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In Alaska, Everyone’s An Oil Baron

Upon announcing her bid for Alaska’s governorship in October 2005, Sarah Palin made a solemn pledge to “put Alaskans first”:

Palin declared her candidacy on October 18, Alaska Day, before any other Republican candidate joined the race for Governor, declaring, “It is time to take a stand and put Alaskans first“. She has been an outspoken critic of Gov. Murkowski’s Canadian gasline deal and wants to see entities compete for Alaska’s natural gas so Alaskans get the most value for their resources. Palin said she is committed to putting Alaskans to work on the gas line and wants provisions in any gas deal for Alaska hire and North Slope gas to energize Alaska’s homes and businesses first.

The statement reads ironically in light of the McCain campaign’s “America First” catch-phrase. For Palin, however, it is more than a matter of rhetoric. The reason is because of an unusual provision in the Alaska Constitution that treats the states resources — everything from fisheries to oil and natural gas reserves — as public trusts:

It is the policy of the State to encourage the settlement of its land and the development of its resources by making them available for maximum use consistent with the public interest.

This is not some sort of trivial, legal matter. On the contrary, all Alaska residents stand to benefit directly from the exploitation of the state’s natural resources. In 2007, for instance, all Alaska residents were sent a dividend check for $1,654 in exchange for their share of income earned from the state’s leasing of oil- and gas-rich territory. Anybody who has been a resident of the state for a year or more is eligible, including children, meaning that a family of four might expect to bring in about $5,000 in income each year this way.

The provision puts Palin in the unusual position of being sort of a landlord-in-chief, charged with negotiating oil and natural gas leases for the “maximum benefit of all Alaskans” — which Palin generally seems to have interpreted as the maximum royalty dividend. In her 2006 campaign for governor, Palin won for essentially two reasons. Firstly, her opponents in the Republican primary were a crusty and exceptionally unpopular incumbent governor (Frank Murkowski) and a Fairbanks businessman (John Binkley) who came across as a chauvinist, allowing her to build plenty of momentum en route to defeating former governor Tony Knowles in the general election. But secondly, she promised an aggressive, “Alaska first” negotiating position vis-a-vis the oil companies, pledging that her negotiations would have provisions requiring Alaska’s gas reserves to be made available first to Alaskans:

Sarah Palin stated today, “Contrary to Murkowski’s recent statements, Alaska’s gas belongs to Alaskans. I’ve been saying for months, we—- Alaskans — need in-state use of gas. All options need to be put on the table with the goal of providing gas to Alaskans as a central provision in any negotiated contract, just a political afterthought as Murkowski is now proposing.”

There is nothing untoward about this; on the contrary, Palin was arguing in essence that Murkowski was shirking his constitutional responsibilities by failing to be an effective, transparent, and hard-nosed negotiator. But these facts are important for placing a couple of things into context:

1. When Palin speaks of how she took in the oil companies, it is not intended in the same way as a Democrat might mean it, as a populist critique of the oil industry’s profit margins. Alaskans, on the contrary, stand to benefit directly from the exploitation of their natural resources, and their fortunes are correlated with those of the oil companies. What Palin means, rather, is that former governors like Murkowski and Knowles had not been adequately tough negotiators, and pledged a more hard-line position.

2. Palin’s popularity in Alaska is not just a matter of her charming personality. Rather, it probably also had something to do with the large royalty check she was able to deliver to Alaskans in her first year as governor.

3. Because Alaskans benefit directly from the leasing of oil- and gas-rich lands, incentives are aligned differently than they are in any other state. Arguably, higher oil industry profits are net beneficial to Alaska, since higher anticipated profit margins will in turn increase the value of leased lands.

Nate Silver is the founder and editor in chief of FiveThirtyEight.

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