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IN THE NEWS
With 16% of the nation's land area and 0.22% of the nation's population, Alaska is America in the Arctic, a state created by a federal government which it now often resents and an individualistic society that has responded to its unique situation in creative ways that commend themselves to the attention of what Alaskans call the Lower 48 or, more simply, Outside. Alaska would not be American at all but for the expansive dream of Secretary of State William Seward, who took advantage of a fleeting opportunity to create an American Pacific empire by purchasing it from Russia in 1867 for $7.2 million. The Alaska Territory owed most of its early growth to decisions made by the federal government. It started growing feverishly with the Klondike gold rush in 1897, just as William McKinley reaffirmed the gold standard. Anchorage, the major city here, had its beginnings in 1913 as the chief worksite of the federal government's Alaska Railroad. The Alcan Highway, connecting Alaska to the Lower 48, was built by the Army in the grim war days of 1942, when the Aleutian island of Attu was held by the Japanese, the only part of the United States occupied by a foreign enemy since the War of 1812. During the Cold War, Alaska was the only state abutting the Soviet Union, across the Bering Strait and over the North Pole. Even today Alaska remains militarily strategic, and the military remains a major presence at Fort Richardson and Elmendorf Air Force Base near Anchorage and Fort Wainwright and Eielson Air Force Base near Fairbanks, and the Pentagon in 2004 installed interceptors for the national missile defense system at Fort Greely 100 miles southeast. Alaska's giant size remains hard for Americans to comprehend: If superimposed on the Lower 48, it would stretch from Florida to southern California to Lake Superior. One-third of Alaskans have no access to the state's roads and are reachable only by boat or airplane; Alaska has, per capita, six times the number of pilots and 14 times the number of airplanes as the rest of the nation, and 663 registered airports. Yet only 655,000 of 293.7 million Americans live here, more than 40% in the Anchorage area, the rest in Fairbanks in the interior and Juneau in the Panhandle and scattered in small towns and Native settlements over millions of acres of stunning scenery and bleak tundra.
Statehood was won in 1959, after a valiant campaign. But statehood did not end federal decision-making power over Alaska--or the widespread resentment of it. Alaska's economy at statehood depended on fishing, oil production in Cook Inlet around Anchorage and the military--all federally regulated or controlled. Less than a decade later, however, Alaska's economy and public life were reshaped by the discovery of North Slope oil. It began suddenly, accidentally: On the day after Christmas 1967, at Prudhoe Bay on the Arctic coast, an undulating roar as loud as four jumbo jets directly overhead drew a crowd of 40 men, heavily clothed against the 30-below weather, to an oil rig. Suddenly a natural gas flare shot 30 feet straight up: This was the great 12 billion barrel North Slope oil field. Earlier oil companies had drilled seven dry wells on Prudhoe Bay, and Arco chief executive Robert Anderson wouldn't have ordered this last try, except that he had a drilling rig nearby. This was the greatest oil strike ever in the United States and the beginning of much of today's Alaska.
Finding oil in Prudhoe Bay was something like finding it on the moon. It was not clear in 1967 who owned the oil or how it could be taken out. The Statehood Act of 1959 provided for the state to choose its own public lands, but only after settling Native land claims. Congress, not Alaska, settled such claims in the 1971 Alaska Native Claims Act which set up 12 regional and 220 village Native corporations, gave them $962 million and time to select their own 44 million acres, and ended the Interior Department's freeze that enabled the state to stake claims to mineral-rich acreage. The only feasible way to get the oil out--the Arctic Ocean ice only breaks up in late July for six weeks--was a pipeline. But that was opposed by environmentalists for fear it would destroy the delicate permafrost and interfere with caribou migrations. Development-minded Alaskans got a pipeline bill through Congress in 1973, by just a one-vote margin in the Senate, but the pipeline had to be built on stilts and wasn't opened until 1977, and Congress banned oil exports to Japan and other obvious East Asian markets. Then in 1980, after brilliant lobbying by environmentalists, Congress passed--over the objections of Alaska's two senators and in the face of tears from its Congressman-at-Large Don Young--the Alaska Lands Act, which set aside 159 million acres as national parks, national monuments or wilderness: One-third of the state was protected from development. Much, if not all, of this was for the best. The pipeline came on line just as oil prices were approaching their peak, thus generating maximum revenues to the state, which gets 100% of the royalties. The environment was protected much better than it would have been without the environmentalists' safeguards--while there have been complaints about pipeline and oil field safety, operations are good by industrial standards. The caribou herd has risen from 3,000 animals to 32,000 and the Natives got more autonomy than the non-Native majority of Alaskans would have given them. With oil providing more than 80% of its revenue, the state abolished its income tax in 1980 and created a low-tax regime that has helped Alaska to grow even as oil revenues and military spending declined.
