen. “I had to cheat, steal, beg, borrow, and lie.”

“I own your ass,” Allen responded.

It was such alcohol-laced conversations, many involving legislators in Alaska’s rain-drenched capital, that lent tone, shape, and substance to the state’s largest oil-fueled political scandal, an epic tale of greed and corruption that began a half century ago and continues to play out today. In late August 2006, the FBI secretly persuaded Allen to plead guilty to bribing a slew of state politicians, as well as admit to doing favors for Ted Stevens, the longest-serving U.S. Senate Republican in history. Agents revealed to Allen that they’d accumulated thousands of hours of wiretapped phone calls, along with video surveillance from Suite 604, which included footage of him handing hundred-dollar bills to politicians.

Allen, who allegedly had a penchant for teenage girls, confessed almost immediately when he was picked up, eventually detailing how he used his oil-contracting firm to renovate and expand Stevens’s cabin. Allen confessed to paying more than $240,000 in phony consulting fees to the senator’s son, Ben Stevens, who was president of the Alaska Senate. Allen helped fund extravagant fund-raisers for U.S. Representative Don Young, replete with a pig roast—a nod to Young’s proudly prolific pork barrel spending on Alaska. And in 2006, when the state legislature had Alaska’s future in its hands, Allen admitted to paying off Kott and other key lawmakers to swing crucial votes. At stake was not only whether to increase oil taxes, but whether to provide industry a host of incentives to fuel construction of a $40 billion natural gas pipeline—a project that could spark a boom the likes of which Alaskans hadn’t seen since the 1970s.

The seeds of this tale were planted early in Alaska’s short history as a state, sprouting when the oil industry took root forty years ago and the state’s most prominent politician began his ascent. Senator Ted Stevens became nearly as powerful as Alaska’s lifeblood industry, gaining a national reputation for securing tens of billions of dollars for his home state between 1968 and 2008—the year he lost reelection after being convicted in federal court for failing to document Allen’s renovations to his home, as required of senators on their financial disclosures. Stevens’s and Allen’s careers paralleled the rise of the oil economy, and by the late 1990s they were good friends. They even owned a racehorse together. Stevens was at the height of his power then, holding the purse strings to the federal budget as chair of the Senate Appropriations Committee. Allen asked favors of Stevens, but he mostly helped the senator out of friendship, no doubt influenced to some extent by Stevens’s frequently aired complaint that he’d sacrificed his Harvard law degree to serve the public.

Alaska had been a state for only nine years when oil workers struck the elephant field, Prudhoe Bay, in 1968. Before that, its economic future hinged on logging, mining, fishing, and military bases. But with a suddenly rich oil economy, Alaskans became comfortable and complacent, working for the oil companies at wages far greater than those in the lower forty-eight states, and numerous businesses, both old and new, profited from the industry. The state planned little for the future, beyond establishing an oil wealth savings account. By 2007 the Alaska Permanent Fund, started three decades earlier, swelled to $40 billion, a piggy bank to get the state by when the oil wells eventually ran dry. But few imagined that day. By the early 1980s, the Permanent Fund yielded annual dividends for every man, woman, and child. Maybe they didn’t approve of their leaders’ close ties to Bill Allen and Big Oil, but they appreciated getting that yearly oil dividend check. (Alaskans don’t pay state income tax or sales tax.) They worried little what the rest of the country thought of Stevens’s funneling home billions of federal dollars or the state’s immense oil wealth.

Leading Alaskans into this trance was a group of old-guard politicians and businessmen who came of age when Alaska was still a territory. They understood the state’s relationship with industry as a business deal: The people of the state owned the oil, and the companies bought leases and paid taxes to develop it. Keeping the crude flowing and the state prospering required a delicate dance of negotiating and hobnobbing with executives from Texas to London. As the years progressed, oil bred a crude culture of business and politics in Alaska, tainted with corruption and the mishandling of resources. Alaskans accepted this as part of doing business. If they turned a blind eye to what their leaders were up to, it was only because some of them didn’t know that it could be done otherwise, and the ones who did were greedy and bloated themselves, living in a northern Neverland, far from the eyes of the rest of the country. The FBI and Justice Department were supposed to change that. But then, it seemed, the Alaska Neverland ethos got to them too. In the end, the feds stood accused of playing as dirty as the people they were investigating—and in some cases, dirtier.

