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Alaskans Pin Hopes on Drilling in Refuge

Economy: The proposed oil project would help the state solve mounting fiscal problems.

April 15, 2002|KIM MURPHY | TIMES STAFF WRITER

ANCHORAGE — It's tax day for most Americans, but here in Alaska, nobody is writing a check to the state. There is no state income tax. To the contrary, Alaska sent a $1,850.28 check in October to every man, woman and child in the state.

The annual Permanent Fund bonanza fuels everything from new big-screen TVs in Anchorage to all-night gambling parties in the bush. The windfall is thanks to royalties from the million barrels of oil flowing every day out of Alaska's North Slope.

It is one of the biggest reasons why Alaska--more than President Bush's energy advisors, probably more than the oil companies--wants to see the U.S. Senate open the Arctic National Wildlife Refuge to oil drilling. This week's expected debate is the culmination of a $7-million lobbying campaign in which the state has ferried members of Congress to one of the most remote places on Earth and hired lobbyists to work in a dozen crucial states.

The oil dividends are also a big reason why Alaska has given major tax breaks to oil companies, why Alaska has tolerated the effects of dozens of serious oil spills on its North Slope, why Alaska is moving to roll back some of its permitting regulations on the oil industry.

The boom years are over. Prudhoe Bay, the biggest oil field in North America, is sending only half the amount of oil down the trans-Alaska pipeline that it did during the 1980s. The state, which depends on oil money for more than 80% of its budget, is facing a shortfall of $865 million--nearly half the general fund. Alaska is running through its $2.6-billion oil savings account so fast it will likely run dry within four years.

What to do? Adopt an income tax? Pass a sales tax? Or start pumping more oil? For about 70% of Alaskans polled recently, it's a no-brainer.

In a state that has tried for years to develop a well-rounded economy--tourism has boomed, fishing is suffering but still profitable--it is oil that continues to fuel the state treasury, and oil and gas that remain the cornerstone of Alaskans' planning for their futures.

"It's like cocaine," said Kip Knudson, general manager of Era Aviation, a regional carrier. "Without it, we just don't have the population base nor the property tax base to support the life to which we have become accustomed. We are about as Third World as you can get. We are completely dependent on resource extraction, and we don't know what to do without it."

In recent years, an increasingly vocal lobby of environmental groups--empowered by the spectacular growth in tourism, which depends on Alaska's pristine landscape--has raised questions about the environmental costs of oil development.

The dispute on the local scene goes far beyond the caribou and their calving grounds that have been the focus of the Arctic National Wildlife Refuge debate. While the oil fields at Prudhoe Bay are probably the best-operated in the world, there has been an average of nearly 400 spills a year on the North Slope since 1996, involving more than 1.3 million gallons of diesel, crude oil and hydraulic oil. While most incidents were minor, 79 spills were greater than 1,000 gallons.

Personnel Matters Raise Questions

In the last few weeks, the state Department of Environmental Conservation, which has no full-time inspectors on the North Slope, has been rocked by the March 5 resignation of its oil spill prevention and cleanup supervisor, Susan Harvey, who had been removed from spill oversight duties two months earlier. The department said her workload was too heavy, but co-workers said she had been punished for regulating the oil industry too vigorously.

Three weeks later, an air quality supervisor for the state Department of Natural Resources, Bill MacClarence, was charged with insubordination for complaining outside the chain of command about the method used to measure oil industry air pollution.

"It's an issue the state doesn't want to deal with, because it's pretty sensitive politically. Because it involves a lot of money," MacClarence said.

No one knows how bad the air is on the North Slope, he said, because no one monitors it. "I can tell you, I've been up there, and it's not pleasant," he said. "In the dead of winter, it takes your breath away."

These revelations are providing ammunition for the environmental community in Alaska, which has worked for years to try to persuade the government to wean the state off oil.

"The oil industry's record has been one of chronic, continual spills, leaks, improper disposal of waste, long-term contaminated sites that are still needing to be cleaned up," said Pam Miller, head of Fairbanks-based Arctic Connections, who opposes drilling in the wildlife refuge.

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