By Tony Hopfinger

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Crude Awakening is the rollicking story of politics in America’s last frontier and oil province — Alaska, the nation’s most wild and mysterious state, where politics and oil blurred on the day wildcatters struck it big in 1968. Living in a northern Never Land, where oil companies and the federal government kept the state living high and wild, a handful of players ran the show. Among them were the late Sen. Ted Stevens and oilman Bill Allen, the Tony Soprano of Alaska who controlled the political machine until the FBI arrived to root out corruption, only to be accused of playing as dirty as those they were investigating. These characters and events paved the way for Sarah Palin’s rise to fame and fall from glory in Alaska. Authors Amanda Coyne and Tony Hopfinger chart the epic tale of these three characters, set in a state of soaring hopes, fading dreams, drying oil fields and an uncertain future.

For our fathers, John and Anton

There are strange things done in the midnight sun
By the men who moil for gold;
The Arctic trails have their secret tales
That would make your blood run cold…

—"The Cremation of Sam McGee,"
from Songs of a Sourdough by Robert W. Service, 1907

PROLOGUE

Late on the evening of May 7, 2006, Alaska state representative Pete Kott left the Capitol building and strolled a few blocks through downtown Juneau to the Baranof Hotel. He rode the elevator to the sixth floor and knocked on the door of Suite 604. Kott was anxious to tell his friends the good news.

A retired Air Force captain with a graduate degree in public administration, Kott had served as a Republican representative in the state House for fourteen years. Along the way, in addition to considerable legislative expertise, he'd acquired a drinking problem. After a couple of good gulps of wine, Kott, his eyes twinkling as he smiled, described to his friends—two executives and a consultant for Alaska's largest oil contractor, VECO Corporation—how his strategy to kill a bill that would raise state taxes on oil companies was coming together. Kott spent the next half-hour bragging about his performance earlier that day. He said he'd "outsmarted the fox" and delivered a "sucker punch."

"I use 'em and abuse 'em," Kott said. "Fuck 'em."

"That was like watching a maestro at work," one of the men in the room said of Kott's handiwork on the House floor.

"That's exactly right," said Rick Smith, a VECO vice president. "This guy's pretty good, right? Boy, I'll tell you what, it's every, every year, I mean, I've been with Pete and coming down to crunch time, he, he makes this shit happen."

Also present in Suite 604 was VECO founder Bill Allen. An oilman most of his life, Allen was a godfather character in Alaska's oil patch. Politically connected, he was in Juneau in 2006 buying influence in the legislature to keep oil taxes favorable for his clients, "the three big boys," as he referred to them: Exxon Mobil, BP, and Conoco Phillips. Part of that effort involved laying the groundwork in the legislature for an upcoming bill that would lock in taxes for decades on the oil companies in exchange for their promise to build a 3,500-mile natural gas pipeline, estimated to be one of the most expensive private energy projects in U.S. history. The gas pipeline was to be Alaska's next boom. The state needed it more than ever now that its oil reserves were running dry. Allen needed the pipeline and lower taxes for his clients so that his oil-contracting firm would continue to prosper. Now 70, he wanted to sell the company. A pipeline project on the horizon would boost VECO's price tag. Allen had the ear of the Alaska oil executives. Some of them rooted him on, turning a blind eye to the bribery.

Allen booked Suite 604 for the 2006 legislative session. It was known as the "Animal House" among legislators, oil lobbyists, and the governor's top aides, who all routinely dropped in to visit Allen and his sidekick Rick Smith. They called themselves the "Corrupt Bastards Club" after a newspaper column that had accused them of corruption. And like many Republican lawmakers, Kott revered Allen, calling him "Uncle Bill."

"I had to get 'er done, so I [could] come back here and face this man right here," said Kott, pointing at Allen. "I had to cheat, steal, beg, borrow, and lie."

"I own your ass," Allen responded.¹

It was such alcohol-laced conversations, many involving legislators in Alaska's rain-drenched capital, that lent tone, shape, and substance to the state's largest oil-fueled political scandal, an epic tale of greed and corruption that began a half century ago and continues to play out today. In late August 2006, the FBI secretly persuaded Allen to plead guilty to bribing a slew of state politicians, as well as admit to doing favors for Ted Stevens, the longest-serving U.S. Senate Republican in history. Agents revealed to Allen that they'd accumulated thousands of hours of wiretapped phone calls, along with video surveillance from Suite 604, which included footage of him handing hundred-dollar bills to politicians. Allen, who allegedly had a penchant for teenage girls, confessed almost immediately when he was picked up, eventually detailing how he used his oil-contracting firm to renovate and expand Stevens's cabin. Allen confessed to paying more than $240,000 in phony consulting fees to the senator's son, Ben Stevens, who was president of the Alaska Senate. Allen helped fund extravagant fund-raisers for U.S. Representative Don Young, replete with a pig roast—a nod to Young's proudly prolific pork barrel spending on Alaska. And in 2006, when the state legislature had Alaska's future in its hands, Allen admitted to paying off Kott and other key lawmakers to swing crucial votes. At stake was not only whether to increase oil taxes, but whether to provide industry a host of incentives to jump-start construction of a $40 billion natural gas pipeline—a project that could spark a construction boom the likes of which Alaskans hadn't seen since the 1970s.