It may well be that things happen in Alaska that wouldn’t happen in states with long histories and established social networks—places where physical magnificence and an excess of natural beauty, set always in nature’s extremes, don’t overwhelm, don’t usurp the senses, senses that otherwise might be used to create stable, well-run communities. Add oil to that mixture, a big, gushing elephant field that brought in billions of dollars so early in the state’s history, and the voices of judicious and honest Alaskans, of which there are many, were drowned out by other, louder voices. The ones who thought the oil and the money would last forever. The ones who wanted more of everything, and felt it was their God-given right to have it.

By the late summer of 2006, FBI agents finally had the evidence they needed to swarm the offices of the Alaska legislature in Anchorage, looking for clues of lawmakers taking bribes and favors from Bill Allen. Those raids would have ramifications that spilled far beyond Alaska’s borders. They would tarnish the reputations of federal agents and prosecutors, lead to the suicide of another, end the career of one of the most important men in the country, and spawn a new leader, a new kind of leader: the wife of a snowmobile racer, a mother of five, a caribou hunter and salmon slayer. Indeed, the timing, as would often be the case for her, was a gift for a former small-town mayor who had just defeated Governor Frank Murkowski in the GOP primary election a week earlier. Sarah Palin was a forty-two-year-old Republican who had been causing a ruckus within her party for the past two years. Out of the ashes of cronyism and corruption, she was born.

The FBI raids seemed to confirm for many Alaskans that Palin—a self-described reformist advocating government transparency—was the real deal, pure and courageous for standing up to those “corrupt bastards” in her party. In contrast to those good old boys, Palin seemed squeaky clean. By then, Palin had divided the Alaska Republican Party, winning over a group of conservative Alaskans who, in retrospect, might have been the first tea partiers of America, and riding their backs all the way to the governor’s mansion in late 2006.

For a brief moment under her tenure, Alaskans largely came together and were reminded of the idealism around which the state had been formed in the first place. It was an idealism borne out of a philosophy of collective ownership of the state’s oil, which funded nearly 90 percent of state government through taxes, royalties, and fees paid by the oil companies. Some in the past had tried to wrench Alaska away from its corporate dependency, but the fight had proved too difficult. But then Palin swept into office, promising to bring Alaskans back to the days when they loved and respected their state and each other. To bring Alaska back to its constitution, penned in a time, before the oil boom, when the dream was pure and Alaska-size.

“I will unambiguously, steadfastly, and doggedly guard the interests of this great state as a mother naturally guards her own,” Palin told Alaskans. “Like a nanook defending her cub.”

And she did—until she didn’t anymore.

If Alaska had been an abstraction to you before Sarah Palin’s rise to fame, you’ve probably by now seen at least a little of this state—the soaring mountains, the dangerous, choppy seas, the vast stretches of untouched land—but you might not have heard much about Alaska’s relationship to oil. Through reality TV, you’ve seen quirky people in quirky towns talking to the camera about their quirky lives, and you might have thought, “How charming; I must visit.”

It is charming. About 710,000 people, a few more than the population of Washington, D.C., are flung out across an area more than twice the size of Texas. And although its larger cities have many of the amenities of the Lower 48, it’s also its own country, holding to its own values—where perceptions of class are far less entrenched than in the rest of the nation. It simply doesn’t matter what clothes you wear, what kind of car you drive, how big your house is, where you did or didn’t go to school. Alaska has its version of royalty but no blue bloods. In fact, if blue blood is sensed, and the bearers of it are not kicked out, they are made to feel extremely uncomfortable. In old-time Alaska, if you behaved badly enough, you were given what was called a “blue ticket,” a ride on the first steamer south to the West Coast. The blue ticket had nothing to do with blue blood, but surely some recipients were East Coasters, carrying with them their East Coast attitudes and their East Coast values, which simply don’t transfer.

