In 2001, a burly anchorage longshoreman named Scott Heyworth turned up in the nearby town of Wasilla for a meeting with its mayor, Sarah Palin. Heyworth, a local Democratic activist, had grown tired of waiting for the Big Three oil companies to tap their huge natural-gas reserves in the state's North Slope, the long swatch of northern Alaska tundra that includes the largest oil and gas fields in North America. For decades, ExxonMobil, ConocoPhillips and British Petroleum had little incentive to sell the trillions of cubic feet of natural gas that shares space beneath the ice with all those oil deposits. Gas is less profitable than oil and much harder to move to market. The majors could afford to wait until the economics of gas were more favorable before embarking on a multibillion-dollar pipeline project. But many Alaskans, accustomed to annual oil royalties, didn't want to wait on gas any longer. Nor did they want the Big Three to own the gas pipeline the way the majors owned the oil pipeline--or rig the tax bills they paid the state as the price of doing business there.
So Heyworth set out to collect signatures for a ballot initiative that would allow some company other than the Big Three to build a pipeline to the south. It was, on one level, a populist end run around some very big companies. And as he made the rounds of small towns seeking support from local officials, he found his way to Wasilla and its then 37-year-old mayor.
Sarah Palin poured the visitor a cup of coffee and listened intently to his 45-minute pitch. "It sounds like a good idea," she told him. "I'll sign it and support it."
And so began Palin's unusual relationship with the oil and gas industry that dominates the state's economy. She says it is her experience in energy matters that best prepares her to be John McCain's Vice President. Indeed, she came out of nowhere to win the governorship by promising to get more out of the oil industry for Alaskans. But for many independent observers, this heady populism was more effective in getting her elected than it was in actually getting things done once she was governor. No initiative illustrates that better than the natural-gas pipeline project, which Palin pushed the big oil companies out of--a popular but ultimately unrealistic gambit, considering that those producers control the gas that the pipeline would eventually ship south. Her critics say that when it comes to oil and gas, Palin has little appetite for dissenting views. "I've never seen a governor with the door so closed," says Bruce Richards, a local official who briefly found himself on the opposite side of an energy issue from Palin.
It may be difficult for Americans in the Lower 48 to fully grasp how much Alaskans benefit from their state's vast oil and gas deposits. Alaska is home to just over 20% of the nation's proven oil deposits and almost 18% of its natural-gas reserves. About 90% of the state's public revenue comes from oil and gas royalty receipts. Alaskans pay no state income or state sales tax. Instead, they receive an annual dividend from the state treasurer that comes directly from the oil industry. Over the past 25 years, the average Alaskan has received roughly $1,200 from the state each year. When fuel costs spiraled out of control in rural Alaska, instead of focusing on suggestions to help rural residents weatherize their homes or develop small-scale renewable energy sources, Palin wrote every Alaskan a second check for $1,200.
The downside of that dependency is that it's sometimes hard to distinguish the state government in Juneau from the energy companies that it regulates. The state's elected officials have always worked closely with oil companies--at times, too closely. In the late 1950s, bureaucrats actually hired an oil-industry lawyer--with the big oil companies paying his expenses--to write the new state's oil and gas lease laws. Palin's populist approach was the perfect complement to rising public discontent with Big Oil, and it was the main engine of her remarkable rise from small-town mayor to a place on the Republican national ticket.
After Palin lost the race for lieutenant governor in 2002, then GOP governor Frank Murkowski rewarded her strong campaign by appointing her chair of the Alaska Oil and Gas Conservation Commission, an obscure but important board that regulates oil-field production. In her short tenure, she gained attention not for her grasp of technical detail but for making public ethics accusations against a fellow board member who happened to be chairman of the state Republican Party. She resigned in protest, leaving the $122,400 job after a year. (He was later fined for, among other things, sending confidential information to an industry lobbyist.) But Palin emerged with the image of a bold reformer in a state where the interests of Big Oil and politicians had seemed inseparable.
By 2005, Scott Heyworth was back in Wasilla, eating pancakes in the mayor's breakfast room next to her husband Todd as they discussed her plans to run for governor. Palin was weighing whether to run as an Independent or a Republican, Heyworth recalls. His ballot initiative had passed in 2002, and he was in a good position to help either way. He organized a Palin fund raiser and turned over the names of 42,000 voters, largely independents who had signed his petitions.
Heyworth saw in Palin a potential ally against Murkowski, who was negotiating behind the scenes with major gas producers to build a pipeline across Canada--a move that critics feared would give too much away. Palin doubled down on her support for her friend's "all-Alaska gas line," and she soon appeared in full-page newspaper ads across the state, standing between a pair of popular former GOP governors who were also wary of Murkowski's ties to the Big Three. "There was Sarah Palin running with the big dogs," recalls John Bitney, a longtime GOP operative in the state. "It elevated her in stature."
Then Palin saw her opening. In October 2005, Murkowski fired natural resources commissioner Tom Irwin, a well-liked "unreconstructed miner," as one political observer calls him, for opposing concessions won by producers on the gas pipeline. Immediately, six of Irwin's top aides walked out in solidarity. The mass exodus created a firestorm, with editorial writers and politicians extolling the "Magnificent Seven" and calling the mass resignations the "Thursday-afternoon massacre."