The seeds of this tale were planted early in Alaska's short history as a state, sprouting when the oil industry took root forty years ago and the state's most prominent politician began his ascent. Senator Ted Stevens became nearly as powerful as Alaska's lifeblood industry, gaining a national reputation for securing tens of billions of dollars for his home state between 1968 and 2008—the year he lost reelection after being convicted in federal court for failing to document Allen's renovations to his home, as required of senators on their financial disclosures. Stevens's and Allen's careers paralleled the rise of the oil economy, and by the late 1990s they were good friends. They even owned a racehorse together. Stevens was at the height of his power then, holding the purse strings to the federal budget as chair of the Senate Appropriations Committee. Allen asked favors of Stevens, but he mostly helped the senator out of friendship, no doubt influenced to some extent by Stevens's frequently aired complaint that he'd sacrificed his Harvard law degree to serve the public.

Alaska had been a state for only nine years when oil workers struck the elephant field, Prudhoe Bay, in 1968. Before that, its economic future hinged on logging, mining, fishing, and military bases. But with a suddenly rich oil economy, Alaskans became comfortable and complacent, working for the oil companies at wages far greater than those in the lower forty-eight states, and numerous businesses, both old and new, profited from the industry. The state planned little for the future, beyond establishing an oil wealth savings account. By 2007 the Alaska Permanent Fund, started three decades earlier, swelled to $40 billion, a piggy bank to get the state by when the oil wells eventually ran dry. But few imagined that day. By the early 1980s, the Permanent Fund yielded annual dividends for every man, woman, and child. Maybe they didn't approve of their leaders' close ties to Bill Allen and Big Oil, but they appreciated getting that yearly oil dividend check. (Alaskans don't pay state income tax or sales tax.) They worried little what the rest of the country thought of Stevens's funneling home billions of federal dollars or the state's immense oil wealth.

Leading Alaskans into this trance was a group of old-guard politicians and businessmen who came of age when Alaska was still a territory. They understood the state's relationship with industry as a business deal: The people of the state owned the oil, and the companies bought leases and paid taxes to develop it. Keeping the crude flowing and the state prospering required a delicate dance of negotiating and hobnobbing with executives from Texas to London. As the years progressed, oil bred a crude culture of business and politics in Alaska, tainted with corruption and the mishandling of resources. Alaskans accepted this as part of doing business. If they turned a blind eye to what their leaders were up to, it was only because some of them didn't know that it could be done otherwise, and the ones who did were greedy and bloated themselves, living in a northern Neverland, far from the eyes of the rest of the country. The FBI and Justice Department were supposed to change that. But then, it seemed, the Alaska Neverland ethos got to them too. In the end, the feds stood accused of playing as dirty as the people they were investigating—and in some cases, dirtier.

It may well be that things happen in Alaska that wouldn't happen in states with long histories and established social networks—places where physical magnificence and an excess of natural beauty, set always in nature's extremes, don't overwhelm, don't usurp the senses, senses that otherwise might be used to create stable, well-run communities. Add oil to that mixture, a big, gushing elephant field that brought in billions of dollars so early in the state's history, and the voices of judicious and honest Alaskans, of which there are many, were drowned out by other, louder voices. The ones who thought the oil and the money would last forever. The ones who wanted more of everything, and felt it was their God-given right to have it.

By the late summer of 2006, FBI agents finally had the evidence they needed to swarm the offices of the Alaska legislature in Anchorage, looking for clues of lawmakers taking bribes and favors from Bill Allen. Those raids would have ramifications that spilled far beyond Alaska's borders. They would tarnish the reputations of federal agents and prosecutors, the suicide of another, end the career of one of the most important men in the country, and spawn a new leader, a new kind of leader: the wife of a snowmobile racer, a mother of five, a caribou hunter and salmon slayer. Indeed, the timing, as would often be the case for her, was a gift for a former small-town mayor who had just defeated Governor Frank Murkowski in the GOP primary election a week earlier. Sarah Palin was a forty-two-year-old Republican who had been causing a ruckus within her party for the past two years. Out of the ashes of cronyism and corruption, she was born.

