Alaska
State Profile
Last Updated July 8, 2003
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With 16% of the nation's land area and 0.22% of the nation's population, Alaska is America in the Arctic, a state that was the creation of a federal government which it now often resents and an individualistic society that has responded to its unique situation in creative ways that commend themselves to the attention of what Alaskans call the Lower 48 or, more simply, Outside. Alaska would not be American at all but for the expansive dream of Secretary of State William Seward, who took advantage of a fleeting opportunity to create an American Pacific empire by purchasing it from Russia in 1867 for $7.2 million. The Alaska Territory owed most of its early growth to decisions made by the federal government. It started growing feverishly with the Klondike gold rush in 1897, just as William McKinley reaffirmed the gold standard. Anchorage, the major city here, had its beginnings in 1913 as the chief worksite of the federal government's Alaska Railroad. The Alcan Highway, connecting Alaska to the Lower 48, was built by the Army in the grim war days of 1942, when the Aleutian island of Attu was held by the Japanese, the only part of the United States occupied by a foreign enemy since the War of 1812. During the Cold War, Alaska was the only state abutting the Soviet Union, across the Bering Strait and over the North Pole. Even today Alaska remains militarily strategic, and the military remains a major presence at Elmendorf Air Force Base near Anchorage and Fort Wainwright near Fairbanks. Alaska's giant size remains hard for Americans to comprehend: If superimposed on the Lower 48, it would stretch from Florida to southern California to Lake Superior. One-third of Alaskans have no access to the state's roads and are reachable only by boat or airplane; Alaska has, per capita, six times the number of pilots and 14 times the number of airplanes as the rest of the nation, and 663 registered airports. Yet only 627,000 of 284.7 million Americans live here, more than 40% in the Anchorage area, the rest in Fairbanks in the interior and Juneau in the Panhandle and scattered in small towns and Native settlements over millions of acres of stunning scenery and bleak tundra.
Statehood was won in 1959, after a valiant campaign. But statehood did not end federal decision-making power over Alaska--or the widespread resentment of it. Alaska's economy at statehood depended on fishing, oil production in Cook Inlet around Anchorage and the military--all federally regulated or controlled. Less than a decade later, however, Alaska's economy and public life were reshaped by the discovery of North Slope oil. It began suddenly, accidentally: On the day after Christmas 1967, at Prudhoe Bay on the Arctic coast, an undulating roar as loud as four jumbo jets directly overhead drew a crowd of 40 men, heavily clothed against the 30-below weather, to an oil rig. Suddenly a natural gas flare shot 30 feet straight up: This was the great 12 billion barrel North Slope oil field. Earlier oil companies had drilled seven dry wells on Prudhoe Bay, and Arco chief executive Robert Anderson wouldn't have ordered this last try, except that he had a drilling rig nearby. This was the greatest oil strike ever in the United States and the beginning of much of today's Alaska.
Finding oil in Prudhoe Bay was something like finding it on the moon. It was not clear in 1967 who owned the oil or how it could be taken out. The Statehood Act of 1959 provided for the state to choose its own public lands, but only after settling Native land claims. Congress, not Alaska, settled such claims in the 1971 Alaska Native Claims Act which set up 12 regional and 220 village Native corporations, gave them $962 million and time to select their own 44 million acres, and ended the Interior Department's freeze that enabled the state to stake claims to mineral-rich acreage. The only feasible way to get the oil out--the Arctic Ocean ice only breaks up in late July for six weeks of the year--was a pipeline. But that was opposed by environmentalists for fear it would destroy the delicate permafrost and interfere with caribou migrations. Development-minded Alaskans got a pipeline bill through Congress in 1973, by just a one-vote margin in the Senate, but the pipeline had to be built on stilts and wasn't opened until 1977, and Congress banned oil exports to Japan and other obvious East Asian markets. Then in 1980, after brilliant lobbying by environmentalists, Congress passed--over the objections of Alaska's two senators and in the face of tears from its Congressman-at-Large Don Young--the Alaska Lands Act, which set aside 159 million acres as national parks, national monuments or wilderness: One-third of the state was protected from development. Much, if not all, of this was for the best. The pipeline came on line just as oil prices were approaching their peak, thus generating maximum revenues to the state, which gets 100% of the royalties. The environment was protected much better than it would have been without the environmentalists' goadings-- while there have been complaints about pipeline and oil field safety, operations are good by industrial standards. The caribou herd has risen from 3,000 animals to 32,000 and the Natives got more autonomy than the non-Native majority of Alaskans would have given them. With oil providing more than 80% of its revenue, the state abolished its income tax in 1980 and created a low-tax regime that has helped Alaska to grow even as oil revenues and military spending declined.
