Going Rogue: An American Life (45 page)

investigation boiling in Juneau, it wasn’t the first time the FBI had called me.

“I’ve got a confidential briefing for you,” Fogle said.

“Okay,” I said, “I’m in

good area. No one can hear me:’

“I have agents standing outside the Capitol Building. More artests of state legislators today. We’re looking for one of them right
now,”

Special Agent Fogle ran through the details that were being made public.

After the call, I snuck back into the AGIA town hall meeting, where Tom was still speaking. By the tinie the

was over and

we were headed to the airport £Or the 1,400-mile journey back to Juneau, the news was out: this time, three lawmakers would be standing handcuffed in a federal courtroom

they

arraigned on charges of extortion and bribery.

The arrests continued to expose an entangled network of corruption throughout state government. Oddly, it was as if every time a monumental issue was unveiled in Juneau, another oil executive, lawmaker, or

state staffer waS indicted. Some

wound up

orange jumpsuits. Others walked free. But enough

proven guilt emerged to expose the corruption of at least one piece of key legislation-oil taxes crafted under the previous

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PALIN

administration. That legislation was called the Petroleum Profits Tax,or PPT.

PPT was rhe latest formula the srate and oil companies used to calculate Alaskans’ share of oil revenues. The majority of legislators wanted oil companies ro share with the state 25 percent of the profit they made selling Alaskas oil; others wanted the rate sky high; some wanted virtually nothing shated with the true resource ownets. The debate was cut short when Murkowski unilaterally proposed setting the rate at the lowest number seriously under consideration, a deal the oil companies liked very much. Heading inco the governorship, I knew something needed to be done about it. An analysis of PPT showed that it was generating far less revenue than legislators had advertised-$800 million less in the year or so since it had passed. Also, PPT called for the state’s share of oil revenues to be tallied as a percentage of oil companies’ profits. Interestingly, after PPT passed, producers’ reported operating costs suddenly doubled. Beyond the numerical haze, the arrest and indictment of a half-dozen lawmakers involved in PPT’s passage created a cloud of suspicion that I believed would be dissipated only by a healthy blasr of sunshine. To that end, I called a special session of the legislature to deal solely with this issue. My feeling was that not only did PPT need the absolute attention of the legislators, Alaskans needed to know the derails weren’t buried in the politics and lifestyle of a normal legislative session.

Throughout the summer, the revenue and natural resources team discussed the clearest way to put a value on our resources. We pored over options. One idea was to scrap PPT entirely and create a more transparent valuation system based on a formula that was clearly understandable and would increase public confidence. We needed to improve the state’s audit function, enabling us to obtain forward-looking cost data from producers. We also
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Going Rogue

felt it was critical ro introduce economic information sharing between the deparrmenrs of revenue and natural resources and the Alaska public, something that was sorely lacking under PPT. After my astute team of experts put their heads together, we arrived at an entirely new way of calculating Alaska’s share of revenue derived from resource development: a hybrid system that included a minimum tax on gross receipts for the North Slope’s oil fields, plus part of a net profits tax to encourage new development and reinvestment in existing infrastructure via incentives we’d provide entrepreneurs keen on new exploration.
It
allowed for tax credits on future work, restricted capital expense deductions to scheduled maintenance, and implemented strong audit and provisions. The new formula would

incentivize the industry to

more, while protecting the

public.

If
that kind of explanation makes your eyes cross, it’s because we didn’t yet have a catchy, name for our proposal. Everything in government attracts an obligatory acronym, it seems, so we figured the one assigned to this plan might as well be memorable and positive. Political terms are meant to paint a picture. For example, liberals prefer the term “social justice” over “welfare” and why conservatives prefer “marriage protection amendment” over “gay marriage ban.”
In
the case of our new valuation formula, it waS Pat Galvin’s wife who came up with the name. Late in the process, she woke up early in the morning, shook Pat awake, and said, “I’ve got it! ACES!” She explained to him why.

Pat presented it to me the next day. “Governor, what do you think of ACES-:Alaska’s Clear and Equitable Share’?”

“Perfect!” I said. The Alaska Aces, the state’s only professional hockey team, was a winner-and this new clear formula was a
winner, too.

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SARAH

PALIN

Once again, it all came down to a discussion around the kitchen table. The night before I was scheduled ro publicly outline the restructured resource tax, Galvin, my special assistant for oil and gas, and others stopped by the Wasilla house fot pizza and one mote review of our plan. We crunched and tecrunched the numbers, trying ro predict every conceivable economic scenario and producet loophole. Numbers don’t lie; the ACES formula was best fot all parties.

ACES reptesented a major philosophical shift in the role of government. As tesource ownets, Alaskans literally had a “working interest” in energy exploration and development. Traditionally, the soveteign’s role is ro passively collect resoutce royalties, but under this value structure, we would shift roward an active role in incentivizing resource development. Our state and narion needed it. Our ACES proposal would provide more value ro Alaskans when the price of oil was high bur would provide substantial relief ro the oil companies when prices fell.

In the special legislative session held in Ocrober and November 2007, legislarors on both sides of the aisle agreed with our approach. The measure passed with overwhelming public support. Of course, I rook the political hits as the oil companies launched a smear campaign that we were raising taxes on industry. But we persevered, and I’m glad that we did. A year later, vindication came when industry officials admitted that the legislation was working and had even significantly increased their profits while spurring to invest more in exploration and new development in Alaska. We had struck that sweet spot where industty and the public interest wete mutually served.

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