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Sean Parnell: The Manchurian Governor?

Craig Medred

No governor in Alaska history has been more tangled up in oil politics than Gov. Sean Parnell, and there have been a lot of tangles. Former Gov. Tony Knowles worked in the oil patch. Former Gov. Wally Hickel was a major player in a company trying to build an Alaska natural gas pipeline. Former Gov. Frank Murkowski cut a secret deal with the Big Three oil producers to try to get a natural gas pipeline built. The effort helped cost him his job, perhaps his reputation. Alaska voters, urged on by then-candidate Sarah Palin, convinced themselves Murkowski was in too tight with Big Oil.

By that standard, how does one define Parnell?

Before he became deputy director of the Alaska Division of Oil and Gas under Murkowski about a decade ago, Parnell was the director of government relations for ConocoPhillips. After he left Oil and Gas, he became a partner in the global law and lobbying firm Patton Boggs, which represents the Alaska interests of Exxon Mobil Corp. And now Parnell, a former employee in one way or another of two of the "Big Three'' in the Alaska oil patch, is the governor calling the Alaska Legislature into special session to try to cut a deal expected to save those oil companies an estimated $1.7 billion a year.

There are two possible explanations for his actions.

One is that his years of experience in the oil industry give him a knowledge and insight into the industry unavailable to most Alaskans, and he is trying to strike a tax deal with the oil companies that will increase the flow of oil into the pipeline and guarantee high state revenues for years to come. The other is that he is driven by a desire -- conscious or unconscious -- to help out old friends in the industry.

Parnell himself has insisted his motivation is the former. Asked about his ties to Big Oil while running for governor, back in 2010, Parnell defended himself by saying the best way to learn about an industry is to work in it. Parnell said then, as he has said since, that all he really cares about is the best interests of Alaska and Alaskans. Asked pointedly why anyone should believe such words from the mouth of a politician, he looked a Dispatch reporter in the eye and said because "it's the truth."

Daffy ideas?

There is a solid argument to be made in defense of Parnell's plan to cut oil taxes. Throughput in the trans-Alaska oil pipeline has been declining for years. Problems appear on the horizon if the flow keeps dropping. When exactly these problems arise is much debated, but everyone agrees that increasing the flow of oil will delay them. Plus the oil companies hint and suggest -- though they do not promise -- that they will do more to try to increase production if taxes are reduced. In tandem, Alaska's supermajors recently announced they are at least trying to get started a new pipeline to market Alaska's trillions of cubic feet of stranded natural gas. But, they add, it's expensive to work in the Arctic and unless we have the capital to finance construction.

Parnell's scheme to give the companies billions in tax breaks could well be the right plan for Alaska's future. But it's hard for many to avoid doubts about who Parnell works for given who Parnell has worked for. Accusations pop up on politically partisan blogs. Political insiders whisper about the governor's motivations, though you're not likely to hear anyone in power calling him out over his past associations with Big Oil. There's nothing to be gained in attacking a sitting governor halfway through his term, especially if you are a sitting Alaska legislator.

About the closest anyone in office has come to claiming Parnell is in the pocket of the oil industry was Rep. Mike Doogan from Anchorage, a former newspaper columnist who finds it difficult to avoid saying what he thinks. He used an e-newsletter to constituents to poke the governor for his "daffy ideas – giving away $2 billion a year to his former employers in the oil industry and creating a super duper agency to build a very, very expensive gas pipeline ..."

"The very, very expensive gas pipeline" is what has been termed a "bullet line," a relatively small-diameter pipe that would move gas south from the North Slope, primarily to provide energy for Fairbanks, Anchorage and the Railbelt communities between. Because construction costs would be high (an estimated $7.5 billion) and because the volume of gas moved by the pipeline relatively low (500,000 cubic feet per day) Anchorage consumers would pay almost a dollar more per million cubic feet of gas than they do now. But a state study, which reduced the originally estimated construction cost of $11.8 billion by more than 35 percent, concluded the bullet line would prove economical.

