The Lingering Influence of Crony Capitalism and Big Oil in Alaskan Politics

In recent posts, I discussed how Governor Palin’s key legislative victory, Alaska’s Clear and Equitable Share (ACES) , has been a transparent, constitutionally-based, pro-growth success. In 2007, Governor Palin signed into law ACES, an oil tax structure that includes incentives for development and investment in capital improvements and ensured that Alaska’s resources would be developed for the maximum benefit for the people of Alaska as per their state constitution. The Alaska constitution states that the state’s natural resources belong to the people of Alaska.

In essence, revenue derived from oil development belongs in part to the people of Alaska who, as owners of the resources, are due their share of the profits as “shareholders”. Beyond this, ACES also replaced Governor Murkowski’s Petroleum Profits Tax (PPT) which was tainted by crony capitalism and corruption and lead to the arrest and conviction of state legislators and Governor Murkowski’s chief-of-staff due to the ties between PPT negotiations and VECO Corp, a oil and gas pipeline company.

ACES has been a success for both the people of Alaska and the oil companies. In a recent Facebook post, Governor Palin highlighted how the revenues of ACES have benefited the people of the Alaska and have made the state financially sound, as it has helped provide a $12 billion state surplus, put billions is savings, pay down underfunded state pension plans, and forward fund education. ACES has proven to be a success for oil companies as well. ACES has contributed to oil job increases, high profits for industry, a record high numbers of oil companies drilling in Alaska, and increased capital development by oil companies spurred by $3 billion of tax incentives. Alaska now has the second best business tax climate in the country, moving up two spots since the passage of ACES.

In the previously referenced Facebook post, Governor Palin brushes off current criticisms of ACES and refers to desires by some to make changes to ACES as “political posturing”. A bill that would alter the ACES tax structure (HB 110) was passed by the House last week. However, this bill does not even remove the progressivity of ACES-the main criticism from detractors. It solely caps the progressivity. In fact, it changes the calculation period for the tax, and it does not account for volatility of oil prices. It is estimated that such a plan could cost the state $100 to $200 million a year. With a constitutionally sound oil taxation structure that has proven to benefit both the Alaskan people and the oil companies, why might Alaskan legislators and Governor Parnell seek to do away with ACES?Are oil companies and crony capitalist Alaskan politicians using the current political climate (and the anti-oil agenda by the current President) as a springboard for altering the oil structure?

A chorus of voices has risen in support of making changes to ACES, but where are these voices coming from? Are these merely echoes of the corruption of the past? Former Republican Alaskan House member, Ray Metcalfe, indicates that this is likely the case.

Metcalfe was instrumental in exposing the impropriety between Alaskan legislators and VECO. He highlights that former VECO spokesman, Paul Jenkins, has been given free rein to write op-eds in the Anchorage Daily News (ADN) in support of making changes to ACES; his most recent ad hominem, snark ladden piece was published Saturday. Prior to the exposure of the VECO scandal, Jenkins wrote paid op-ed advertisements in support of VECO in the ADN before the scandal prompted the ADN to stop running the ads. Paul Laird, former BP spokesman, has also been involved. He was general manager of the Alaska Support Industry Alliance until last July. The Alliance has been pushing hard for changes to ACES as well, including pushing an ad campaign that shared the stories of those supposedly negatively affected by ACES. During the 2010 election cycle Laird donate money to three House members’ campaigns. All three of these legislators voted in favor of the new tax structure last week. Current Alliance General Manager, Rebecca Logan, also donated money to a legislator who supported the change to ACES and to Governor Parnell, who also has pushed for changes to the ACES.

Despite supporting ACES while serving as Lt. Governor, Parnell has pushed for changes to ACES since February of 2010. Governor Parnell (while governing conservatively on budgeting, earmarks, and Obamacare, advocating for the 10th amendment, and supporting Governor Palin’s gasline project, AGIA) has a revolving door career between politics and the oil industry. In the early and mid 1990s, Parnell served in the Alaska House of Representatives and Senate. Following his time in the Senate, Parnell became director of government relations for ConoccoPhillips. He then went to work for Governor Murkowski as the director state division of oil and gas from 2003 to 2005. During part of this period time, Governor Palin had served as an oil and gas commissioner until she encountered unethical behavior from another commissioner and Alaska GOP chair,Randy Ruedrich, and she resigned and lodged a complaint against Ruedrich. Prior to running for Lt. Governor in 2006, Parnell worked at Patton Boggs, a law firm that represented ConoccoPhillips and ExxonMobil in the Exxon Valdex oil spill case.

Additionally, Parnell’s 2010 election donations came from those with ties to special oil interests who may have a stake in any changes made to ACES. One of these donors was Kevin Jardell, who had a managerial role in Governor Murkowski’s administration and has worked as a lobbyist for ExxonMobil (as a side note, that linked article also notes that Governor Palin did not allow lobbyists in her office). Jardell, in addition to Camden Toohey, made the highest individual donations to Governor Parnell allowable by Alaska election laws. Camden Toohey has had a revolving door career as well-working as lobbyist, then in President Bush’s Interior Department, and now working as a legal adviser with Shell. With the EPA red tape tying up Shell’s drilling in the Arctic until 2012, would Shell have a particular interest in potential changes to ACES as federal restrictions are reducing their profits?

Governor Parnell is not the only one with donors who may have a vested interested in changes to ACES and have ties to the corrupt oil taxation processes of the past. Rep. Anna Fairclough’s, who headed up the HB 110 efforts, greatest percentage of 2010 election funding came from energy and natural resource industry including BP and ConoccoPhillips. BP and ConoccoPhillips spoke before the House Resource committee in February to advocate for the proposed changes to ACES. Another proponent of this bill is Rep. Mike Hawker ,who is no friend of Governor Palin and is one of the charter members of the Corrupt B*****s Club (CBC), the name corrupt and boastful legislators gave to themselves because of their embrace of their own corruption. Hawker, in addition to Rep.Chenault, were two legislators who voted for HB 110 and who received tens of thousands in campaign donations from VECO executives. Hawker and Chenault voted for Governor Murkowski’s corruption tainted PPT and against Governor Palin’s ACES. Suffice it to say, the CBC is still kickin’ in Alaska politics, perhaps now with some new inductees.

HB 110, touted by Governor Parnell and supported by a majority of Alaskan House members, does not appropriately address the criticism of ACES’s progressivity, does not deal with the volatility of oil prices, and is likely to reduce state revenue by hundreds of millions of dollars. Beyond that, the proponents of this bill have a history of engaging in crony capitalism, corruption, and unethical behavior. While it is unlikely that Senate version of the bill is unlikely to pass, Governor Parnell supports changes to ACES, and there is the potential for such a bill to be taken up again next year. These are the very things that Governor Palin has fought against her entire political career. Governor Palin has called out the unethical behavior of Alaska GOP chair Randy Ruedrich when she was an oil and gas commissioner. She implemented corruption free ACES project that was passed in a transparent manner without the outside influence of oil companies. She championed the AGIA pipeline project that was negotiated in a transparent manner. She has called out the Obama administration on their pervasive crony capitalism. Should she run for President in the future, there’s no doubt she would continue to strive to rid government of corruption; stop the revolving doors between the private sector, lobbying, and government; and end the behind-closed-doors negotiations that have been pervasive for years in Washington. For Governor Palin, phrases like “walking the walk, not just talking the talk” and ” no more politics as usual” are not platitudes, they’re the way she’s lived her political career.