Oil Money in Alaska Politics

Over the past decade the state of Alaska has charted a difficult course of developing its resources while preserving it's environment. It has also struggled with the problem of planning for the future, as its richest asset, the Prudhoe Bay oil field, is rapidly being depleted.

Through the 1970s progressive citizens and political leaders were successful in increasing taxes on oil production, and modernizing the state's oil and gas leasing program. At present, the state collects roughly 30 percent of the gross revenue, about $3.5 billion annually, from its North Slope oil production. Part of this is invested in a trust fund for the future, part returned directly to citizens, and the remainder is used to finance a number of social programs, public works, and low interest loans.

The oil industry has profited handsomely from its Alaskan investments, but is constantly at odds with the state over tax and other development issues. In order to control the "political environment," the major oil companies finance elaborate lobbying and public relations programs, and are involved deeply in state and local political contests. Following are some examples of how oil money is being used to corrupt the political process.

In 1982 Democrat Bill Sheffield was elected governor, following a divisive race that turned on the regional issues of moving the state capital and rural development. Sheffield had spent a lot of money for the campaign, much of it from corporations, and about S566,000 in his own money. Following his inauguration, Sheffield sought to raise campaign funds so that he could pay himself back.

This led to trips to New York, Dallas, Houston and Denver, where he raised $155,000 from companies that handled the state's investments, like Prudential-Bache, Dean Witter, Reynalds, and Lehman Brothers; oil interests, including members of the Hunt family; and firms and executives of dozens of major oil companies, such as Arco, Shell, Phillips, Sohio Diamond Shamrock, Dresser Industries, Brown and Root, and Tesoro.

The governor traveled with his attorney general, and commissioners of Revenue and Natural Resources, on private aircraft supplied by three firms with oil interests- Enserch Inc., a resources conglomerate; ERA, an aviation company; and Parker Drilling. Organizers of the trip included Ely, Guess and Rudd, a politically well connected law firm, whose former partner, Norm Gorsuch, was a top campaign official for Sheffield, and now serves as his attorney general. The firm represents a long list of oil companies, including Exxon, Shell, Tesoro, VECO International, and Alyeska Pipeline-the consortium of Sohio, Exxon, Arco, Mobil, Union and other companies that operate the Trans-Alaska Pipeline System (TAPS).

The fundraising trip occured simultaneously with a decision by the governor to drop opposition to a proposed federal oil and gas lease sale in the environmentally sensitive Norton Sound area. As news of the trip leaked out, critics questioned the ethics of the fundraising. Sheffield was forced to appoint a special prosecutor, but he was subsequently cleared of breaking any state law.

Later in 1983, Gorsuch's former law firm, Ely, Guess and Rudd, began working with VECO International, an oil field service company, to establish a program for making unreported campaign contributions. Under advice from lawyer Robert Ely, the company solicited contributions of $100 each from its employees, which it withheld from paychecks and forwarded to state legislative candidates.

VECO hired a former state senator, Ed Dankworth, to replace Gorsuch as its lobbyist, and to help distribute the funds. Dankworth had once served as head of the Alaska State Troopers and had served as chairman of the powerful Senate Finance Committee, which oversees oil industry taxation, until he was forced to give up his seat in 1982 amid criminal conflict of interest charges.

Dankworth's problems stemmed from his attempt to use his influence to sell the state an oilfield service camp that was once used to build the TAPS pipeline. According to testimony before a grand jury, Dankworth was approached by another former Trooper Chief, Pat Wellington, who was working as a security agent for Alyeska. Wellington told Dankworth that Alyeska had a surplus pipeline construction camp that it wanted to sell, and that might be useable as a state prison facility. Dankworth said he was personally interested in buying the camp. Wellington told the grand jury, "I said . . . 'Alyeska will be willing to sell the camp to anybody, I'm sure. But,' I said, `I extended the invitation and the offer to you Ed, as a member of the Finance Committee and as a state official interested in law enforcement."'

Dankworth found a partner and signed an agreement to buy the camp for $900,000 from Alyeska, and began trying to sell the camp to the state for $3 to $4 million. Dankworth subsequently used his position on the Finance Committee to insert a special appropriation, titled "surplus property," into the state budget to purchase the camp. In November 1982 he was indicted on two counts of conflict of interest violations, but escaped prosecution when a state judge ruled that he was protected by legislative immunity.

Having left the legislature, Dankworth started a business as a lobbyist, picking up VECO and other clients. Despite his troubles over the conflict of interest charges, he remained an influential figure in the state legislature.

In the fall of 1983 Dankworth began meeting with legislators to discuss changing the leadership of the state senate, promising $35,000 in campaign contributions for senators who followed his plan.

The money, or a large part of it, was to be raised through the VECO contributions. Under Alaskan law, corporations are allowed to contribute to legislative candidates, but the maximum allowable contribution is $1,000. Moreover, disclosure is required for all contributions over $ 100. VECO sought to get around these restrictions by asking its oil field workers to make $100 contributions, which were then deducted from paychecks.

Once employees agreed to the payroll deduction, they were sent a memo from the chairman of VECO and told the names of the candidates to whom their contribution would be sent, unless they voiced objections. Through this device VECO channeled thousands of unreported campaign contributions to candidates for the state senate.

The scheme began to unravel when news reports appeared about the VECO contributions and Dankworth's plan to reorganize the senate leadership. The Alaska Public Offices Commission, which is charged with overseeing Alaska's campaign disclosure laws, launched an investigation. In August the Commission staff reported that it believed VECO had violated three campaign disclosure laws, including making contributions in excess of $1,000; making contributions under another person's name; and failing to file reports of its contributions with the Commission.

These examples are but a small part of the larger picture of the oil industry's power in Alaska. The industry is actively promoting its candidates for city and borough government in the Eskimo community of Barrow and the surrounding villages, which have the power to levy property taxes and impose environmental restrictions on nearby oil development. Local charities-including, if not especially, public broadcasting-constantly have their hands out to the oil companies. And the government sector is now seeing a steady stream of public officials taking jobs with the industry, after dealing with the industry as a guardian of the public interest.

Sheffield and pro-industry legislators are unlikely to reduce current taxes on the oil industry, primarily because the money is already committed to projects with growing constituencies. But there is a disturbing trend of giveaways to the industry on issues that will have the greatest impact in the future, such as changes in lease terms on properties where production has yet to begin, speeding up the schedule of lease sales, or relaxing environmental controls.

James Love is a graduate student at Princeton University, and former director of Alaska PIRG. Maureen Kennedy assisted with this article.