Alaska

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12

The Exxon Valdez Disaster

For years after the pipeline opened, many residents warned that a major oil spill in northern waters was certain to occur, in part because the oil industry refused to employ double-hulled tankers in the Alaska trade. On the night of March 23, 1989, the Exxon Valdez left the Valdez pipeline terminal bound for Long Beach, California. The tanker’s captain, who had a history of alcohol abuse known to his employers, retired to his cabin after the pilot, who had guided the ship through the Valdez Narrows, had left the ship. The third mate, who lacked the U.S. Coast Guard certificate required for controlling vessels in these waters, was alone on the bridge. In the early hours of March 24, far outside the 16 km (10 mi) wide shipping lanes, the tanker struck Bligh Reef, a well-charted hazard, and ran aground. More than 38 million liters (10 million gallons) of crude oil was discharged into Prince William Sound, making this the worst spill in North American history.

Efforts to clean up the mess proved extremely difficult. Exxon Corporation, the owner of the vessel, paid out several billion dollars in cleanup and litigation costs. The Exxon Valdez Oil Spill Trustee Council, made up of state and federal officials, was established to administer the disbursement of over $900 million in civil penalties paid by Exxon to restore the environment. The council has provided funds for the purchase of huge tracts of land in Alaska, often bought from Native Regional Corporations, to be used in expanding public parks, national forests, and wildlife refuges. A portion of the money paid in damages was allocated for scientific research and public education.

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13

Alaska at Century’s End

In the 1990s Alaska faced declining oil revenues; its agriculture remained negligible; despite huge coal reserves, only one coal mine operated in the state, and it exported a modest 881,000 metric tons of coal to South Korea annually. The state government had carefully nursed the wild salmon stocks so they again yielded bountiful harvests. The tourist industry had increased every year since statehood, but the state’s efforts to diversify its economy were not a great success. Democratic governor Tony Knowles, first elected in 1994, pledged to “add value to our resources” while at the same time enhancing the beauty and cleanliness of Alaska.

The twelve Native corporations (plus a 13th, established in 1976 for Natives living outside the state) paid out, from the 1971 cash settlement, an average of about $6,000 each to their shareholders between 1972 and 1981. Meanwhile, as early as 1974 they started to conduct business operations, often as joint ventures with established firms. The results have been mixed. Going into the 1990s, most of the corporations had lost money on direct business operations. All were hurt by the 1986 collapse of world oil prices. Offsetting the losses was income from mineral leases, financial portfolios, and sales of net operating losses. As a group, in their first 20 years of operation, the corporations were significantly less profitable than the average U.S. corporation. Six of them entered the 1990s with few assets and were recovering from heavy losses. In fact, the Natives might have realized a higher return if they had invested the cash settlement in a diversified mutual fund portfolio. Nevertheless, the regional corporations have given the Natives valuable business experience and political clout in the state.

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The 21st Century

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1

Oil and Budget Issues

In the 2000s the Alaskan economy continued to depend heavily on taxes and royalties from oil and natural gas. In 2005 crude oil accounted for 86 percent of the state’s general revenues. Production of oil from the North Slope has declined by nearly half since a peak in 1988, but reductions in production were offset by a rise in the price of oil in the 2000s, allowing the state to accumulate a budget surplus.

Sustaining the revenue from oil and gas has been among the reasons given by the advocates of drilling in the Arctic National Wildlife Refuge (ANWR), which borders the North Slope fields and which is currently protected from development. An estimated 10.4 billion barrels of oil may lie untapped in ANWR. Opening ANWR to drilling had been strongly promoted by Republican governor Frank Murkowski and Republican U.S. senator Ted Stevens. Federal legislation to allow drilling in ANWR has been repeatedly blocked in the U.S. Congress. Debate has focused in part on whether the amount of oil available would justify the expense of development and the potential environmental risks to an undisturbed wilderness area.

Increases in the price of oil were expected to improve state revenues in 2006, but the partial shutdown of a portion of the Prudhoe Bay complex in August and September meant a reduction in the amount of oil sold. BP, the company that operates part of the North Slope oil fields, discovered serious corrosion in part of the pipelines after a small leak, and closed a section at Prudhoe Bay for replacements and repairs. The partial shutdown came after a major leak in the pipeline in March 2006. Up to 267,000 gallons of oil may have spilled before the March leak was detected. The incidents raised questions about the condition of the aging pipeline and about the adequacy of the technologies and monitoring procedures used to test for corrosion and leaks. A Congressional committee investigated BP’s maintenance of its portion of the Alaska pipeline and criticized the company's practices. Environmental groups cited the recent pipeline leaks and shutdown as evidence that drilling in ANWR could pose serious risks to the environment despite improved technology.

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2

Political Corruption and New Governor

The Federal Bureau of Investigation (FBI) began looking into political corruption in Alaska in 2004, although the investigation only became known in 2006 after the bureau served search warrants on the offices of government officials, especially state legislators. The corruption scandal involved money paid illegally by seafood companies and an oilfield services company, and the offices were searched for evidence of financial ties between the legislators or their staff and the companies. A number of state legislators and U.S. senator Ted Stevens were indicted; executives of Veco, the oilfield services company, and a few political lobbyists pled guilty. One of the lobbyists had been chief of staff for Alaska governor Frank Murkowski; he admitted secretly channeling money from Veco for Murkowski’s reelection campaign in 2006.

Dissatisfaction with Murkowski led to a challenge in the 2006 Republican Party primary from Sarah Palin, a social and fiscal conservative who first gained attention as a whistle-blower in a scandal involving state government. Palin emerged as the victor in the primary, and she went on to win the general election. She took office as the state’s first female governor in December 2006. Palin became the Republican Party’s candidate for vice president in 2008 when she was named to the ticket by presidential candidate John McCain.

The History section of this article was contributed by Claus-M. Naske. The remainder of the article was contributed by Donald Francis Lynch.

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