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.

That was when Sarah Palin reared her head.

She saw the launching of a natural-gas-pipeline project as a God-given opportunity to prove herself bigger than Big Oil. Thus was born, in the spring of 2007, the Alaska Gasline Inducement Act, or AGIA, under the terms of which the state would pay up to $500 million in startup money to the company it selected to build the pipeline. The chosen company would have to comply with AGIA’s stringent, inflexible terms. Certain provisions, such as the state’s refusal to set tax rates in advance or even specify the formula by which they would be calculated, seemed designed specifically to discourage Exxon Mobil, BP, and Conoco­Phillips from participating.

In fact, the terms discouraged almost everybody. In the end, the only bidder to meet AGIA’s requirements was the Calgary-based pipeline-construction company TransCanada. Nonetheless, Palin was thrilled. She felt that with AGIA, she’d stuck her thumb in the eye of Big Oil as no governor before her ever had. She was good, and they were bad, and she’d defeated them. She was Joan of Arc at Orleans.

There was only one problem: Trans­Canada didn’t have any gas. Exxon Mobil, BP, and ConocoPhillips had the gas. In her populist fervor, what Palin had done—aided and abetted by the state legislature—was contrive to pay as much as $500 million to a foreign company to look into the possibility of someday building a line.