For more than 30 years, a natural-gas pipeline had been the great white whale of Alaskan resource development. Tens of millions of dollars had been spent in the quest for it. The names of collapsed consortiums and failed legislative initiatives littered the tundra like the bleached horns of long-dead caribou. Then, last summer, Sarah Palin said she had harpooned the whale.
The oil giant is resistant to a shift to green energy.
"I fought to bring about the largest private-sector infrastructure project in North American history," Palin said at the Republican convention. "And when that deal was struck, we began a nearly $40 billion natural-gas pipeline to help lead America to energy independence."
During the vice-presidential debate, she said it again: "We're building a nearly $40 billion natural-gas pipeline, which is North America's largest and most expensive infrastructure project ever."
And to Katie Couric, she said, "We should have started 10 years ago, but better late than never."
To many outside of Alaska, it may therefore come as a surprise to learn that not only does such a pipeline not exist, but--even as Alaska's deep winter darkness gives way to the first light of spring--the prospect that it will be built within Sarah Palin's lifetime grows dimmer by the day. ( View a slideshow hitting the highlights of Governor Palin's travels.)
Barack Obama wants the pipeline. It says so right on the White House website, in the section about energy and the environment: prioritize the construction of the alaska natural gas pipeline. But Obama might not realize that one of the biggest obstacles in its path--all Palin's rhetoric notwithstanding--is the woman who wants to take the presidency from him in 2012, Governor Sarah "Drill, Baby, Drill" Palin.
As Mike Hawker, the Republican co-chairman of Alaska's House Finance Committee, told me one night in Juneau not long ago, "The only thing standing in the way of an Alaska gas pipeline is the Sarah Palin administration."
And as former Governor Tony Knowles, a Democrat, told me over coffee one morning in Anchorage, "It's as if getting the gas pipeline built is only her second-highest priority. Her highest is making sure the oil companies don't build it."
You see, before she became the woman who John McCain said "knows more about energy than probably anyone else in the United States"--and long before she became the new darling of the newly disenfranchised far right--Sarah Palin had been a bare-knuckle backwoods populist who'd built a career out of puffing up dragons she could then slay. Her tactic was first to demonize, then to defeat. She'd ridden her luck for 10 years, from the Wasilla city council to the governorship. And when she became governor, in 2006, she found herself eyeball-to-eyeball with Alaska's most demonizable dragon of all--Big Oil.
How better to defang the industry that had ruled Alaska like a colonial master for 40 years than to make sure its major players would be no more than spectators at the state's next grand pageant, the building of a new pipeline that would carry natural gas from Alaska's North Slope to what Palin called the "hungry markets" of the Lower 48?
In her zeal, however, Palin overlooked one salient fact: It was Alaska's three largest oil producers--Exxon Mobil Corp., BP, and ConocoPhillips Co.--that controlled the natural gas the new pipeline would need if it were ever to pump anything more than hot air.
By writing the rules in a way that excluded the oil companies from the process, Palin--although she gained the short-term approval-rating points that made her seem attractive to McCain last summer--all but assured that the "largest private-sector infrastructure project in North America" would never be anything more than her personal field of dreams.
There is a considerable gap between the image Sarah Palin tries to project and the reality that underlies it. In sometimes startling fashion, her deeds often belie her words. And as I learned on a recent visit to Alaska, nowhere is this more evident than in the story of the still-chimerical gas pipeline.
There are certain basic facts about Alaska: It's big, it's beautiful, it's far away, the winters are cold and dark, and it far exceeds the national average in such categories as suicides, alcoholism, wife beating, child abuse, school dropouts, and percentage of the population likely to be found bearing one or more loaded firearms at any given hour of the day. But the most important fact about Alaska--the one that has done more to determine its destiny than all the others--is that underneath it lies a whole hell of a lot of oil.
Oil was Alaska's leading source of revenue even before Atlantic Richfield Co. made the first strike at Prudhoe Bay on the Arctic coast in 1968. But it was Prudhoe, the biggest oil field in the United States--containing more than 20 billion barrels of oil and more than 25 trillion cubic feet of natural gas--that transformed Alaska, which had been a state for less than 10 years, into a colony controlled by Big Oil.
I first went to Alaska in 1975, at the height of the oil boom, to write a book about it. More than 25,000 workers were building an 800-mile pipeline to carry the oil from Prudhoe Bay and the adjacent North Slope fields to Valdez, on Alaska's south coast. Thousands more were working on the slope itself. It seemed as if everybody who was already living in the state had quit what they'd been doing and gone after the big money being paid by Big Oil, and that most of the population of Texas had come up to join them. The Teamsters union alone was collecting more than $1 million a week in dues from Alaskan workers.
Crazy times. Wild times. Once-in-a-lifetime kind of times. Or maybe not. Maybe the gas line would bring it all back. I went out to Alaska to take a look.
The first thing I learned about the pipeline was that the reason nobody had built it in 30 years was that nobody could have made any money by doing so. Here's how it works: You decide to build a pipeline to carry gas from Point A to Point B, and you spend a couple of years scoping out a route and putting together a cost estimate. Then you have what in the gas business is called an open season, when you try to persuade whoever has gas to commit in advance to shipping it through your pipeline for, let's say, 25 years. Once you've signed up your shippers, you go to a bank, and the bank loans you the money you need to build the pipeline. Once you have your financing, you go to the Federal Energy Regulatory Commission in Washington and ask for a permit. They check your shipping commitments, your financing, and about a zillion other things, and if they like the way things look, they issue the permit. Then you build the line, and the gas starts to flow and keeps flowing for 25 years or more, and everybody makes a ton of money.
But with natural gas selling for less than $2 per million British thermal units, or MMBtu--which it had been for about 50 years--there was no way to make money building a $40 billion pipeline to carry it all the way from the North Slope of the Brooks Range in Alaska to Chicago, or Green Bay, Wisconsin, or Burnt Chitlin, Louisiana. Only in the past 10 years did the price climb above $3 per MMBtu, the lowest possible number at which an Alaskan pipeline might be feasible, according to experts in the natural-gas sector. (After spiking to more than $12 last summer, by February gas was down to about $4.75.)
In Alaska, another factor came into play. The gas was controlled by the same three companies--Exxon Mobil, BP, and ConocoPhillips--that were producing the oil at Prudhoe Bay. By injecting it into their oil wells to increase pressure, they'd been using the gas to up the production of oil, a far more valuable commodity. Only in the past several years, as the North Slope fields began to run dry--production at Prudhoe in 2008 was only one-third of its peak output, in 1979--had the three companies begun to consider selling their natural gas.