The bullet line died in the Legislature this year. It does, however, have its supporters, Parnell among them, as does the cut in oil taxes. And thus, as Doogan put it, "Voila! – it's special session time again."

The governor with the history as an oil-industry lobbyist has called the Legislature back into session to work on cutting oil taxes and making plans to spend state money building a natural gas pipeline, instead of trying to get the oil companies to do it. Doogan, it should be noted, is not planning to run for re-election. Those who are running have been far more reserved as to why Parnell is doing this.

Manchurian Candidate

There is no way to truly know what is in the heart of a man. When Parnell served as the lieutenant governor for Palin, he was a big booster of Alaska's Clear and Equitable Share (ACES) -- her plan to stuff state coffers with oil revenue. It did. The oil companies screamed they were being robbed, and they were if you look at this from the standpoint of the traditional model for taxation in the United States. Most states set taxes designed to cover the costs of government, not to generate huge surpluses. But Alaska's tax has generated a huge surplus, more than $11 billion for an infrastructure poor state still in many ways more wilderness than frontier.

Parnell was moved to ask "how much (money) is enough," which is a reasonable question for a Republican conservative to pose about a tax plan that is more Democratic liberal in the money it takes and downright socialist in its redistribution of oil money to Alaskans through the Permanent Fund Dividend. But because of Parnell's history with Big Oil, he took a beating from the old Palin crowd and liberal Democrats.

They are suspicious Palin might have helped some sort of Manchurian Candidate slip into the governor's office. Parnell does have a decidedly interesting history. He's been deep in Alaska oil issues since his days as the co-chair of the state Senate Finance Committee and a member of the Energy Council, a coalition of elected representatives from 10 oil producing states, in the late 1990s. He moved on from there to the stint at ConocoPhllips, one of Alaska's biggest oil producers, than back into state service in the state Division of Oil and Gas; then to the partnership at Patton Boggs and finally back into state government as lieutenant governor only to have Gov. Sarah Palin quit and make him the chief.

As the lieutenant governor, Parnell played the good subordinate. His emails to Palin border on sycophantic. At a December 2007 press conference to discuss ACES, Palin's signature gubernatorial achievement, Parnell said, "The old is gone, and the slate has been wiped clean. Public trust has been restored here today. This is really a new beginning.''

Now, Parnell wants to return to the days of Gov. Frank Murkowski's yesteryear. If anyone is confused about where he is coming from, it's understandable. Over the years, Parnell has jumped the fence on oil taxes like a snowshoe hare trying to escape a hungry lynx. Unsure of Parnell's real position on almost anything, Rep. Don Young, R-Alaska, once labeled him "Captain Zero." But the better label might be "Captain Who?"

Parnell himself doesn't talk much about his years spent working for the oil industry in Alaska. His campaign website when he was running for governor actually made no mention of his past associations with Big Oil. He prefers talking publicly about issues with which few rational voters could disagree -- stomping out domestic violence in rural Alaska, improving education statewide, and getting Big Oil moving at last on building a commercial-size, natural gas pipeline, a long term Alaska dream. He appears, to his credit, to have made progress on the latter. The state has a contract with the Big Three that requires them to start building at least some of the North Slope infrastructure that would be necessary if gas was to be shipped south down a pipeline.

Palin fought the companies over gas. The result was deadlock that was not in the state's interest. Parnell has chosen to work with the companies, which has at the very least appeared to generate some movement toward construction of an in-state gasline to tidewater and a liquefied natural gas facility to start shipping product around the Pacific Rim. There is "alignment," as Parnell and Commissioner of Natural Resources Dan Sullivan call it, between the companies on a way forward. This might not sound like much, but it's significant. Exxon Mobil, BP and ConocoPhillips trust each other about as much as Eygpt, Israel and Syria. But even one of the gasline's biggest boosters, Sullivan, concedes that a pipeline is far from a done deal. Parnell has ConocoPhillips, BP and Exxon Mobil together at the table with TransCanada Corp., which has an agreement with the state to design a line. But there is no guarantee anything is going to happen.

