Palin Overstates Energy Experience
Monday, October 06, 2008 at 12:01 pm
ANCHORAGE, Alaska — Vice President Dick Cheney is the chief caretaker of national security in the Bush administration. If Gov. Sarah Palin follows in his footsteps, she’ll be angling for energy.
In an early exchange with Sen. Joseph Biden during the vice presidential debate in St. Louis on Thursday, Palin called energy her “area of expertise.” She talked about her deep energy experience throughout the evening.
As governor, Palin said, she faced off with big oil, ultimately raising industry taxes in Alaska. She stated that a $40 billion natural gas pipeline was well underway, thanks to her leadership — referring to a plan to subsidize a Canadian company with a half-billion dollars to explore such a project. These decisions, Palin argued, would allow her to lead the United States to “energy independence” — important not only for the economy, but for national security.
A close examination of Palin’s energy background, however, reveals that the GOP vice presidential candidate has only a relatively short history of studying and working on this issue. Palin served as chairwoman of a state energy board, a position reserved for a private citizen, for 11 months. A year before running for governor, Palin joined a group of other Republicans in TV ads advocating an all-Alaska gas pipeline route, though she eventually didn’t support this in office. As governor, Palin made a series of distinctly populist energy decisions that yielded short-term political gains, rather than policies designed for the long-term benefit of Alaska.
In more than a dozen interviews over the course of a month with Alaska insiders and close observers of state politics, most say Palin does not have a deep understanding of energy policy as she has claimed on the presidential campaign trail. In fact, she’s regularly described, even by those who support her policies, as having little expertise in the area.
There are a number of specific criticisms. Palin’s been accused of taking credit for the work of her predecessor, Gov. Frank Murkowski, in pushing through oil tax policy changes; promoting policies that may not actually further her pro-drilling mantra; hiring a personal friend and college drop-out to head a $40-billion oil revenue fund; calling the gas pipeline project a success, though it may never be built, and ignoring the root causes of the state’s consumer energy problems.
On the campaign trail, Palin has frequently touted her experience in standing up to big oil by supporting a windfall profit tax as an example of her energy experience. Though Palin now praises the plan, which has filled the state’s coffers with billions in additional revenues, she opposed the measure when running for office in 2006.
“I guess I don’t see her, personally, as an expert on the [oil] industry.” said Oliver Scott Goldsmith, economics professor and director of the Institute of Social and Economic Research at the University of Alaska, Anchorage. “I see her as the person who’s taken a hard stance with the [oil] industry — when it’s been politically attractive to do that.”
In fact, a year before Palin pushed for higher taxes for oil companies, her predecessor, Murkowski, Alaska’s U.S. senator for 21 years before serving as governor, had laid the foundation for this hike, by instigating a new tax program.
Though oil prices were rising, Alaska revenues were not following suit because, under the old system, companies paid state taxes based on production rather than profits. The policy was particularly troubling as Alaska’s biggest source of oil, Prudhoe Bay, has been a declining oil field for years. In response, Murkowski pushed through a measure that would tax oil companies based on how much money they made, rather than how much oil they produced.
During the 2006 campaign, Palin was asked by the Anchorage Daily News if she supported Murkowski’s new “net tax” policy. Palin said in a written response that she supported the old “gross” tax plan, along with a credit system that would encourage oil companies to invest in more production.
Once in office, Palin quickly changed her mind. She held a special legislative session that resulted in an increase to the net profits tax rate put in place by Murkowski.
“The tax that she instituted was just a higher rate version that had been put in place the year before she took office,” Goldsmith said. “It was a change in the direction of how taxes are calculated on the industry. I don’t think she can be credited with that. That had been put in place before her time.”
Regardless of the plan’s origins, the move was heralded by many Alaskans, who felt the oil companies were not paying their fair share of taxes. In conversation, Alaskans frequently mention their frustration with the recent Supreme Court decision that slashed the damages Exxon Mobil must pay local fishermen and residents because of the Exxon Valdez spill.
By spring 2008, the same high gas prices responsible for a state budget surplus also meant higher energy bills and gas prices at the pump for Alaskans.
