After serving two terms as governor, twice being elected as Anchorage's mayor, but losing a 2004 bid for a U.S. Senate seat, Tony Knowles is running for governor again. At an age when some think of retirement - he is 63 - Knowles relishes the challenges and what he sees as historic opportunities to shape Alaska's future for generations. "I hadn't been thinking of running in 2006, but as time passed, the more I realized what a historic point we are at, with a natural gas pipeline. I believe everyone has a responsibility to make a contribution when the opportunity presents itself."

"We can do it better"

"Remember that famous bumper sticker?" Knowles asked. "It was a prayer, something about a chance to do it (manage a pipeline boom) all over again and this time do it right? Well, we have that chance.

"If we can get our fair share from a gas pipeline deal and don't squander the benefits, we will have job benefits and business opportunities of unbelievable dimensions, of converting a huge nonrenewable resource into a lasting legacy, such as in education, that will last for generations."

Knowles said he is also mindful of the governor's role as commander in chief of the Alaska National Guard, which carries with it a responsibility to ensure Alaskans of basic safety and timely response in crises. Knowles takes this seriously because Alaska has a large number of retired and active military personnel, and he himself is a Vietnam veteran.

"Experience is important"

Knowles points to his experience in Alaska, not only in public service but as a small business owner. "We paid out over $10 million in payroll from our restaurant in the years we had it, and we had a full health benefit package for our employees," he said. That gave him the nuts-and-bolts experience of running a business. "I remember that every Jan. 4, my wife, Susan, and I would be typing out W-2 (tax) forms. That was in the days when we had to do payrolls by hand."

Knowles had an early-on connection with the oil and gas industry, too. He was a roughneck on drill rigs in Cook Inlet and the North Slope in the 1960s. That experience has helped shape Knowles' understanding of the industry, he said.

Track record

Knowles points to his track record as governor in working with the oil industry: In 1995, soon after he took office, he went to London and Houston to meet with the chief executives of the major North Slope producers to hear their concerns. It was an unprecedented action for an Alaska governor. It prompted criticism, but it was meant to signal that the state was "open for business" after years of contentious disputes and lawsuits with the industry over taxes.

He negotiated with BP on a controversial change in fiscal terms on offshore leases on BP's Northstar field, which was then undeveloped. After thorough scrutiny, the Legislature approved the change, and it was further upheld by the state Supreme Court after litigation. Northstar is producing 60,000 barrels per day today and is bringing the state more money under the negotiated fiscal terms than it would have under the previous terms. Knowles also pushed then-Interior Secretary Bruce Babbitt to open up the National Petroleum Reserve- Alaska for leasing and exploration. Babbitt did so under strict environmental terms urged by the state. Discoveries have since been made in NPR-A and the first production is expected in 2009.

The gas pipeline

PHOTO/Rob Stapleton/AJOC Former Gov. Tony Knowles, the Democratic candidate for governor in the coming election, outlines his position on a natural gas pipeline during an interview at the Journal of Commerce's offices Sept. 8.

When he was governor, neither the industry nor the state were ready to seriously tackle the pipeline, he said. Natural gas prices were at $2 per thousand cubic feet (mcf) during most of Knowles' tenure as governor, and there was no interest in a gas pipeline by industry. "When prices increased to $3, to $3.50, it started to look as if it might be feasible. That's when I appointed my first gas pipeline task force. We were looking for the Legislature's help to bring the industry to the table with something that was marginally economic." It was a process that eventually led to the Legislature's passage of the state Stranded Gas Act in 1998, the law that sets out procedures for the state to grant incentives to get industry to build the pipeline.

As for the current gas pipeline contract proposal, Knowles thinks the long-term commitment of state royalty and tax-share gas-in-kind "is the wrong direction," because it places tremendous obligations and risks on the state. "Marketing gas on that scale is not a business we should be in," he said. The state's current policy with oil royalty is to take it both in-kind and in-value (cash payment) and the in-kind royalty oil is sold to refiners in the state. The scale of these sales, and the risk to the state, is much smaller than that contemplated in the current gas deal, he said.

However, Knowles said he understands the discomfort of the producers and the problems created for a gas pipeline because of the state's current ability to switch between in-value and in-kind payments every six months. "They want us to make up our mind and do it one way or the other," he said. "I would preserve the option to switch back and forth. It is important for the state to have that choice. However, it could be done over longer intervals of time. This is a negotiating point."