The FBI raids seemed to confirm for many Alaskans that Palin—a self-described reformist advocating government transparency—was the real deal, pure and courageous for standing up to those "corrupt bastards" in her party. In contrast to those good old boys, Palin seemed squeaky clean. By then, Palin had divided the Alaska Republican Party, winning over a group of conservative Alaskans who, in retrospect, might have been the first tea partiers of America, and riding on their backs all the way to the governor's mansion in late 2006.

For a brief moment under her tenure, Alaskans largely came together and were reminded of the idealism around which the state had been formed in the first place. It was an idealism borne out of a philosophy of collective ownership of the state's oil, which funded nearly 90 percent of state government through taxes, royalties, and fees paid by the oil companies. Some in the past had tried to wrench Alaska away from its corporate dependency, but the fight had proved too difficult. But then Palin swept into office, promising to bring Alaskans back to the days when they loved and respected their state and each other. To bring Alaska back to its constitution, penned in a time, before the oil boom, when the dream was pure and Alaska-size.

"I will unambiguously, steadfastly, and doggedly guard the interests of this great state as a mother naturally guards her own," Palin told Alaskans. "Like a nanook defending her cub."

And she did—until she didn't anymore.

If Alaska had been an abstraction to you before Sarah Palin's rise to fame, you've probably by now seen at least a little of this state—the soaring mountains, the dangerous, choppy seas, the vast stretches of untouched land—but you might not have heard much about Alaska's relationship to oil. Through reality TV, you've seen quirky people in quirky towns talking to the camera about their quirky lives, and you might have thought, "How charming; I must visit."

It is charming. About 710,000 people, a few more than the population of Washington, D.C., are flung out across an area more than twice the size of Texas. And although its larger cities have many of the amenities of the Lower 48, it's also its own country, holding to its own values—where perceptions of class are far less entrenched than in the rest of the nation. It simply doesn't matter what clothes you wear, what kind of car you drive, how big your house is, where you did or didn't go to school. Alaska has its version of royalty but no blue bloods. In fact, if blue blood is sensed, and the bearers of it are not kicked out, they are made to feel extremely uncomfortable. In old-time Alaska, if you behaved badly enough, you were given what was called a "blue ticket," a ride on the first steamer south to the West Coast. The blue ticket had nothing to do with blue blood, but surely some recipients were East Coasters, carrying with them their East Coast attitudes and their East Coast values, which simply don't transfer.

Idyllic mountains, glaciers, choppy seas foaming with salmon: a place that encourages you to be yourself—the real self, the self without entrapments. It is its own country, and being governor of Alaska is like being president of your own country.

But Alaska can also be ingrained and ingrown, and incestuously corrupt. And perhaps more insidious, petty and small-minded, particularly if you were born and raised here and don't have a window to the world outside—an understanding of how other states evolved and flourished, from modest ambition and hard work, through the necessary stages of maturation. But Alaska skipped much of that, jumping the line. Nine years after statehood, wildcatters found oil at Prudhoe Bay, and the boom was on, the newfound, easy, and oil-drenched prosperity spawning, among other things, an Alaskan kind of wild ambition, built on the belief you can do anything and you can be anything as long as you have the skills that Alaska requires: the ability to endure the midnight sun and winter darkness, to fend for yourself during the booms and busts, to know how to use tarps and duct tape creatively, as well as how to stay warm, handle a shotgun, and deal with big oil companies to keep it all going. And beyond that, why shouldn't this translate elsewhere, as some Alaskans who haven't spent much time outside the state believe? If you can be anything you want to be in Alaska, why not in the rest of the country?

In the early hours of August 29, 2008, when the networks began announcing that Republican presidential candidate John McCain had chosen as his running mate a young, attractive woman, Alaskans were no less shocked than the rest of the country. We'd known the McCain camp considered Governor Sarah Palin, then 44, earlier in 2008, but we thought her hopes were all but dashed by midsummer. Her ratings, once the highest of any governor in the nation, were dipping in the weeks before McCain made his surprise pick. Her combative relationship with fellow Republicans and the lifeblood oil industry of Alaska had started to take a toll. Meanwhile, Palin was enmeshed in the biggest political scandal of her career, dubbed "Troopergate," a tawdry family feud that'd spilled over into her administration and spawned a state investigation. Troopergate threatened to soil Palin's two-year Cinderella story. Then, just as the walls were closing in, McCain, who still saw stardom in Palin, plucked her from the wilderness, her timing, as always, impeccable.

