Alaska Gov. running out of time for pipeline deal

By Yereth Rosen

ANCHORAGE, Alaska (Reuters) – Alaska Gov. Frank Murkowski
sees a natural gas pipeline as vital to the state’s financial
future, but his sagging poll numbers could force him from
office before the $20 billion project gets a final go-ahead.

Nearly five months after the Republican governor reached a
contract with the three major Alaska oil producers, the
pipeline to carry natural gas from northern Alaska to the lower
48 U.S. states still does not have legislative approval and the
pact is the object of public scorn.

Murkowski must now head back to the drawing board and
renegotiate portions of the pipeline deal before he faces
former two-term Governor Tony Knowles, the likely Democratic
nominee, in the November general election.

That assumes the governor can make it out of his party’s
primary, where he faces stiff challenges from former Wasilla
Mayor Sarah Palin and former state Sen. John Binkley.

Recent polls show him to be the nation’s second-least
popular governor and lagging both Palin and Binkley in the GOP
primary campaign. But Murkowski will likely try to convince
voters that he deserves reelection because of his gas pipeline
efforts, one Alaska political expert said.

“He is the incumbent and he will make the argument, as he
already has, that previous governors did nothing about the gas
line,” said Jerry McBeath, a political scientist at the
University of Alaska Fairbanks. “I would definitely not write
him off at this point.”

The massive natural gas pipeline is a decades-old dream for
state officials. Murkowski likens the pipeline to the discovery
of the giant Prudhoe Bay oil field and ensuing oil boom nearly
four decades ago.

“It’s going to be that big. In fact, it’s going to be
bigger,” said Murkowski, who served for 22 years in the U.S.
Senate before becoming governor.

But for much of the Alaskan public, the gas pipeline deal
the governor negotiated with ConocoPhillips, BP Plc and Exxon
Mobil Corp. is a bust.

Critics, weighing in at public meetings, in newspapers and
on the airwaves, have been vociferous, complaining that the
Murkowski deal would convert the state into a powerless
subsidiary of the oil companies.

“The decisions about our most important resources will no
longer be made in Juneau. They will be made in London, England,
and in Houston and Irving, Texas,” former Gov. Wally Hickel, a
famously pro-development Republican, said in a recent opinion
column in the Anchorage Daily News. “If this contract is
approved, those who sign it will sign away our future.”

MURKOWSKI CAVES

In response to the criticism, Murkowski announced plans to
renegotiate portions of the deal and present a revision by the
November election.

The idea of a pipeline tapping into the North Slope’s rich
natural gas reserves goes back more than three decades. The
reserve has the potential to provide at least 5 percent of U.S.
gas needs for decades, but it has remained stranded without a
transport system to bring the product to markets.

The Murkowski-negotiated contract proposes that the state
invest in a 20 percent ownership of the pipeline, expected to
cost over $20 billion. It would freeze oil taxes for 30 years
and natural gas taxes for 45 years, but the governor now plans
to shorten the tax freeze period.

Other unpopular points of the deal include granting the
three giant oil companies more favorable terms on oil and gas
leases and a provision preventing the state from taking
pipeline-related disputes to court.

State lawmakers have given the contract a chilly response.
The legislature adjourned a special session last month without
passing any of the bills that the governor wanted to use to
clear the path for his pipeline deal. Murkowski has called for
a second special session to start July 12.

Murkowski’s reelection hopes are tied to the deal.

“I’m not running against people. I’m running for this
contract, which is in the interests of Alaskans,” Murkowski
said at a recent news conference.

The three oil producers have launched campaigns to convince
the public and the legislature to sign off on the contract.

“The green light for Alaska’s future is gas,” said one
recent BP newspaper advertisement. “Gas means go ahead’ for
Alaska’s bright future.”

Still, the pro-contract campaign may be counterproductive
to Murkowski’s cause, said Ivan Moore, an Anchorage pollster
and political consultant. According to Moore’s polling, the
governor’s disapproval rating is 73 percent.

“He’s got the oil industry out there saying it’s a great
deal, and I think that makes people very nervous,” said Moore.
“It’s a little bit like the fox saying, Come on in the
henhouse.”‘