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Friday, September 22, 2006 - Page updated at 12:00 AM

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Alaska politics crazy this year, even by state's own standards

Seattle Times staff reporter

ANCHORAGE — How fitting for tavern owner Mr. Whitekeys that in the weeks leading up to his final show, voters dumped their once-popular governor and federal agents raided state legislative offices — searching for, among other things, hats emblazoned with "Corrupt Bastards Club."

Whitekeys has spent a quarter-century lampooning Alaska's politicians in stage shows at his Fly-By-Night Club, a bright-blue bar that proudly bills itself the "sleaziest" nightspot in town.

He's never had a shortage of fodder. Alaska, a state seemingly still in puberty, always has been known for its colorful characters and political upheavals.

One former governor — there have been only eight — was nearly impeached and another claimed he was guided by an invisible "little man" on his shoulder. In the 1980s, two of the state's most powerful lobbyists were sent to prison on extortion and racketeering charges. A state lawmaker was busted for illegal possession of machine guns.

"This place plays by its own rules. Always has," said Whitekeys, who recently sold the bar and put his stage show into hibernation.

But even by Alaska standards, things have been pretty wild lately.

Last month, Gov. Frank Murkowski suffered a humiliating defeat in the Republican primary, losing badly to the former mayor of a town not much bigger than Omak. A U.S. senator for 22 years before becoming governor, Murkowski was dogged by ethics scandals and political missteps, including appointing his daughter to his old job in Congress and buying a private jet.

On Aug. 31, FBI agents swarmed the offices of six legislators, including Senate President Ben Stevens — son of the state's most powerful figure, U.S. Sen. Ted Stevens. At the Capitol in Juneau, agents lugged boxes marked "evidence" past photo-snapping tourists.

Though little has been revealed about the investigation, it's clear the feds are looking into the relationship between lawmakers and Veco, a politically powerful oil-field service company with close ties to the younger Stevens.

All this happened against a backdrop of trouble for Alaska's lifeblood oil industry. In early August, BP was forced to partially shut down the giant Prudhoe Bay oil field after discovering badly corroded pipes.

BP officials, already facing a criminal probe into an earlier spill at Prudhoe, were hauled before Congress and berated for ignoring warnings about the corrosion.

Aside from rocking two of the state's most-prominent political families and shaking up the state's Republican-dominated establishment, the events last month further jeopardized two of Alaska's biggest petroleum dreams.

Murkowski and the Legislature have been jousting for the past several months over his proposal for a new pipeline to carry natural gas from the North Slope to markets in the Lower 48. The $25 billion, 2,100-mile pipeline would create a construction boom and tap the state's vast gas reserves.

But legislative leaders have no desire to take the project up again right now.

Meanwhile, BP's problems at Prudhoe Bay pose a serious obstacle to the state's effort to allow oil drilling in environmentally sensitive areas, such as the Arctic National Wildlife Refuge.

Dependent on oil

In a sense, everyone in Alaska is on the take from oil.

Nearly 90 percent of the state budget comes from oil taxes and royalties. Citizens pay no state taxes. And the state next month will send out Permanent Fund dividends, the annual cut each citizen gets from earnings on the state's $34.5 billion oil savings account. This year's checks are $1,106.96 per person.

Meanwhile, record-high oil prices have created a gusher of new money for the state treasury.

So it's no surprise that Alaskans generally have had a friendly relationship with the oil industry. But things have gone a little sour lately, said Jerry McBeath, a political-science professor at the University of Alaska, Fairbanks.

McBeath said many Alaskans — who have been hit as hard as anyone by high fuel prices — don't believe the state has been getting its fair share of the record-high profits the industry has reaped the past few years.

Politically, "this is the worst time for the industry since the Exxon Valdez oil spill," McBeath said.

A citizen initiative before voters in November would for the first time tax natural gas while it's still in the ground. The measure, aimed at forcing energy companies to start producing the gas, is bitterly opposed by the industry but stands a good chance of passing.

"The industry is under a lot of pressure now — on all kinds of fronts," said Judy Brady, executive director of the Alaska Oil and Gas Association.

Both of the leading candidates to replace Murkowski — former Gov. Tony Knowles and Sarah Palin — openly criticize the industry.

Knowles, a Democrat who has been considered a friend of big oil, and Palin, the maverick Republican who defeated Murkowski last month, both say there is a general sense that the state's political leaders have conceded too much to the oil companies. And with profits soaring, they say, it's especially offensive to learn that BP failed to maintain crucial pipes at Prudhoe.