Some of Palin's more forward thinking Alaskan supporters recognized that a few successes in the forty-ninth state don't translate easily into the credentials usually thought necessary for being president. But many thought otherwise. After all, in Alaska, Bill Allen, who grew up as a migrant fruit picker, could become a political kingmaker. In Alaska, that same person could rub shoulders with leaders of some of the most powerful companies in the world. In Alaska, that person could befriend one of the most powerful men in the country, Senator Ted Stevens. In Alaska, a small-town mayor who went to five colleges and couldn't name what she read could charm a whole state, become governor, and extract billions of dollars from oil companies, and then just quit her job, without seemingly a second thought.

And why not, when you're in a state that's so much about a state of mind? Always in the process of becoming, not yet arriving. A state in a state of adolescence, still very much finding its way.

This book is an attempt to capture that state of mind, as well as trace the political and economic forces that have acted on the fifty-two-year-old state of Alaska, as it continues the struggle to shape its identity. It's the story of the rise and fall of Ted Stevens and Bill Allen, two of the biggest characters in a state full of big characters. They helped make Alaska and, each in his own way, helped pave the way for Sarah Palin to come into and then exit the country. It's the story of Alaska coming of age, all of its big hopes and dreams paid for by oil, a finite resource.

PART I

THE GOOD OLD BOYS

CHAPTER 1

They Built a Dream, and Others Drilled It

Soon oil would rule Alaska. Soon the sheen of oil would spread through this frontier so widely that without it, Alaska's future would become unimaginable. Crude would make everything that was about to happen to Alaska possible: wealth and corruption, growth and environmental degradation, soaring hopes and fading dreams. Alaska's best known leaders—Sarah Palin and Ted Stevens—were born out of oil, as was the lesser known Bill Allen, who was nonetheless as influential as any leader in Alaska. Eventually Alaska's oil would spread throughout the country, helping to fuel America, to supply energy to a growing populace. And it would help energize an emerging party led by a small-town Alaska mayor, who had an Alaska-size confidence in her ability to lead America.

All of this would have been unimaginable back in the winter of 1955–1956. Oil wasn't much on the minds of the delegates who met in the student union at the University of Alaska in Fairbanks to pen a constitution for a state that did not yet exist. Alaska was still a U.S. territory managed by the federal government. Many residents sought self-determination—statehood—and had embarked on a peaceful and popular uprising against the federal government to take control of the vast hinterland they called home. Drafting a state constitution was a first step toward realizing the dream; the U.S. Congress and the president would have final say on whether Alaska became a state. But that would come later. First, Alaskans, most of them anyway, wanted to prove to the rest of the country they were reasonable and capable enough to write their own founding rules of the land. And so the territory chose fifty-five representatives to ponder and debate how Alaska, as a state, would be formed and structured. The delegates came from the far corners of a land that stretches 1,400 miles from top to bottom, 2,400 miles from one side to the other—an area almost a fifth the size of the lower forty-eight states—so big that if Alaska is superimposed on a map of the continental United States, it stretches from the Canadian border to the Gulf of Mexico, from the Atlantic to the Pacific.

At the time of the constitutional convention, about 208,000 people called Alaska home. Delegates hailed from the urban centers of Anchorage, Juneau, and Fairbanks, as well as the small towns and villages, places with names like Kotzebue, Ketchikan, and Homer. They carried with them the smell of asphalt and pine, wood smoke, whale blubber and seal oil, of the hard, barren north and of soggy rain forests and little cabins in the middle of a vast wilderness. Some came out of that Alaska wilderness and traveled long distances by boat to reach the territory's few roads, where they then could jump in cars and trucks to make the last leg of the journey. Some carpooled. One delegate hitchhiked. They were businesspeople, lawyers, miners, fishermen and homemakers, and eccentric sourdoughs. Among the fifty-five were six women and one Alaska Native, the mayor of the Tlingit village of Kla-wock in southeastern Alaska.

The delegates huddled for seventy-five days in what is now called Constitution Hall at the University of Alaska in Fairbanks to realize a dream akin to creating a new country: a new state, free to elect its own officials, free to manage its resources—fish, minerals, wildlife, and oil—and free to organize and live by its own rules. This constitution would be based on the people's needs and on other constitutions that had come before it. Most of the drafters were Democrats. A few were Republicans. Politics, though, was put aside for the sake of the larger purpose. Many still say this represented Alaska's finest hour, before the big oil strike.