Wisely, Alaska did not squander its windfall. In 1976, Governor Jay Hammond persuaded the legislature to establish a Permanent Fund for most of the oil revenues. Each year it presents every one-year resident with a dividend of 20% of the average of profits for the preceding five years--$1,107 in 2003, $919 in 2004. More important, even though $13 billion has been paid in dividends, most of the money has been invested. The North Slope is producing less than half as much oil as in the late 1980s, but the Permanent Fund was worth $27.4 billion in 2004, and most of its income now comes from investments rather than oil. Some speculated that Alaska voters would pressure legislators for bigger payouts. But Alaskans have acted like investors: They want their dividend checks not just now, but in the future. In 1999, after Governor Tony Knowles proposed tapping the Permanent Fund, voters rejected the change by an 83%-17% margin. In spring 2004, Governor Frank Murkowski urged the legislature to use earnings from the Permanent Fund to balance the budget. But the state Senate balked, and it turned out that sharply rising oil prices pushed the state's budget into surplus.
Similarly, the 12 regional Native Corporations created by the Alaska Native Claims Act have proved to be successful, not just in providing income for Natives, but in helping them preserve Native traditions and adapt to Alaska's market economy at their own pace. On Indian reservations in the Lower 48, all land is held by the tribe and supervised by the government; elections held on the political model have produced a winner-take-all politics that is too often corrupt and incapable of pursuing long-range strategies. The corporate model, on the other hand, allows the Alaska Native corporations' management more continuity in office--though some have made bad decisions and been thrown out. But the cumulative voting method, by which a minority can get a seat on the board, has produced management that is sensitive to all opinions. Huge windfalls are avoided because 70% of profits from mineral sales are shared by all corporations. But the corporation itself, not a distant federal bureaucracy, is left with the choice of how much ancestral land to retain and how much to exploit economically. Individual Natives can make the transition from their traditional communal economy, living on subsistence fishing and hunting, or make their way in the market economy; 43% of Natives now live in Anchorage, Fairbanks, Juneau, Matanuska-Susitna or the Kenai Peninsula. The 12 regional Native corporations and the 30 village corporations in 2001 had revenues of $2.9 billion, paid $52.1 million in dividends, had payrolls of $434 million and gave $9.3 million to charities and $4.1 million to scholarships. Under federal law Native corporations are eligible for sole-source Pentagon contracts with no upper limit, and two corporations now contract to provide civilian guards for domestic military installations.
Not all is rosy here. Native villages in the bush have essentially no private sector economy, and rates of alcoholism and suicide remain high. In the solemn mien so typical of Natives, one may be seeing the memory of great kill-offs by disease, which struck Native villages as recently as the 1920s. Native subsistence hunting was threatened by a 1989 state Supreme Court decision that struck down the subsistence preference for fishing and hunting by rural residents. The legislature refused to pass a constitutional amendment allowing it, and in 1999 the Interior Department took over regulation of fishing (it has regulated hunting since 1990) and shut down commercial and sports fishing for a time to protect Natives' subsistence. But in the long run, Natives have made great progress. A May 2004 report by Native organizations showed dramatic improvements since statehood in Native Alaskans' incomes, health and education levels. The credit for that is widely shared; as Julie Kitka of the Alaska Federation of Natives said, "It's fascinating to see a lot of the success that's occurred, based on lots of people's actions--Congress, the state, Alaskans, Natives, corporations, tribes." Alaska's senior Senator Ted Stevens put in a January 2004 appropriation a provision to set up a commission to revise the legal and law enforcement system in rural Alaska and to create an economic development commission to promote private sector investment there. This would be done through Stevens's Denali Commission, which has worked to improve public health standards in the bush.