Wisely, Alaska did not squander its windfall. In 1976, Governor Jay Hammond persuaded the legislature to establish a Permanent Fund for most of the oil revenues. Each year it presents every one-year resident with a dividend of 20% of the average of profits for the preceding five years--$1,850 in 2001, $1,540 in 2002. More important, even though $12 billion has been paid in dividends, most of the money is invested. The North Slope is producing only half as much oil as in the late 1980s, but the Permanent Fund was worth $21.8 billion in 2002 (down from a $27.8 billion peak in 2000), and most of its income comes now from investments rather than oil. Some speculated that Alaska voters would pressure legislators for bigger payouts. But Alaskans have acted like investors: They want their dividend checks not just now, but in the future. In September 1999, after Governor Tony Knowles proposed tapping the Permanent Fund, voters rejected the change by an 83%-17% margin. Permanent Fund checks are especially valuable to Natives who live on subsistence fishing and hunting, and help account for the fact that Alaska has the smallest income gap between rich and poor of any state.
Similarly, the 12 regional Native Corporations created by the Alaska Native Claims Act have proved to be successful, not just in providing income for Natives, but in helping them preserve Native traditions and adapt to Alaska's market economy at their own pace. On Indian reservations in the Lower 48, all land is held by the tribe and supervised by the government; elections held on the political model have produced a winner-take-all politics that is too often corrupt and incapable of pursuing long-range strategies. The corporate model, on the other hand, allows the Alaska Native corporations' management more continuity in office--though some have made bad decisions and been thrown out. But the cumulative voting method, by which a minority can get a seat on the board, has produced management that is sensitive to all opinions. Huge windfalls are avoided because 70% of profits from mineral sales are shared by all corporations. But the corporation itself, not a distant federal bureaucracy, is left with the choice of how much ancestral land to retain and how much to exploit economically. Individual Natives can make the transition from their traditional communal economy, living on subsistence fishing and hunting, or make their way in the market economy in Anchorage or Fairbanks or the North Slope oil fields, as many have.
Not all is rosy here. Native villages in the bush have essentially no private sector economy, and rates of alcoholism and suicide are agonizingly high. In the solemn mien so typical of Natives, one may be seeing the memory of great kill-offs by disease, which struck Native villages as recently as the 1920s. And the issue of subsistence hunting has been simmering in Alaska politics since the state Supreme Court in 1989 struck down the subsistence preference for fishing and hunting by rural residents. Efforts by Governor Tony Knowles and Senator Ted Stevens to get the legislature to approve a constitutional amendment to allow rural preference failed because conservatives feared Native commercial sales and overfishing. In October 1999, the U.S. Interior Department took control of fisheries (it has managed hunting since 1990), and in 2001, shut down commercial and sports fishing for a time to protect Natives' subsistence. Salmon runs have been declining for a decade, and the salmon industry is ailing. Alaska used to produce half the world's salmon, but most are now produced by salmon farms in foreign markets. To keep Alaska's fishermen employed, the state in 1959 banned fish traps like the ocean pen nets used in Chile, Norway, Scotland and Canada, and it now limits boat and net sizes and the number of commercial fishing permits. Salmon prices are far below their late 1980s peaks, and it's not clear whether Alaska's heavily manned and tightly regularly fishing business can survive in its current form.
One of Alaska's economic assets has been its three-member congressional delegation which, in November 2002, when Senator Frank Murkowski was elected governor, had 86 years of seniority and key committee posts with which to fight for Alaska's economic interests against the stands of environmental restriction groups. Not all their fights have been successful. They have failed to get approval of oil drilling in a small sliver of the Arctic National Wildlife Refuge--an area the size of Washington-area Dulles International Airport in an area the size of Delaware--although it was on the verge of being approved in 1989 when the Exxon Valdez ran aground in Prince William Sound in March 1989. Environmental groups have made ANWR oil drilling one of their main issues in their direct-mail fundraising even though ANWR is estimated to have between 9 and 16 billion barrels of oil, the most by far in any untapped U.S. oil field. George W. Bush backed it in his 2000 presidential campaign and put it into his energy bill; it passed the House, with strong support from the Teamsters Union, by a 223-206 margin in August 2001, but was blocked in the Senate in 2002. Other energy development may be going ahead--in the Copper River Delta on Prince William Sound, in the Cook Inlet, on the man-made Northstar Island in the Beaufort Sea--but these are small potatoes in comparison.
