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In Alaska elections, candidates may change but energy problem remains the same

  • Author: Amanda Coyne
  • Updated: September 27, 2016
  • Published November 4, 2012

FAIRBANKS, Alaska -- HooDoo, a new brewery in the industrial part of Fairbanks, opened its doors to a happy crowd for the first time at the end of October, just a week before Tuesday's election. The mammoth, greater Fairbanks borough is the second-most populous area in Alaska with about 100,000 people, but only a little more than 30,000 reside in the city limits, so the community still carries a small-town feel. Nearly everyone seemed to know someone at the brewery opening.

It was Halloween, and most people opted for normal Fairbanks attire, voting for the warmth of Carhartts and Xtratufs, with lots of flannel and stocking caps. A few people, though, seemed to be dressed as victims of horrible, mysterious crimes that taxed the imagination. Someone dressed as a secret serviceman. The best costume, however, was the man wearing an impeccable suit. People whistled under their breaths and looked appreciatively at his ensemble.

"I'm pretending I'm a businessman," he said and laughed. Turns out, he was a businessman and he'd just come from work to join a festive evening, in a place that very much needs some festivities.

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Times haven't been looking too hot for chilly Fairbanks lately. For the past few years, businesses and the people who own them have been packing up and heading south. They're tired of living in this Tantalian torment, where residents of the richest U.S. state living just a few hundred miles from the biggest energy fields in North America pay the highest energy prices in the country. The situation has become so bad here that devolution seems to have taken hold: Many have decided to return to heating with wood. (One HooDoo Brewing Co. patron predicted that soon they'll take to pounding rocks together to start fires.)

Even before the industrial-scale wood burning started, Fairbanks was famous for the winter "ice fog" that forms when crystals of ice are trapped in the cold air that fills the valley between the low hills surrounding the city. Now residents are subject to smoky ice fog and fights over wood-stove bans. Those citing health problems want the wood-burning stopped. Those citing financial burdens want it to continue.

Fights abound, and like nearly every problem plaguing this city, and increasingly across Alaska as well, no one seems to have a solution. Or if they do, others have a different solution, and when there are two solutions, there's bound to be three. Cliques form, agencies are created, state jobs and political careers fall on the line, and nothing gets done.

It's said that when California sneezes, the rest of the country catches a cold. It can also be said that when Fairbanks gets a chill, the rest of Alaska should keep their down comforters on hand.

Indeed, much of Alaska -- a state that if in full production, has enough energy to nearly power the whole country -- is also being crippled by high energy prices. In Anchorage, the state's largest city, there's talk of having to import natural gas from Canada. Iran, too, has to import energy, but Iran has more excuses than does Alaska.

Many politicians are trying to focus on this issue, particularly during this election cycle when all but one legislative seat is up grabs in Tuesday's election, and especially in Fairbanks. But it's complicated and although candidates are trying to boil it down, it does not easily lend itself to quick talking points without having to really stretch the truth.

For this reason, among others, so much of the heat in this campaign is centered on state oil taxes and who is for or against Gov. Sean Parnell's plan to give the oil companies up to $2 billion a year in tax breaks. Parnell and others calling for "oil tax reform" argue it will spur industry to ramp up oil production and help replenish the 800-mile trans-Alaska pipeline, as the state's umbilical cord is presently running at about two-thirds empty.

What isn't being talked about much, however, is what those who are for or against the oil tax break will do with the money, or what the next phase is in Alaska's future if oil production ramps up. Because of the steep tax on oil production enacted by former, half-term Gov. Sarah Palin, state coffers are bulging. Alaska has more than $60 billion in various accounts. The money sits there gathering dust as a growing number of Alaskans, in Fairbanks and elsewhere, are choosing between groceries and heating fuel.

On to the races

You can excuse Fairbanksans for being particularly cynical this election, when hundreds of thousands of dollars are being spent here now by 11 Interior candidates and their surrogates who want to influence the voters. Mailboxes are stuffed with political fliers. Radio and TV ads play endlessly, promising, among other things, that this candidate or that one will bring cheap energy to Fairbanks.