Idyllic mountains, glaciers, choppy seas foaming with salmon: a place that encourages you to be yourself—the real self, the self without entrapments. It is its own country, and being governor of Alaska is like being president of your own country.

But Alaska can also be ingrained and ingrown, and incestuously corrupt. And perhaps more insidious, petty and small-minded, particularly if you were born and raised here and don’t have a window to the world outside—an understanding of how other states evolved and flourished, from modest ambition and hard work, through the necessary stages of maturation. But Alaska skipped much of that, jumping the line. Nine years after statehood, wildcatters found oil at Prudhoe Bay, and the boom was on, the newfound, easy, and oil-drenched prosperity spawning, among other things, an Alaskan kind of wild ambition, built on the belief you can do anything and you can be anything as long as you have the skills that Alaska requires: the ability to endure the midnight sun and winter darkness, to fend for yourself during the booms and busts, to know how to use tarps and duct tape creatively, as well as how to stay warm, handle a shotgun, and deal with big oil companies to keep it all going. And beyond that, why shouldn’t this translate elsewhere, as some Alaskans who haven’t spent much time outside the state believe? If you can be anything you want to be in Alaska, why not in the rest of the country?

In the early hours of August 29, 2008, when the networks began announcing that Republican presidential candidate John McCain had chosen as his running mate a young, attractive woman, Alaskans were no less shocked than the rest of the country. We’d known the McCain camp considered Governor Sarah Palin, then 44, earlier in 2008, but we thought her hopes were all but dashed by midsummer. Her ratings, once the highest of any governor in the nation, were dipping in the weeks before McCain made his surprise pick. Her combative relationship with fellow Republicans and the lifeblood oil industry of Alaska had started to take a toll. Meanwhile, Palin was enmeshed in the biggest political scandal of her career, dubbed “Troopergate,” a tawdry family feud that’d spilled over into her administration and spawned a state investigation. Troopergate threatened to soil Palin’s two-year Cinderella story. Then, just as the walls were closing in, McCain, who still saw stardom in Palin, plucked her from the wilderness, her timing, as always, impeccable.

Some of Palin’s more forward thinking Alaskan supporters recognized that a few successes in the forty-ninth state don’t translate easily into the credentials usually thought necessary for being president. But many thought otherwise. After all, in Alaska, Bill Allen, who grew up as a migrant fruit picker, could become a political kingmaker. In Alaska, that same person could rub shoulders with leaders of some of the most powerful companies in the world. In Alaska, that person could befriend one of the most powerful men in the country, Senator Ted Stevens. In Alaska, a small-town mayor who went to five colleges and couldn’t name what she read could charm a whole state, become governor, and extract billions of dollars from oil companies, and then just quit her job, without seemingly a second thought.

And why not, when you’re in a state that’s so much about a state of mind? Always in the process of becoming, not yet arriving. A state in a state of adolescence, still very much finding its way.

This book is an attempt to capture that state of mind, as well as trace the political and economic forces that have acted on the fifty-two-year-old state of Alaska, as it continues the struggle to shape its identity. It’s the story of the rise and fall of Ted Stevens and Bill Allen, two of the biggest characters in a state full of big characters. They helped make this state and, each in his own way, helped pave the way for Sarah Palin to come into and then exit the country. It’s the story of Alaska coming of age, all of its big hopes and dreams paid for by oil, a finite resource.

Contact Amanda Coyne at amanda(at)alaskadispatch.com and Tony Hopfinger at tony(at)alaskadispatch.com.