Another contentious issue is logging in the dense Tongass National Forest in the Panhandle--the economic mainstay of Ketchikan, where Murkowski grew up. In 2001, the Clinton administration banned logging in roadless areas in national forests, which applied to 9.7 million acres in Alaska. Once loggers cut 600 million board-feet a year; the Clinton ban reduced that to 50 million board-feet, enough for one or two sawmills; the Bush administration seems inclined to allow 155 million board-feet. Frustration over ANWR and Tongass may be one reason Murkowski ran for governor.
Alaska remains heavily dependent on oil and on the federal government, so there is some reason for unease about its economy. The state government benefited when oil prices were high in 2000, but was strapped when they fell in 2001 and 2002. The state receives hundreds of millions of dollars every year in "Stevens money"-- construction, highway, sewer and harbor projects shepherded by Senator Ted Stevens, chairman of the Appropriations Committee and the most senior Republican in the Senate. But Stevens, though he was reelected at 78 in 2002 by a 78%-11% margin, will not remain in the Senate forever. There are some promising signs of private sector development, more than in the nation's other offshore state, Hawaii. One is tourism, with more than 1.4 million visitors spending over $1.8 billion a year--some arrive on cruise ships and others head to Denali National Park and Mount McKinley. Tourism is the mainstay of the old Russian-settled capital of Sitka and of the private sector economy in Juneau. Another spur is the air freight business. The Anchorage airport, near the top of the world, is seven hours from New York, Tokyo and London, and is a major transfer point for UPS and FedEx. More all-cargo, wide-bodied aircraft move through Anchorage International than any other U.S. airport. A third reason is that this is a low-tax, low-regulation state, which has been attracting independent-spirited, entrepreneurial-minded young families; Alaska has the nation's third-youngest population, although its small elderly population is growing (up from 4% to 6% in the 1990s). Big institutions don't run things here: Unions, politically pivotal 25 years ago, are much less so now, and the oil companies, while not unpopular, weren't able to stop higher state oil taxes. The biggest private employers now are not the oil companies, but Safeway and Providence Alaska Medical Center: This is an economy that buzzes with small business success.
Politically, Alaska is heavily Republican, with a libertarian streak. In national politics, it has been solidly Republican since the 1970s because national Democrats have favored locking up natural resources. In 2000, George W. Bush carried Alaska 59%-28%, carrying even the traditionally Democratic Panhandle and the Native-majority bush country beyond Anchorage and Fairbanks. No Democrat has been elected to Congress since 1974, though some contests have been close. Oddly, Republicans were shut out of the governorship from 1982 to 2002, until Frank Murkowski finally recaptured the office in 2002. The legislature is not only solidly Republican, but solidly conservative. Referendums show Alaskans to be increasingly conservative, though with a libertarian tinge: In 1998, they voted for medical marijuana, English-only and a ban on same-sex marriage, though a ban on wolf snaring was defeated. In 2000, they rejected an initiative that would not only have legalized marijuana but would have paid restitution to those convicted of marijuana offenses.
Some regional differences persist. Anchorage is much like a prosperous Rocky Mountains' metropolis with longer summer days and winter nights; it is affluent and booming, with an unusually high percentage of working women. Politically, it is solidly Republican. So are the smaller settlements in a 200-mile arc around Anchorage, which have been growing even more rapidly: The Matanuska Valley (one of the few places in Alaska where farming is possible), Seward, the Kenai peninsula and the little port of Valdez at the southern terminus of the pipeline. Fairbanks, Alaska's second-largest city, is a pipeline and mineral service center deep in the interior, unprotected from Arctic winds in winter and crowds of mosquitoes in the brief but hot summer. It tends to vote Republican, too.
The old Alaska, first settled by Russians, can be seen in the towns of the Panhandle and in the capital of Juneau, located on an inlet of the Pacific up against a steep mountain. These are historically Democratic, but variable these days; in the 2002 gubernatorial election, Ketchikan voted for Murkowski, champion of logging in the Tongass, while Juneau, the capital, voted for Ulmer, the city's former mayor. Juneau is a remote site for most Alaskans, reachable only by harrowing and often-cancelled plane rides through the fjords, and there have been efforts to move the capital to a site near Anchorage. Alaskans voted to do so in 1974, but rejected proposals to pay for it in 1978 and 1982. Juneau, threatened with the loss of 40% of its economy, has had no trouble raising up to $1 million to keep state government there. Juneau defeated a proposal to move all state government by 55%-45% in 1994 and a proposal to move the legislature by 67%-33% in 2002. Mostly Democratic is the bush, the villages where Natives--Athabaskans, Aleuts, Yupiks, Inupiats--are the large majority. Natives make up 15% of Alaska's population and nearly 50% in the vast lands north and west of Anchorage and Fairbanks. They are greatly outnumbered and outvoted on many issues, and yet are the object of awed respect for their achievement in building civilizations in such a forbidding environment.
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