This despite the fact the issue seems mostly out of state lawmakers' hands and in the paws of local government and three dueling companies -- Fairbanks Natural Gas, Flint Hills Resources and Golden Valley Electric Association. Though there's recent alignment on a plan to create a public utility to truck natural gas from the North Slope south to Fairbanks, that plan is still far from a given. And even then, relief isn't expected for years for most residents.

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The businessman at HooDoo was Mark Simpson. He's a money manager for Denali Capital Management, a small, homegrown firm. He is as frustrated as anyone in Fairbanks. "All everyone talks about is oil taxes while we're paying 240 percent more for heat than the national average. This is what everyone needs to talk about," he said and pointed up to the lights.

"As soon as the energy situation is fixed, we can talk about oil taxes."

Indeed, as the years go by, as the price of fuel continues to rise, and as Fairbanks struggles with the crippling temperatures that drop degree by degree toward 50-below almost every winter, the state's collective brain trust seems to have all but abandoned the nuts and bolts of fixing real problems in real time.

Since 1968, when ARCO struck it big in Prudhoe, Alaskans have been so mired in the oil tax debate that it appears they've forgotten those taxes were supposed to be the state's ticket to independence. And since Gov. Frank Murkowski re-wrote the tax structure in 2006, and then Palin road into office and re-wrote it again, in 2007, the chatter has turned into something out of Babel.

For years, state leaders have been focused on marginal versus effective tax rates, exploration versus production credits, profits versus net, oil field life cycles and the different gradations of carbons in hydrocarbons. And then, of course, there's tax "progressivity," a word that has become as familiar to Alaskans as a "chad" was to Floridians during the disputed presidential election in 2000. (Aspiring science-fiction writers take note: As your setting, choose a state with some of the biggest energy reserves in the nation. The plot: corporate domination of those reserves. Your antagonist: a mastermind of rhetoric who introduces a benign sounding, small word whose meaning no one really understands but conjurers chai and chi, a word that will eventually begin to stand for ideology and party affiliation, a word that ultimately turns citizens against each other while everyone freezes to death in the dark.)

The Races

State House races in Fairbanks are interesting and hard fought, but it's likely that no matter what happens, there won't be a big change in the House leadership. So the big battles here, as in the rest of the state, focus on Senate races and the fabled and much maligned "bipartisan coalition," the fate of which rests on how many of the nine Democratic senators up for reelection win. The fate of the oil tax issue rests also on that coalition.

In Anchorage, Democratic incumbents Sens. Bill Wielechowski and Hollis French are holding their own, if not favored. The Senate races are tighter in Fairbanks.

Because of redistricting, in one district two incumbent senators are squaring off: Democrat Joe Thomas and Republican John Coghill. Both are nice, hometown men. Coghill, at least, is upset at having to run against Thomas.

"When I saw who they had redistricted me against, I was like, oh man. Thomas is a good man," Coghill said. "We've done good things together for Fairbanks."

Whatever their history might have been, Thomas has come out in this race punching. Coghill is doing his best to punch back, though his blows don't seem to be landing as hard. His main issue is abortion or, in his words, "family issues," but that hasn't made its way much into the discussion. Oil taxes are also right up there for him. And on that one, he appears to be losing.

This partly has to do with the cost of energy in Fairbanks. People worried about $1,100-monthly heating bills find it hard to feel too much sympathy for multinational oil corporations that are making huge profits on a commodity that many Alaskans like to believe belongs to them, even if it resides deep in the ground and is sometimes hard and costly to develop. Coghill said it's an uphill battle against those who chant, "It's our oil."

"It's hard to compete with them," he said. "How do you counter the phrase 'a $2 billion giveaway'?"

Even if there's been no real vision of what to do with that $2 billion -- except to keep it in savings, where everyone can fight over what to do with it -- it's not easy to suggest alternatives, as he's discovered. Coghill says he made and scrapped no less than three commercials trying to defend his belief that lower oil taxes will spur investment. The people on whom he tested the ads were left with more questions than answers, he said.

