Stricter Rules, Higher Taxes After Spill : The Honeymoon’s Over for Alaska and Oil Firms

Vic Fischer remembers the lavish reception in the downtown Petroleum Club back in 1969, after Alaska sold its first big oil lease for $900 million.

“The place was mobbed,” said the former state senator. “You couldn’t move.”

Fischer was chatting with a British Petroleum executive and an Eskimo activist when “this great big guy--the eternal Texan with a great big cowboy hat--comes barreling right into our group.”

The stranger shoved the Eskimo, bellowing, “Get out of my way!”

Fischer interceded. “We don’t talk to people that way here,” he said.

The Texan snorted and pushed past. “Well, things are going to be different now,” he growled.

Fischer noticed he was wearing an Exxon name tag.

Twenty years later, after the ruptured tanker Exxon Valdez poured nearly 11 million gallons of heavy crude oil into Prince William Sound, things are different again.

Now Alaska is shoving back.

Stricter anti-pollution measures, higher taxes against the oil giants and a wariness about upcoming elections all suggest that the honeymoon may be over between Alaska and the industry that has become its lifeblood.

“Basically, the difference is that prior to the spill, most Alaskans were willing to give industry the benefit of the doubt when they made pronouncements about development in an environmentally responsible manner,” said Gov. Steve Cowper, a Democrat.

“Now the burden of proof has shifted to the industry,” he said in a telephone interview from Juneau.

“Everyone did become complacent,” said Tim Kelly, Republican president of the 20-seat state Senate. “But after all, the system worked for 10 years. For 10 years, we didn’t have a problem, then one night, some guy just didn’t turn soon enough. It was sheer carelessness.”

Kelly, who came to Alaska from California 15 years ago to work on the pipeline, considers himself part of the Legislature’s pro-oil majority.

Personal Consequences

For Alaska’s estimated 500,000 residents, even the most bureaucratic of decisions translates into uniquely personal consequences when it comes to oil.

Alaska’s black gold--about 25% of the nation’s domestic oil--comes from public land, meaning that every man, woman and child in the state receives an annual dividend check from oil royalties. This winter, the amount is expected to be around $900.

Oil revenues make up approximately 85% of the state budget and have created a $10.5-billion permanent fund--the nest egg for the inevitable day when the wells run dry.

Alaskans pay no state income taxes, and oil has funded everything from schools, highways and cultural complexes to research and development projects.

“There was even one (project) to see whether you could build a washing machine powered by dogs,” recalled Jim Palmer, director of government and public affairs for BP Exploration, the biggest oil producer in Alaska.

In short, Palmer said, “there are only three taxpayers in Alaska--BP, Arco and Exxon.”

Power Over Lawmakers

State Sen. Mike Szymanski, a Democrat whose district includes Valdez, said that Alaska used to have a saying that “the oil industry could do anything it wanted to with the Legislature except refine it.”

Cowper disagrees. “The oil industry has never, at any time, controlled state government,” the governor said. But the industry “has a strong presence in Alaska and deserves to have its views discussed,” he added.

While at times testy, the relationship between oil and Alaska generally has been regarded as symbiotic.

But when Exxon sullied one of the most beautiful and bountiful waterways in the state, the marriage--like the tanker itself--unexpectedly hit the rocks.

Flurry of Bills

Within six weeks, the Legislature passed a flurry of bills that will roughly cost the oil industry an additional $235 million a year in taxes.

The biggest bill, which repealed tax breaks for lucrative Prudhoe Bay oil fields, had been bottled up in Senate committees for several years.

The Democrats were able to force it to the floor after the Exxon Valdez spill, and the measure passed by a single vote, a decision that oil lobbyists are convinced was punishment for the Valdez spill.

Lobbying efforts by the oil industry before the vote were intense, “and in one case bordered on outright bribery,” according to Szymanski.

Offered a Bribe

The senator claimed he was, in effect, offered a cruise boat, which would pay itself off by participating in the $1-billion Valdez clean up. Szymanski declined, voted to repeal the tax breaks and refused to say who made him the boat offer.

Szymanski is one of nine senators up for reelection next year. The governor’s office is also up for grabs; Cowper, by coincidence, announced the day of the spill that he would not run again.

In other spill-related legislation this past session, civil fines for oil spills jumped from $10 per gallon to up to $50 per gallon. The cap on fines was raised from $100 million to $500 million.

A state Office of Oil Spill Coordination was formed, and a volunteer cleanup corps is being mustered in coastal communities.

Scandal Stirs Talk of Reform

More recently, a scandal involving a major oil field service company has stirred talk of possible campaign reforms that could weaken corporate clout in future elections.

Veco Inc., which was the major contractor in the cleanup operation following the Exxon Valdez spill, was accused of channeling $100 donations from employees’ paychecks to five Republican senators in the 1984 elections. Veco was fined $28,000.

Campaign donations are limited to $1,000 per individual or corporation in Alaska. The Veco donations averaged seven times that amount.

A poll commissioned by Arco showed a sharp decline in public support for the industry after the Valdez spill.

While some 80% of those surveyed before the spill had agreed that the oil industry was good for Alaska, only 50% answered yes afterward.

Hank Rosenthal, Arco’s director of government affairs in Alaska, said public opinion has rebounded.

“By and large, the industry is highly regarded in the state,” he said.

Ill Will

But enough ill will festers to prompt the Anchorage Chamber of Commerce to declare September “Oil Employees Appreciation Month.”

“We wanted to remind oil workers that they are welcome in the community,” said chamber Director Duane Heyman.

“People were upset and angry and there were some nasty incidents,” he said. A school janitor told one child whose mother and father work in the industry that he should be ashamed of his parents, Heyman said.

The chamber’s theme is “They Are Us,” borrowed, ironically, from the Pogo comic strip saying “We has met the enemy, and it is us.”

Oil and Alaska form “less of a marriage than a family situation,” Heyman said. “You can’t really get rid of your brothers and sisters whether you want to or not.

“People are going to be more cautious and less trusting,” he said. “Even the die-hard business community never wanted the state destroyed ecologically or aesthetically.”

‘Just Another Wrinkle’

Rosenthal sees “no significant shift” in the relationship between the oil industry and state.

“I wouldn’t say it’s business as usual,” he added, “but this is just another wrinkle, another flash point of contention.”

“Before the oil spill, I saw what I call a convergence in the Legislature,” said Bill Glude, director of the Alaska Environmental Lobby, a coalition of 20 groups.

“In the past, we had a frontier mentality with a Third World economy--we were willing to sell off our resources cheap, our labor cheap and our environment cheap to keep the economy going. We were willing to sacrifice anything,” he said.

Even before the Exxon Valdez spill, legislators were beginning to take “a longer-term look at development, and environmentalists were realizing that we need projects, and that they can be environmentally and socially sound,” Glude said.

The spill seemed to accelerate that process, he said. “I think it will definitely have a lasting effect.”

Hoping to capitalize on any lingering feelings of collective shame, the lobby is drawing up “certificates of absolution” for anyone who tithes 10% of their oil dividend check this year.

Said Glude: “We’re calling it a guilt bond.”

Times researcher Ann Rovin contributed to this story.