"All of that mixes together into a pretty unpalatable stew," Knowles said.

"Bald Ego" takes flight

Murkowski can't blame the anti-oil mood for his demise.

In late 2002, just after he was sworn in as governor, Murkowski appointed his daughter, Lisa Murkowski, to replace him in the Senate. It was all downhill after that — and Murkowski hit a lot of trees on the way down.

Two political friends he appointed to state jobs were chased from office by ethics complaints.

Murkowski scrapped the state's "longevity bonus" program, a monthly cash payment to seniors. And even though the Legislature tried to block his efforts to buy a jet, he kept pushing and eventually got his plane — a craft his critics dubbed the "Bald Ego."

On top of all that, the public and many legislators were miffed by Murkowski's secret negotiations with oil lobbyists over a major rewrite of oil-tax laws and the industry's gas-pipeline proposal.

By election time, one local columnist had taken to calling him America's "most unpopular nonindicted governor." Murkowski's 19 percent showing in the primary was the worst in state history for an incumbent governor.

State Rep. Jay Ramras, a rookie Republican lawmaker from Fairbanks, said the election was a "referendum on the leadership style of a very long-in-the-tooth ex-U.S. senator."

But Palin said it was more than that. Palin, former mayor of Wasilla, a small town 40 miles north of Anchorage, won despite being outspent by both of her opponents and her rocky relationship with Republican Party leaders.

It was Palin who pressed the ethics complaints that forced out two of Murkowski's appointees. And she was a leading critic of Murkowski's dealings with the oil industry.

Aside from going for Palin's populist message, voters also approved a ballot measure that largely restores campaign donation and lobbying limits that Murkowski and the Legislature weakened three years ago.

"People are saying, 'No more of this,' " Palin said.

Veco a prominent player

Palin said the FBI raids will only fuel that mood.

The FBI remains mum about the investigation. But agents were searching for "anything of value" provided to legislators by Veco executives and documents related to the recent high-stakes oil-tax and gas-pipeline talks, according to a copy of a search warrant obtained by the media.

Agents were also looking for hats or garments with the slogan "Corrupt Bastards Club" or "Corrupt Bastards Caucus," nicknames several lawmakers jokingly gave themselves after a newspaper column accused them of being too cozy with Veco.

Veco has long been a prominent political player. The company's top executives handed out about $1 million in state and federal campaign donations during the past decade — much of it coming in the past two years as the gas-pipeline talks heated up, according to the Anchorage Daily News.

The company, which has been cited in the past for violating campaign finance laws, also has paid big consulting fees to state lawmakers.

Sen. Ben Stevens, for instance, has received more than $250,000 in consulting fees from Veco since 2001. State law doesn't require Stevens or the company to disclose what work he did — and neither is saying.

Knowles and Palin have both sworn off donations from the company, although Knowles received more than $20,000 from Veco in past elections. In Washington state, U.S. Senate candidate Mike McGavick said he returned $14,000 he received from company executives.

Meanwhile, several Democratic legislators have decried what they say is a "culture of corruption" in the Legislature.

"I've watched for the last 10 years, and each year these Veco people and industry people get more and more blatant," said Rep. Harry Crawford of Anchorage.

But others say they haven't seen the unseemly atmosphere the Democrats describe.

"Everybody gets their arms twisted, but that's part of the job," said Rep. Ralph Samuels, an Anchorage Republican. "I've never had anyone say, 'Hey, we held a fundraiser for you, you better vote for our bill.' "

State Republican Party Chairman Randy Ruedrich notes that federal probes sometimes turn out to be little more than fishing expeditions.

But Mike Doogan, a former newspaper columnist who is running as a Democrat for the state House, said he doubts the feds would raid the offices of a powerful U.S. senator's son without good cause.

"Anybody who says this was a fishing expedition, go whistle," Doogan said. "They've got something."

And then there's Mr. Whitekeys. With Alaska in the midst of such political upheaval, Whitekeys said he worries he's "giving up a gold mine" by giving up his stage at the Fly-By-Night.

"But that's why we're closing," he laughed. "Because I got all that money under the table from Veco and now I don't have to work anymore."

Ralph Thomas: 360-943-9882 or rthomas@seattletimes.com

Copyright © 2006 The Seattle Times Company

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