Gas pipeline ownership

Knowles also doesn't see pipeline equity ownership as a must-have for the state, though he wouldn't reject it if there are advantages, he said. "In my judgment the decision would be made based on two things, first whether the pipeline is a good place to invest, financially, and second, whether there is value in having a seat at the table as an owner." Under any circumstance there would have to be more public discussion on the idea. "I wouldn't foreclose it, but I would think of something less than 20 percent," which is the share contemplated in the current agreement.

Point Thomson gas field

In the debate over gas leases held by the major producers in the North Slope's Point Thomson field, Knowles said he would take the leases back. "In 2001, my last year in office, we were on the 17th or 18th annual renewal of those leases. Pat Pourchot, who was commissioner of Natural Resources, and Mark Myers, who was oil and gas director, put together an agreement with Exxon Mobil that was to be the last chance, with development beginning in 2006. It was a deal signed in blood. Yet they (the Murkowski administration) let them off the hook six months ago," by delaying a finding that the lessees were in default of obligations. "It has made a mockery of the state's leasing process." Exxon Mobil was just granted another extension recently.

Project labor agreement

Knowles said he supports having a PLA in the gas contract. "The goal is for Alaskans to have an opportunity to go to work. A project labor agreement is a court-tested way in which Alaskans can be given preference in jobs. It's the only legal way we can really ensure resident-hire.

"The other part of this is that we have to prepare our work force through training for these opportunities," he said. "Our vocational training is nowhere near what it needs to be to meet the current demand for qualified workers, not even considering what will be needed for the pipeline."

Education

Knowles supports an overhaul of the current school funding formula so that every district in the state meets its operational needs. Accountability will also be required. He is committed to using surplus oil and gas revenues to create an education trust fund to raise the quality of schools.

He has a particular interest in vocational training. An unfortunate side effect of the federal No Child Left Behind Act is that the new federal rules divert classroom time and vocational training has been hit particularly hard. "Forty percent of Alaska high school students do not graduate, and Alaska is 45th in the nation in its rate of high school graduation. We need to make high school more relevant and interesting to retain the kids who are just not interested in academics, to encourage them to stay in high school and graduate." Stronger vocational programs are one way to do this, along with programs in the arts and music. "Why do we have to cut off high school at 2 p.m.? We haven't explored these options."

It is through acquisition of skills, training and jobs that Alaskans will reap the most benefits from a gas pipeline. Virtually all skilled crafts these days require education and training. "You almost have to know calculus to be a carpenter," Knowles said.

Health care

"Obviously this is a national issue, but there's much that Alaska can do," Knowles said. "We now have 120,000 Alaskans not covered by health insurance, and aside from the moral question involved - that these people should have access to preventative care - the hard-nose bottom line is that this drives up the cost of health care for all the rest of us when these people go to hospital emergency rooms, which are required to treat them. Twenty percent of the costs of our largest health providers is the cost of care which can't be collected. All the rest of us pay for that."

Knowles said he has several ideas on how to extend affordable health care to Alaskans who now don't have insurance. One is to investigate an arrangement in which individual Alaskans can join large pools of state employees now covered by group insurance. He would certainly roll back the tightening of eligibility requirements for Denali Kidcare instituted during the Murkowski administration. That resulted in many young Alaskans no longer having access to health coverage through Denali Kidcare, including 900 pregnant women. Today there are 28,000 Alaska children without health coverage. "It's my goal that that every child in Alaska have access to affordable health care. It's the right thing to do."

Tim Bradner can be reached at tim.bradner@alaskajournal.com.

PHOTO/Rob Stapleton/AJOC Former Gov. Tony Knowles, the Democratic candidate for governor in the coming election, outlines his position on a natural gas pipeline during an interview at the Journal of Commerce's offices Sept. 8.

Tony Knowles was born Jan. 1, 1943, in Tulsa, Okla. He has been married to Susan Morris Knowles since 1968. They have three grown children - Devon, Luke and Sara. Knowles served in the U.S. Army from 1962 to 1965 in the 82nd Airborne, Military Assistance Command Vietnam, intelligence unit. He has a bachelor's degree in economics from Yale University (1968).

After graduation, he moved to Alaska and worked on oil drilling rigs on the North Slope and in Cook Inlet. In 1969, Knowles started his first of four restaurants. Knowles began his political career at the local level, serving on the Anchorage Assembly from 1975 to 1979, and two terms as Mayor of Anchorage from 1982 to 1988. He was elected governor in 1994 and re-elected in 1998.

PHOTO/Rob Stapleton/AJOC Former Gov. Tony Knowles, the Democratic candidate for governor in the coming election, outlines his position on a natural gas pipeline during an interview at the Journal of Commerce's offices Sept. 8.