For years, Alaskans have dreamed of the revenue bounty promised by the state's natural gas resources. But until recently, prices were too low to make shipping natural gas to the lower 48 states profitable. Murkowski had negotiated a deal with the Big Three oil companies of Alaska - BP (
BP), ExxonMobil (
XOM,
Fortune 500), and ConocoPhillips (
COP,
Fortune 500), which hold long-term North Slope leases - to finance and build a pipeline to get the 235 trillion cubic feet of natural gas estimated to be buried under the North Slope to market. The deal guaranteed a tax cut for the oil companies, and promised that Alaska wouldn't change those rates for decades.
But when Murkowski brought the proposal to the Alaska statehouse, it was rejected as a sweetheart deal for the oil companies. Several of the governor's negotiators were later indicted, accused of making back-room deals with the industry. Voters subsequently booted Murkowski from office. You don't mess with revenues from oil and gas in Alaska, because it goes into Alaska's Permanent Fund, which sends a check to each resident every year.
Once in office, Palin took an aggressive stance toward the oil companies. Her nickname from high-school basketball, "Sarah Barracuda," was resurrected in the press. Early in her term, she shocked oil lobbyists when she was so bold as to not show up when Exxon CEO Rex Tillerson came to Juneau to meet with her. Palin, after scrapping Murkowski's deal, would not give Big Oil the terms they wanted, yet insisted that the companies still had an obligation under their lease to deliver gas to whatever pipeline Alaska built. She invited the oil companies to place open bids to build a pipeline, but they refused. A bid by TransCanada, North America's largest pipeline builder, was approved by the legislature in August.
Palin also raised taxes on oil companies after Murkowski's previous tax regime produced falling revenues in 2007, despite skyrocketing oil prices. Alaska now has some of the highest resource taxes in the world. Alaska's oil tax revenues are expected to be about $10 billion in 2008, twice those of previous year. BP says about half its oil revenues now go to taxes, when royalty payments to the state are included. Earlier this week, Palin approved gas tax relief for Alaskans, and paid every resident $1,200 to help ease their fuel-price burden.