Still the federal government continues to make decisions that shape Alaska's economy--and not always Alaska's way, despite the clout of Stevens, senator since 1968, and Don Young, Congressman-at-Large since 1973. They have failed to get approval of oil drilling in a small sliver of the Arctic National Wildlife Refuge--an area the size of Washington-area Dulles International Airport in an area the size of Delaware--although it was on the verge of being approved in 1989 when the Exxon Valdez ran aground in Prince William Sound in March 1989. Prospects for approval looked better in 2005 but Governor Frank Murkowski warned that "people should not be sharpening drill bits" yet. Environmental groups have made ANWR oil drilling one of their main issues in their direct-mail fundraising even though ANWR is estimated to have between 9 and 16 billion barrels of oil, the most by far in any untapped U.S. oil field. George W. Bush backed it in his 2000 presidential campaign and put it into his energy bill; it passed the House, with strong support from the Teamsters Union, by a 223-206 margin in August 2001, but was blocked in the Senate in 2002 and again in 2003.
In the meantime, they had unexpected success in 2004 on the proposal for a natural gas pipeline. For years gas has been burned off at the wellhead or pumped back into the ground in the North Slope--there is an estimated 30 trillion cubic feet in Prudhoe Bay and another 70 trillion cubic feet elsewhere on the Slope. The long-unpassed energy bill included provisions for a federal loan guarantee of up to 80% of the cost of a gas pipeline, but as it continued to languish Stevens in October 2004 inserted the proposal into the unstoppable military construction appropriation. He omitted the price floor provision guaranteeing the oil companies a minimum price for their gas, but did provide rapid permit approval and avoidance of judicial review; he directed that the pipeline be built across Alaska and not, as some have proposed, east into the Canadian Arctic. Governor Murkowski, Stevens's colleague in the Senate from 1981 to 2002, accepted two proposals--one from the three North Slope oil companies, another from a pipeline company with Native corporations involved--to build the pipeline, and he urged that the state take an equity interest in the project as well. In February 2005 the Federal Energy Regulatory Commission issued standards requiring fair bidding opportunities for small and large companies seeking pipeline access to encourage more exploration of possible gas supplies. Before construction begins, the state must contract with a developer and Canadian regulators will need to act if the pipeline is to go from southern Alaska into Canada. But with oil and natural gas prices high, the pipeline suddenly seemed a real possibility.
Alaska remains heavily dependent on oil and on the federal government, so there is some reason for unease about its economy. Fishing, its largest employer, is a troubled industry. Tourism, the number two employer, is on the rise, with some 1.4 million tourists spending $2 billion a year--some arrive on cruise ships and others head to Denali National Park and Mount McKinley. Tourism is the mainstay of the old Russian-settled capital of Sitka and of the private sector economy in Juneau. Another spur is the air freight business. The Anchorage airport, near the top of the world, is seven hours from New York, Tokyo and London, and is a major cargo transfer point for UPS, FedEx, Northwest Airlines and the U.S. Postal Service. More all-cargo, wide-bodied aircraft move through Anchorage International than any other U.S. airport. The state receives hundreds of millions of dollars every year in "Stevens money"-- construction, highway, sewer and harbor projects shepherded by Senator Stevens, chairman of the Appropriations Committee in 1997-2001 and 2003-05 and the most senior Republican in the Senate. Don Young, chairman of the Infrastructure Committee since 2001, sponsors projects as well, including two huge proposed bridges, one to tiny Ketchikan and the other from Anchorage to the largely uninhabited land two miles across Knik Arm. Yet for all its federal help, this is a low-tax, low-regulation state, which has been attracting independent-spirited, entrepreneurial-minded young families; Alaska has the nation's third-youngest population, although its small elderly population is growing (up from 4% to 6% in the 1990s). Big institutions don't run things here: Unions, politically pivotal 25 years ago, are much less so now, and the oil companies, while not unpopular, weren't able to stop higher state oil taxes. The biggest private employers now are not the oil companies, but Safeway and Providence Alaska Medical Center: This is an economy that buzzes with small business success.
