In the clinical terminology of political science, Alaska is a classic “petrostate.” That is, its political system is geared toward the maximization of oil “rents”–royalties and other income derived from energy firms–to the neglect of all other economic activities. Such polities have an inherent tendency toward corruption because of the close ties that naturally develop between government officials and energy executives and because oil revenues replace taxation as a source of revenue (Alaska has no state income tax), insulating officials from the scrutiny of taxpayers. Ever since the discovery of oil in the North Slope, Alaska’s GOP leadership has largely behaved in this fashion. And while Governor Sarah Palin has made some commendable efforts to dilute her party’s ties to Big Oil, she is no less a practitioner of petrostate politics than her predecessors.
To put things in perspective: in 2007 Alaska produced approximately 719,000 barrels of oil per day. That puts it in the same ballpark as Egypt (710,000), Oman (718,000) and Malaysia (755,000). Of these, Oman is particularly interesting as a parallel. According to the Energy Department, “Oman’s economy is heavily reliant on oil revenues, which account for about 75 percent of the country’s export earnings”–an assessment that would describe Alaska nicely if it were an independent nation. Equally revealing, oil rents provide 42 percent of Alaska’s annual revenue, more than any other source. If lavish federal contributions were discounted (Alaska has one of the nation’s highest per capita rates of federal subsidies), oil’s share of state revenue would jump to 53 percent–about the same as in Venezuela.
Since taking office as governor in 2006, Palin has devoted herself to a single overarching objective: increasing Alaska’s income from oil and gas. To this end, she has pushed through two signal pieces of legislation: the creation of Alaska’s Clear and Equitable Share (ACES) tax on oil and natural gas production, and the Alaska Gasline Inducement Act (AGIA). The ACES tax replaced the Petroleum Profits Tax, which had been instituted by her now-disgraced Republican predecessor, Frank Murkowski, and was widely viewed as being excessively favorable to the oil companies. Under ACES the companies are taxed at a higher rate, and a progressive surcharge of 0.4 percent is added for every dollar the net profit per barrel exceeds $30. But–and this is a big but–the companies receive an increased tax credit for some new investments in exploration and infrastructure improvements.
The AGIA proposal, which has received more national attention, is intended to facilitate construction of a natural gas pipeline from Alaska’s North Slope to Canada and eventually the Lower 48. Under the bill, Alaska will provide incentives, including a $500 million handout, to any company willing to build the $40 billion-plus conduit. (The $500 million will be used to help defray the costs of gaining regulatory approval, clearing environmental hurdles and so forth.) In August the Alaska Senate approved a state license for TransCanada Corporation of Calgary to pursue federal certification for construction of a 1,715-mile pipeline from the North Slope to Canada’s Alberta Gas Hub. Palin said at the GOP convention that the pipeline will “help lead America to energy independence,” but it’s clear from her advocacy of the AGIA and TransCanada’s application that her principal goal was to increase Alaska’s income from gas production. (The fact that the proposed pipeline will end in Canada, not the United States, does not seem to have attracted any notice.)
The question thus arises: how does Palin’s experience as a maestro of petropolitics bear on her candidacy for vice president? To begin with, it should be clear that she has nothing in common with the leaders of any other state. Although it is true that Texas produces more oil per day than Alaska, Texas is no longer a petrostate, since its economy has become so much more diversified. Alaska is virtually alone in possessing a large (oil-supplied) state budget surplus–now about $5 billion–at a time when most states and the federal government are facing massive deficits and citizen groups are rising up in fury at the prospect of budget cuts. Palin is simply unqualified to deal with the demanding economic realities of any nation that is not a petrostate.
Second, Palin’s only real nitty-gritty legislative experience is in measures aimed at expanding oil and gas production, to the virtual exclusion of other factors, including the environment. Although critical of the cozy ties between her GOP predecessors and Big Oil, Palin, like them, views Alaska as an unlimited source of raw materials to be exploited for maximum economic benefit, much like the leaders of comparable petrostates (Kuwait, Nigeria and Venezuela). She says she cares about the environment, but her support for drilling in ANWR and her eagerness to push the AGIA pipeline through forests in Alaska and the Yukon suggest otherwise. We can only assume that, as veep, she would favor similar policies in the Lower 48, entailing more drilling, digging and pipe-laying in environmentally sensitive areas.
Finally, much like the leaders of other petrostates that depend on oil sales to fill government coffers, Palin is leery of efforts to promote renewable sources of energy and other petroleum alternatives–the exact opposite of running mate John McCain’s proclaimed objective and that of most members of Congress. At a meeting of the National Governors Association in February, Palin argued against providing subsidies for alternative energy sources, claiming that domestic sources of oil and gas–many located in Alaska–can satisfy the nation’s needs for a long time to come. “The conventional resources we have can fill the gap between now and when new technologies become economically competitive and don’t require subsidies,” she asserted. When pressed by a reporter for Oil & Gas Journal she went further, denouncing government support for renewable energy. “I just don’t want things to get out of hand with incentives for renewables, particularly since they imply subsidies, while ignoring fuels we already have on hand.” Surely, at this moment in history–with global oil output facing imminent decline and global warming an inescapable reality–anyone opposed to government support of renewable energy should be considered stupendously ill equipped for national office.