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Tales of oil industry's influence in Alaska

As federal investigation continues, and political figures are charged, a new oil-tax bill seeks to undo the industry's influence.

By Yereth RosenCorrespondent of The Christian Science Monitor / December 12, 2007

Anchorage, Alaska

In grainy, secretly recorded hotel-room videotapes, executives with Alaska's biggest oil-services company plot ways to craft an industry-friendly version of a pending oil-tax rewrite, brag about how they "own" key politicians and hand out wads of cash to lawmakers, who swear their fealty.

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"Never forget who takes you to the dance," says former House Speaker Pete Kott, pointing to VECO Corp. Chairman and heavyweight Republican patron Bill Allen, in one of the tapes. "I had to cheat, steal, beg, borrow, and lie."

"Well, that will stay in this room," one lobbyist responds. Bursts of laughter ensue.

"I sold my soul to the devil, though," Representative Kott jokes later, to which Mr. Allen tells him: "Now I own [you]."

That 2006 conversation and others like it recorded by the Federal Bureau of Investigation have extended far beyond Juneau's elegant Baranof Hotel and its now infamous Suite 604, rented annually by the VECO oil officials. The tapes have been played repeatedly in federal court, on local news, and the Internet. The still-unfolding scandal, brought to light by a federal investigation years in the making, has forced Alaskans to ask serious questions about who is running their state.

The investigation covers vast political territory, including federal fisheries policies, budget earmarks, federal grants, and even ambitions for private prisons in Alaska – but most of what has been revealed so far involves the staggering amount of leverage the oil industry exerts over fundamental oil policy, including last year's oil tax.

Alaska has endured other scandals, says Jerry McBeath, a political science professor at the University of Alaska Fairbanks. But "in terms of the impact on the integrity of the state's institutions, this has been the worst."

Allen and former VECO vice president Rick Smith are headed to prison, having pleaded guilty to providing more than $400,000 in illegal benefits to various Alaska politicians. More charges and trials are expected. Those implicated include some of the state's most powerful figures – US Sen. Ted Stevens (R); his son, former state Senate President Ben Stevens (R); and US Rep. Don Young (R). None of the three have been charged, and though Allen and Mr. Smith testified they gave illegal payouts to each, the four have asserted their innocence.

One decisive response to the scandal came last month, when the legislature rewrote the 2006 tax bill that critics say was hopelessly tainted. Gov. Sarah Palin, a reform-minded Republican who has clashed famously with her party's establishment, called for the special session to "restore public trust in our oil and gas value system."

The oil-tax bill that resulted – passed Nov. 16 – raised overall rates, tightened allowances for deductions and investment credits, and closed loopholes. Gone, for example, are credits for investments made several years ago and the ability of companies to write off public-relations and lobbying expenses. The measure includes an explicit ban on credits or deductions for costs of repairing or replacing improperly maintained equipment.