Politically, Alaska is heavily Republican, with a libertarian streak. In national politics, it has been solidly Republican since the 1970s because national Democrats have favored locking up natural resources. George W. Bush carried Alaska 59%-28% in 2000 and 61%-36% in 2004, carrying even the traditionally Democratic Panhandle and the Native-majority bush country beyond Anchorage and Fairbanks. No Democrat has been elected to Congress since 1974, and if one came close in 2004, it was in unusual circumstances: Senator Frank Murkowski, elected governor in 2002, promptly appointed his daughter, state Senator Lisa Murkowski, to his U.S. Senate seat. That prompted a proposed state constitutional amendment revoking the appointive power from the governor. It passed, and it almost enabled former Governor Knowles, the Democrats' strongest candidate in years, to beat Lisa Murkowski. But she won 49%-46%. In state races, persona may matter more than party: Frank Murkowski was the first Republican nominee elected governor since 1978. The legislature is solidly Republican, and tends to be more solidly conservative than any governor. Referendums show Alaskans to be increasingly conservative, though with a libertarian tinge: In 1998, they voted for medical marijuana, English-only and a ban on same-sex marriage, though a ban on wolf snaring was defeated. In 2000, they rejected an initiative that would not only have legalized marijuana but would have paid restitution to those convicted of marijuana offenses. In 2004 they rejected medical marijuana once again and rejected a ban on bear baiting.
Regional differences persist. Anchorage is much like a prosperous Rocky Mountains' metropolis with longer summer days and winter nights; it is affluent and booming, with an unusually high percentage of working women. Politically, it is solidly Republican. So are the smaller settlements in a 200-mile arc around Anchorage, which have been growing even more rapidly: the Matanuska-Susitna Valley (one of the few places in Alaska where farming is possible), Seward, the Kenai peninsula and the little port of Valdez at the southern terminus of the pipeline. Fairbanks, Alaska's second-largest city, is a pipeline and mineral service center deep in the interior, unprotected from Arctic winds in winter and crowds of mosquitoes and, in 2004, huge wildfires bellowing smoke, in the brief but hot summer. It tends to vote Republican, too.
The old Alaska, first settled by Russians, can be seen in the towns of the Panhandle and in the capital of Juneau, located on an inlet of the Pacific up against a steep mountain. These are historically Democratic, but variable these days; in the 2002 gubernatorial election, Ketchikan voted for Murkowski, champion of logging in the Tongass, while Juneau, the capital, voted for Lieutenant Governor Fran Ulmer, the city's former mayor. Juneau is a remote site for most Alaskans, reachable only by harrowing and often-cancelled plane rides through the fjords, and there have been efforts to move the capital to a site near Anchorage. Alaskans voted to do so in 1974, but rejected proposals to pay for it in 1978 and 1982. Juneau, threatened with the loss of 40% of its economy, has had no trouble raising up to $1 million to keep state government there. Juneau defeated a proposal to move all state government by 55%-45% in 1994 and a proposal to move the legislature by 67%-33% in 2002. Mostly Democratic is the bush, the villages where Natives--Athabaskans, Aleuts, Yupiks, Inupiats--are the large majority. Natives make up 16% of Alaska's population and nearly 50% in the vast lands north and west of Anchorage and Fairbanks. They are greatly outnumbered and outvoted on many issues, and yet are the object of awed respect for their achievement in building viable civilizations with impressive art traditions in such a forbidding environment.
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