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Still, Coghill does have some things going for him. He holds huge name recognition, with family roots running deep back to the Interior's pioneer days. Although word is that Thomas is surging, the money's on Coghill to win. If he loses, he could be joining the Fairbanks exodus, for at least part of the year. There's an orphanage in Uganda he's helped support and that needs him, he said.

Coghill's giving it up to God. "If I'm reelected, I'll do God's work in Juneau. If I'm not, I'll do it in Africa."

The other big state race in Fairbanks pits Democrat Sen. Joe Paskvan against another staunch Christian Republican -- Pete Kelly, who is said not to be quite as kind as Coghill.

Kelly is a former lawmaker-turned University of Alaska lobbyist-turned Parnell special assistant. When he was a lawmaker, he said things like, "This legislation will not end juvenile crime. It cannot protect kids from a popular culture that replaces the virtues of honor, bravery and chastity with the anemic values of open-mindedness, diversity and Earth worship." And, "Jesus said we were to give to the poor, not to take other people's money and give it to them."

In 2001, the Anchorage Daily News charged that Kelly and his allies "could use a civics course" because they "displayed a shocking ignorance of the basic principles of American and Alaska constitutional government." Nonetheless, Parnell still found it fit to give Kelly a state job, doing what, nobody really knows. Kelly has been getting plenty of help from the Alaska Republican Party, but not all of it's been helpful. One of his mailers had a typo in the word "Fairbanks."

Meantime, Paskvan's being heavily supported by the unions and has been using that to play to the many populists in Fairbanks. One of Paskvan's mottos is "I'm not for sale." In speeches, he invokes the state constitution and how it was written to ward off exploitation by Outsiders.

It's a message, delivered by a third-generation Alaskan, with salt and pepper hair and a congenial smile, a rally call that appears to be taking hold.

Resource curse?

Jim Dodson, head of the Fairbanks Economic Development Corp. -- which these days must make him feel like a hockey coach in Cuba might feel -- has watched these races closely. He's familiar with the fights and the talking points on oil taxes. But he is more concerned about keeping his city alive. A lifetime Fairbanksan, a former member of the U.S. Army Special Forces in Vietnam, a businessman, a former government worker, he faces a daunting task. But Dodson is one of those many highly intelligent people you meet in Alaska who spend their days sitting in small offices, wondering how it's come to this.

He remembers when Alaska promised itself that if it cobbled together some money, it would use that wealth to better its citizens. Alaska, he remembers, was going to be the best state in the nation, with the best schools, the best political system, the best minds, the envy of the rest of the country.

And then came oil.

Alaska became rich beyond its dreams, and the resource curse -- the "Dutch disease," as Dodson put it -- struck. Alaskans began to forget how to struggle, how to fight to build an economy. Instead of a united effort to make the state better, Alaska is now geared toward infighting and political jockeying. It now has some of the worst schools, most violent neighborhoods, the most dysfunctional communities in the country, and 90 percent of its government is funded by the oil industry.

Were that not enough, the citizens of Fairbanks are back to heating their homes with wood like it's the early 1900s.

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Dodson is a systems guy, and as such, puts the blame on a lack of leadership from the top, on not taking charge of the state's resources, of not having a vision for how those resources should be developed and spent, for Parnell for dropping a huge, complex bill on a legislature that simply doesn't have the ability to deal with.

In the office of the Fairbanks Economic Development Corp. hangs a full-page advertisement that ran in the Fairbanks Daily News-Miner in 1958, promising North Slope natural gas to Fairbanks residents. "It's fortunate with the advent of statehood, the economic boost accruing from the use of clean and efficient natural gas, will compliment other advantages gained from this new political condition."

Change the date and the reference to statehood, and the same ad could run in the newspaper today.