At the time, a few believed that vast oil reserves would be found someday and somewhere in the 586,412 square miles that made up the territory, or off its 6,640 miles of coastline, much of which, both onshore and off, still hadn't been explored. There had been sightings of black stuff, including up north in the Arctic, where early explorers took note of how it created sparkling rainbow sheens on lakes. They found tarry mud that trapped caribou in their tracks, and met resident Eskimos who burned scraps of the oil-soaked tundra for fuel. Many of these reports came from a vast area, flat as the moon, called the North Slope, a misnomer if ever there was one. Back before oil was discovered and big machines marched across the tundra, nothing diverted the eye from the flatness save the herds of thousands of caribou that migrated across parts of the North Slope. Today the oil workers up there like to say with a straight face that there's a woman behind every tree, and then laugh when you look around. In the summer, a line of clouds in the distance can lead you to believe that the person who designed this swath of barren landscape had humanity enough to put a city within reach. And then you look again and curse the designer for being a trickster. In the winter, this is a frozen apocalypse. Even if there was oil, who would be crazy enough to try to get it out?

At the time of the constitutional convention, Alaskans were more concerned about fishing and minerals, controlled by alleged robber barons and Outside corporations (yes, "Outside," with a capital "O"—that's how Alaskans refer to anybody who doesn't live in their state), and a federal government proving increasingly incompetent in managing the huge territory and its rich resources. Having little say in how territorial lands were divided and developed, Alaskans wanted to take control of the resources in the territory that were comprised of more than 98 percent federal land. As it was, if oil was found, or for that matter, gold or other minerals, the feds had control of the development, including land leasing and royalties.

The drafters of the state constitution called for managing resources in the interests of the people. They had a particular concern for fish traps, of all things. Alaskans depended on fishing to keep their state afloat, and a battle had been brewing for years over canneries and fishing companies wreaking havoc on what was supposed to be a sustainable industry. Commercial fishing was big business for Alaska, and Outside canneries had deployed the traps, jeopardizing the prized salmon fishery. Fish traps would be banned.

For all of the optimism and hope, though, many Alaskans saw a different path to independence. Some wanted to secede from the United States and form their own country. (Later they would form their own party—the Alaska Independence Party—the party Todd Palin once belonged to and Sarah Palin respected.) But the real fight came nationally. A coalition of Democrats and Republicans couldn't see Alaska's potential, and thought that the state would forever be a ward of the federal government, with a small population unable to pay its share of taxes in exchange for the huge influx of federal dollars that would be needed to develop and sustain Alaska. Partisan politics too played into the debate. Alaska's lone territorial delegate to Congress, Bob Bartlett, was a Democrat. So was its territorial governor, Ernest Gruening. The Republicans had a weak majority in Congress, a majority they might lose if Alaska became a state. Another group, southern Dixiecrats, didn't like the idea, either. Alaska Democrats, they thought, were the wrong kind of Democrats—the kind who supported civil rights.

Corporations that made fortunes from Alaska's minerals and fisheries were also nervous about the call to make Alaska a state. At the constitutional convention, there was a steady cry over how Outside businesses had no interest in Alaska's future, how they couldn't be trusted as good corporate neighbors, and how Alaska as a state would inevitably face conflict over managing resources that would require private enterprise to develop. Alaska, as a state with only a couple hundred thousand people, would need to raise tax revenue, and an obvious way was leasing and taxing the development of minerals or oil or timber on state land. But generating interest in such development would demand negotiations with the very companies that extracted the resources and policy decisions from a citizen-elected legislature. As some developing countries have learned, a government's short-term desire to make money can lead to the destruction of resources, with nothing left to show for it. At the convention, Bob Bartlett, the territorial delegate to Congress, warned of not only exploitation but a corporate lockup of Alaska's riches, foreshadowing the state's future in many ways:

Two very real dangers are present. The first, and most obvious, danger is that of exploitation under the thin disguise of development. The taking of Alaska's mineral resources without leaving some reasonable return for the support of Alaska governmental services . . . The second danger is that outside interests, determined to stifle any development in Alaska which might compete with their activities elsewhere, will attempt to acquire great areas of Alaska's public lands in order not to develop them until such time as, in their omnipotence and the pursuance of their own interests, they see fit.¹

Genre:

On Sale: Nov 8, 2011
Page Count: 304 pages
Publisher: Bold Type Books
ISBN-13: 9781568586922

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Amanda Coyne

About the Author

Amanda Coyne is co-founder of AlaskaDispatch, an online news site devoted to covering the state. Her writing has appeared in Harper’s, the New York Times Magazine, and the Guardian. She lives in Anchorage.

Tony Hopfinger has reported on Alaska politics and oil since coming to the state in 1999. He is the co-founder and executive editor of Alaska Dispatch. He lives in Anchorage.

Learn more about this author