Crowning achievement

If Parnell could make that pipeline happen, it would be a crowning political achievement. If not, nobody would notice. For decades, every governor has tried to make this happen. None have succeeded. Who could really expect success from the quiet man who rode Palin's coattails into office? Some consider it almost a fluke that he is now governor. He moved up when Palin left halfway through her first term to pursue national fame and fortune after her failed bid as a Republican vice presidential candidate.

He was re-elected as incumbent governor in November 2010, in significant part because he largely played the role of Captain Zero. Post-Palin, Alaskans seemed happy to have a governor who stayed largely out of the public eye and focused on issues about which Alaskans could agree. Overlooked in the run-up to the 2010 election was where Parnell came from -- Patton Boggs.

This isn't some rinky-dink law firm. The company might be best described as a global political powerhouse. It touts itself as "among the first national law firms to recognize that all three branches of government could serve as forums in which to achieve client goals.'' Among its clients is Exxon Mobil. One of its big goals in Alaska has been to try to put one of the world's worst oil spills behind it. Parnell helped Exxon deal with a state angry at the company for smearing Prince William Sound with 11 million gallons of crude oil back in 1989.

For Parnell, being on the private side in the long-running, push-pull between Alaska and the oil industry was nothing new. Patton Boggs came after his stint in the Murkowski administration's Oil and Gas division, where he'd arrived after leaving ConocoPhillips. An attorney by training, Parnell was hired by ConocoPhillips as director of government relations after schooling himself in the oil and gas business as a state lawmaker. Parnell was co-chairman of the state Senate Finance Committee in the late 1990s when Alaska was struggling through a major budget crisis linked to falling oil prices.

Alaskans have long viewed oil revenues as a God-given gift. The state income tax was dumped when oil money started pouring in. Oil today pays for more than 85 percent of the cost of state government. Dealing with the budget means dealing with the oil business, and Parnell got his introduction to this at a time when Alaska was making do with less.

As the 1990s drew to a close, the oil business was in trouble -- not only in Alaska but worldwide. Crude prices had tanked, with some analysts predicting they would stay low a long time. Doug MacIntyre, a short-term oil market forecaster for the U.S. Energy Information Administration, in March 1999 told the Alaska Legislature to prepare for a long downturn, warning that "2000 should be better than 1999 (but) I don't want to speculate on 2005, 2010. These charts don't make it look too promising for Alaska."

$16 a barrel oil

The experts, of course, were wrong. By 2005, oil prices that had been projected to fluctuate in the range of $12 to $16 per barrel were more than $50 per barrel and headed up. As they climbed, then-Gov. Murkowski started negotiations with Exxon Mobil, ConocoPhillips and BP on how to jump-start construction on a long-proposed gas pipeline from the North Slope to the Lower 48. Parnell was a player in those discussions.

He had deep connections to Murkowski. In 2002, Parnell volunteered to head the new governor's Department of Law Transition Team. A year later, when Murkowski Attorney General Gregg Renkes decided to do a full review of the Department of Law, Parnell was one of three attorneys on the review team. At the time, Parnell was still employed at ConocoPhillips. Why he subsequently left the company to take a mid-level manager's job as deputy director of the state Division of Oil and Gas in the Murkowski administration has never been clear.

Parnell's departure from ConocoPhillips in 2003 went unmentioned by the company at the time, despite his rather high-profile job. So too was his arrival at Oil and Gas, a division in the Department of Natural Resources. Parnell just sort of slipped in there. Everyone says he was likable, which remains one of his great strengths.

"He was low key," said Bob Loeffler, who headed up DNR's Division of Mining, Land and Water. "He was really easy to talk to, easy to work with, smart."

Jim Clark, Murkowski's former chief of staff, called Parnell a good team player doing his best to help move forward an Alaska gasline. Parnell seemed in agreement with Murkowski's philosophy that "the most important thing was to get the infrastructure in the ground," Clark said. Murkowski's gasline plan was to do pretty much whatever was necessary to get the pipeline built, and if the state later thought it had gotten a raw deal from the oil companies, it could come back with new tax schemes to squeeze its fair share out of industry.

