Palin Faces Off With Oil Giants / On Energy, Alaskan Stood Tough, Reached Out, Bucked Her Party

Days after she was sworn in as governor, Sarah Palin began to clean house at the Department of Natural Resources. She fired and demoted several top officials and eventually appointed a new director at the agency that oversees the energy companies that provide the state with 85 percent of its revenue.

“Non-negotiator”: The shake-up was an early sign that this newly elected Republican governor was not like her predecessors – she was determined not to cave in to the energy industry.

“She is a non-negotiator. She draws lines in the sand,” said Tim Bradner, an oil-industry analyst for Platt’s Oilgram and the Alaska Journal of Commerce.

Mother governor: Palin, in her inaugural speech, had another way of putting it: “I will unambiguously, steadfastly and doggedly guard the interests of this great state as a mother naturally guards her own.”

Tax bonanza: Since becoming governor in December 2006, Palin has tripled production taxes on oil and seized control of a proposed $30 billion natural-gas pipeline from the oil giants – acts that run counter to traditional Republican tenets.

Confrontation: The Palin administration now stands in a faceoff with oil and gas titans, particularly over control of the proposed gas pipeline. Who blinks first – Palin, or companies such as BP Alaska, ConocoPhillips and ExxonMobil – will determine who controls transport of Alaska’s massive untapped gas resources and future tax revenues. Most analysts predict it won’t be Palin who yields.

Cupcakes for Democrats: “She has been more adversarial with the producers than any previous governor,” said Democratic state Rep. Mike Doogan, whom Palin courted – with a tray of cupcakes – to power her oil program through the legislature this year.

Public hero, party not: Palin’s showdown with the oil companies has earned her enormous public acclaim but alienated her from all but a handful of Republican legislators and forced her to develop working alliances with Democrats. At least 40 Republicans were opposed to the enormous oil-production tax increase crafted in the legislature.

“Cut a deal”: Rep. Mike Hawker, who chairs the state House budget committee, said Palin “cut a deal with the Democratic caucus…. She rode the tide of vindictive populism against the oil and gas industry in this state.”

Control is key: “She came into office with a single focus, and that was to undo everything the previous governor had done, and to do as much as she could to prevent Alaska’s oil producers from having any participation in any development of an Alaska natural gas line,” Hawker said.

Leases at stake: Palin not only wants a greater share for state coffers, she also has told oil companies they must develop the leases they have or give them up – a challenge to producers who may have been waiting for marginal oil and gas fields to become economical before investing millions more in them.

Big Oil’s dilemma: Palin’s hard line on expanding state control has flummoxed oil executives. They have warned that the higher taxes will discourage investment in oil production at a time when Alaska must compete with other fields around the world for oil capital.

Too costly for BP: Steve Rinehart, spokesman for BP Exploration, said the company has decided to place one of its North Slope projects on hold as a result of the tax increase. “It was a bread- and-butter oil-field development and $1 billion worth of work. We decided it doesn’t make sense in the current tax environment,” Rinehart said.

ILLUSTRATION: PHOTO

MEMO: REPUBLICAN NATIONAL CONVENTION.

Originally published by Los Angeles Times.

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