Political backbone

Winter comes early in Fairbanks. Late last week, with temperatures in the single digits, a group of 30 or so hardy residents turned out for a rally to support the two Joes, incumbent Sens. Thomas and Paskvan. Signs read "It's our oil" and "Not for sale." The rally was organized by a loose affiliation calling itself "Backbone." The group traces its roots back to a 1999 coalition of former Govs. Wally Hickel and Jay Hammond, state constitution framer Vic Fischer, former Senate Presidents Chancy Croft and Rick Halford, and business and labor leaders who were protesting BP's takeover of ARCO.

White puffs of hot breath swirled into the cold air to punctuate speeches about "our oil" not "being for sale," and Parnell's plan for a $2 billion dollar "giveaway." The crowed shivered. Paskvan invoked the late and beloved U.S. Sen. Bob Bartlett and the famous speech he gave at the Alaska Constitutional Convention in 1955. Constitutional delegates were meeting just down the street at the University of Alaska Fairbanks when Bartlett delivered these words:

Development must not be confused with exploitation at this time. The financial welfare of the future state and the well being of its present and unborn citizens depend upon the wise administration and oversight of these developmental activities.

"The danger of exploitation is no less now than it was when Bartlett gave his speech" Paskvan told the crowd, which then marched down the street for a half-block, and then marched back. It was cold, after all, and those wood-heated cabins were waiting.

Pay up or freeze

At noon, the sun was still relatively high in the sky, but it was aloof and chilly and everyone knew every day it was getting closer to packing up its rays and calling it quits, ceding the land fully to the spirits of the God-awful winter. Soon the mercury will tumble. Soon the woodsmoke will freeze, diesel will turn to jelly, soft rubber tires will become frozen rocks, and uncovered noses will turn black with frostbite. And no doubt a Fairbanksan or two will lose a finger or a toe to the cold.

By then, though, the legislative races that have absorbed so much of this city's collective energy will be over. Mailboxes will no longer be stuffed to the brim with campaign ads. Citizens won't be barraged with promises every time they turn on the radio or the television or sign on to Facebook.

People will spend their days in a hazy winter twilight, gathering wood for the stove, working to pay the exorbitant electric bills, shaking their head in wonder at how it came to be that they can have a pipeline in their backyard carrying roughly 600,000 barrels of oil a day while they worry how to pay the energy bill and still have enough cash left over for food.

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By January, the successful politicians will be gone, too. They'll be in the warmer, rainforest environs of Juneau. Some will be hanging out with the oil lobbyists and executives, who will find them, for those few months, the most interesting people they have ever met. Others will face threats from the oil companies and their allies that if they don't get the tax break they want -- if progressivity isn't altered -- they will just have to abandon the state as too costly a place to operate, leaving Alaska cold and shivering.

Gov. Parnell is already in the thick of preparing another bill to lower oil taxes; another hulking bill that will take up nearly all the time and energy of the next legislative session.

The issue has become so complex legislators need consultants to explain it. They flood into the capital city along with oil executives from Texas and Oklahoma. Two-billion dollars is a lot of money, even to multinational corporations that earn more than $5 billion in profit a year of Alaska's oil. And the symbolism is probably worth more: The Alaska example is being used across the globe as a cautionary tale of what happens to an oil province when it overly taxes those who extract the crude the state depends on.

Collectively, the executives and the consultants will spend hour upon hour in conference committees, going over charts and Power Points and revenue numbers that boggle even the best minds. Countless hours of meetings will be held. Threats will be made, arms twisted. Wine bottles will be uncorked.

Deals will be worked out. Maybe not in this upcoming session, but eventually a deal will be struck, no matter who wins the races.

Eventually, unless something radical happens -- like the citizens, under a strong leader, truly take ownership of the oil and refuse to settle for less than that ownership demands -- the oil companies will get what they want, or something close, something they can live with. They'll get it because the great unspoken:

It's increasingly looking like Alaskans don't have a choice; like whatever choice they once had, they gave up long ago, when they saw the energy curse coming and decided it was easier to fight each other and not the curse.

Now it might have come to this: either roll over or freeze.

Contact Amanda Coyne at amanda(at)

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