The oil companies saw the gasline differently. They saw it as a tool they could use to leverage lower oil taxes. It was a classic push-pull. Oil taxes under Murkowski were already high. The state was already raking in money. The oil companies wanted to trade the promise of a natural gas line for what they still call "fiscal certainty" -- long-term, stable oil taxes at moderate, if not low, rates.

Natural gas is, of course, Alaska's oldest pipe dream. Alaskans have been talking about natural gas development since before construction of the 800-mile oil pipeline from Prudhoe Bay to Valdez in the 1970s.

Alaskans know the value of big construction projects like this. Pipeline construction, and later the revenues from taxes on the oil that flowed through the pipeline, transformed the frontier state's economy. It was only 40 years ago that the biggest store in Alaska was the J.C. Penney low-rise in downtown Anchorage. High rises, including the ConocoPhillips building, now tower over the downtown area.

Petroleum wealth changed everything. Alaska grew from about 300,000 people before pipeline construction to nearly 400,000 after, while newfound state oil riches continued to fuel population growth of about 35,000 over the next decade before the expansion finally slowed. That was the end of the boom.

Grew up during last boom

Gas was to be the next boom. Gas was the hope to keep the economy chugging along as oil flows slowed, as they are now, on the way toward the end of Prudhoe Bay production.

As a kid growing up in Anchorage in the 1970s, Parnell not only heard about Alaska's oil and gas dreams, he lived them. Sean's father was Kevin "Pat" Parnell, an Anchorage printer, assemblyman and later state representative. Pat moved his family north to Anchorage in 1973, just before pipeline construction transformed the state into something akin to the Wild West.

When Sean was a kid in the state's largest city, Anchorage was a magnet for pipeline workers with money to burn. Downtown was a hotspot of strip joints and bars where it was easy to score drugs on the street. Author Joe McGinniss, who moved in next-door to Palin before writing a book about the former governor, also wrote a book about Alaska in the 1970s aptly titled "Going to Extremes."

Many in Alaska were doing exactly that, although the Parnells weren't. Papa Kevin, who Sean has described as the son of an abusive father who died on Skid Row in Seattle, kept Sean and his brother on a short leash.

"Growing up around the family dinner table," Sean once told Scene magazine, "we basically talked about public service and theology."

Scene is the in-house publication of Pacific Lutheran University, which is where Sean went to study business immediately after graduating from East High School in 1980. He graduated in four years. Then came studies at the University of Puget Sound Law School. He finished that task on time, too. He was always upwardly mobile, often by way of government.

Not many negatives

By the start of the 1990s, he was back in Anchorage practicing law, then successfully launching into politics. He won a seat in the state House at age 29, and served two terms there before jumping to the Senate in 1996. There he worked hard, by all accounts, at becoming knowledgeable on oil and gas issues, and at getting ahead.

"Those (Parnell) kids grew up with expectations," said former Anchorage Assemblywoman Heather Flynn, who knew Sean's parents well. "They had a very structured upbringing. "

Though Flynn differs with Sean on some policy issues -- she is more socially liberal than he -- she, like most others, is loath to say anything negative about him.

"I've known Sean since he was a kid," she said. "He was always polite, always greeted me by name. He's intelligent. He's well educated. He seems to think before he speaks."

Old Parnell friend Sen. Fred Dyson, R-Eagle River, underlines that. Parnell, according to Dyson, really is only interested in the best interests of Alaska. And yet in 2005, just as Murkowski was nearing a gas deal aimed at securing the state's economic future, Parnell left public service to take that high-paying job as a partner with Patton Boggs.

Parnell was at Patton Boggs when Murkowski's effort to broker a gas line deal blew up. Commissioner of Natural Resources Tom Irwin, then and now a Parnell associate, wrote a memorandum saying Murkowski and Clark were giving away too much to the oil companies in order to get the gas line built. After the memorandum hit the press, Murkowski fired the commissioner. Five top members of the Department of Natural Resources -- including Mark Myers, Parnell's old boss as head of the Division of Oil and Gas -- promptly said they were leaving with Irwin. It was the beginning of the end for Murkowski, who has gone down in history as perhaps Alaska's most arrogant governor. And it was the start of what was to become the Sarah Palin phenomenon.