Palin’s response to the high cost of gas was to distribute $1,200 checks to all Alaskans, on top of the $2,000 they received as their annual oil revenue payment. Palin appointed her close friend, Deborah Richter, to head the division that distributes the earnings from a pot of money worth about $40 billion. Richter has one year of college experience.
“It’s a one-time, special return of the vast wealth that Alaska has right now. We’re returning it to the resource owners, the people of Alaska,” Palin said in June. “I am confident the people of Alaska can spend the surplus dollars better than state government is going to spend them.”
The money was distributed to everyone, regardless of income — even children. The Anchorage Daily News editorial board criticized the plan for not targeting residents who needed the most help, including the elderly and those living in rural communities. The board argued the $741 million would be better spent on a renewable energy project, like a local hydropower plant that was recently proposed.
“You want to incentivize people as much as possible to conserve,” Goldsmith said. “I think there’s been less thought given to that than to sort of quick fixes, throwing money at the problem.”
Palin also suspended an 8-cent state gas for a year at the same time the rebate program was approved. The plan was nearly identical to the gas tax holiday plans proposed by Sens. John McCain (R-Ariz.) and Hillary Rodham Clinton (D-N.Y.), which were widely criticized by economists.
The rebate plan was extremely popular with the Alaska public. Palin’s approval rating hovered around 80 percent, making her the most popular governor in the country.
Now that Palin is running for national office, it’s difficult to imagine how her rebate policy would play out across the country. Palin made the energy program successful in her state because the relationship between oil and the economy is so closely tied, unlike the rest of the country or even any other state or region.
“It’s not the sort of thing you can make work on the national level,” said Cliff Groh, an Anchorage attorney who oversaw taxes for the state in the 1990s. “Alaska is so different it’s hard to extrapolate to the other 49 states. I don’t think there’s quite that much money.”
Even Palin’s explicit national policy – or mantra – “drill baby, drill,” is contentious.
During the vice presidential debate, Palin insisted that her experience in Alaska can help the United States move toward energy independence.
Palin implied that her most successful drilling project is well underway in Alaska. “And we’re building a nearly $40 billion natural gas pipeline,” Palin said, “which is North America’s largest and most expensive infrastructure project ever to flow those sources of energy into hungry markets.”
The only problem is: the project is at least a decade away from completion.
For 30 years, Alaska politicians have tried to get a natural gas pipeline built to deliver gas to the rest of the United States. Back in the 1970s, when the oil pipeline was constructed, there were plans to build a similar line for natural gas. However, the companies that would produce the gas have never been convinced they’d get enough of a return on their investment.
Palin brought on several advisers to help create a plan to get a developer to sign on to the project. The advisers have been described by many observers as expert in their field. One, Marty Rutherford, had previously served as a lobbyist for the company that eventually won the bid, TransCanada.
TransCanada won a guarantee of $500 million in public money to explore building the pipeline, with the plan to eventually complete the full project in about 10 years. The company would charge producers a tariff to use it.
Since Palin’s push to get public money for TransCanada, a number of other hiccoughs have come up, including tensions with native peoples in Canada over the path the proposed gas line will take.
An even bigger problem for the project is that no clients have signed on to use the pipeline. In fact, the three largest oil producers in the state, BP, Conocco Phillips and Exxon Mobil, have already said they will not use the pipeline and would prefer to invest in their own.
Mead Treadwell, the chairman of the U.S. Arctic Research Commission, who has spent much of his 30-year career in Alaska focussed on developing the state’s natural resources, says that despite these hurdles, its clear that Palin pushed the project further than any of her predecessors.
“The oil producers tried to stop [the TransCanada proposal] with their own project … but Palin is, in my mind, properly credited with getting both projects rolling,” Treadwell said.
Even Palin’s critics agree that she has done something new.
“For 20 years nothing would have passed the legislature that big oil didn’t want,” said Dan Dickinson, a consultant to the state legislature on energy. “There’s change there, no question about it. But there are problems here to be solved.”
Dickinson, and others, pointed out that it will be years before the success of the pipeline can be determined.
As for what Palin has done so far, Dickinson is skeptical.
“Can I think of anything she did to increase energy independence?” Dickinson asked himself. “No.”
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