Grabbing Palin's coattails

Parnell grabbed her coattails and caught the ride. As Murkowski's gas line plan disintegrated and a drumbeat of news about an ongoing FBI investigation into how the oilfield services company VECO Corp. had used its money and influence to manipulate state government exploded, upstart Susitna Valley politico Palin positioned herself brilliantly as a reform-minded consensus builder with no connections to anything that had gone down in the state capital.

"The Palin folks were at that point ... really just saying, 'I'm the anti-Frank Murkowski,'" Clark said.

Parnell, once a member of the Murkowski team, morphed into one of those "Palin folks." After beating Jerry Ward, a former state senator tainted by his own scandals, in the Republican primary for lieutenant governor, Parnell quickly formed an alliance with Palin. "I never suspected any conspiracy," Clark said, but he has wondered, as have others, how Parnell and Palin became so tight, so fast.

Within weeks of winning their primaries, the duo had co-authored a campaign "book" titled "New Energy for Alaska." Among other things, it called for a new gas line plan "best for ALL Alaskans." There was little detail, other than the promise to dump the Stranded Gas Development Act, under which Murkowski had tried to negotiate a deal with the gas producers. That Parnell had been a key player in helping to write the act was not mentioned.

"New Energy for Alaska'' did, however, paint Palin and Parnell as moving in lockstep, and their gas line pledge eventually developed into two pieces of legislation. One called ACES increased oil taxes. The other called AGIA -- the Alaska Gasline Inducement Act -- set up a framework to try to manipulate gasline financing and thus spur construction.

Former state senator, onetime oil industry lobbyist and sitting lieutenant governor, Parnell was given high marks for helping Palin move both acts through the Legislature. AGIA passed with only one dissenting vote, that of Fairbanks Anchorage Republican Ralph Samuels, who thought his opposition would likely mark the end of his political career. He is no longer in politics.

Both AGIA and ACES were strongly supported by liberal Democrats, leading a challenger to Palin in the 2006 governor's race to question the conservative credentials of both the governor and Parnell. Anchorage businessman and independent candidate Andrew Halcro confessed to having a hard time figuring out just what Parnell represented. That theme was summarized in blunter terms by Don Young after Parnell unexpectedly challenged him, with Palin's blessing, in the 2008 Republican primary.

"Captain Zero" was the term Young coined to define Parnell. An Anchorage radio talk show host called Parnell "Mr. Oatmeal." Parnell indicated to Scene magazine he had little objection to the labels at the time. He argued, the magazine reported, that they underscored his "quiet and deliberate leadership style. 'I take it as a compliment,' said Parnell."

Parnell remains quiet and deliberate. His leadership style is, however, being severely tested. He couldn't get the Alaska Legislature to buy a cut in oil taxes, leading to a special session during which he hopes to get them to buckle. Parnell contends tax reductions are a necessity to up the flow of oil, which is falling about 6 percent per year.

Many in the Legislature aren't so sure. They believe the tax cuts are more of a giveaway, and they wonder about why. Parnell's history simply makes it hard to get a solid feel for where he is coming from.  He was a Murkowski understudy before he became a Palin understudy and in between he did that stint at Patton Boggs, a powerhouse that plays in the places Big Oil and big money play. On the company website, Thomas Hale Boggs Jr., the company chairman, has bragged that he heads a "firm that has played a key role in every major piece of legislation and regulatory decision for nearly 50 years."

Alaska and former Patton-Boggs partner Parnell are now deeply involved in a major piece of legislation, one worth billions per year to the oil industry. There are a lot of odd connections. The threads of Sean Parnell's life look a little like plot lines for a John Grisham novel, but Grisham's books are fiction. This is reality.

Contact Craig Medred at craig(at)alaskadispatch.com