Own a Piece of the Pipe: A Cautionary Tale

Ethan Berkowitz’s campaign platform includes his “own a piece of the pipe” plan. If elected, Berkowitz would press for the Alaska Legislature to create a corporation – it’s exact role regarding the gas line isn’t well defined – in which Alaskans could buy stock using their Alaska Permanent Fund Dividends. There are even fancy stock certificates already printed, available for download.

This is hardly the first time that someone has appeared offering Alaskans a chance to invest in infrastructure. WC takes you back to Valdez in 1907 (this summary is from the Valdez Museum’s website):

There was much talk and speculation about construction of a railway line from Valdez into the interior and even some preliminary track laid; however no line ever reached any further than the Keystone Canyon. Two rival companies, in particular, were the cause for considerable upheaval in Valdez. The Alaska Syndicate was initially interested in using Valdez as the terminus for its line from the Kennicott Mine. The Alaska Syndicate was choosing among Valdez, Cordova and Katalla for a terminus for their railway from the Kennicott Mine. When it appeared that Valdez would not be selected, H.D. Reynolds appeared on the scene touting his plan for the Alaska Home Railroad. He convinced the people of Valdez that “his railroad was their railroad.” Many Valdezans invested their entire savings or businesses into supporting his project. Reynolds bought up much of the town; he soon owned a newspaper, hotel, bank and even some of the streets. In 1907, a shoot-out erupted over the right-of-way through Keystone Canyon between the two rival railroad companies. The Alaska Home Railroad project fell apart and the Alaska Syndicate chose Cordova as the terminus for its Copper River and Northwestern Railway. Reynolds left town in a hurry, owing a great deal of money, and was last seen in an insane asylum. Valdezans were left with no railroad, 500 unemployed workers, and little money.

You can still see the half-built tunnel in Keystone Canyon as you drive along the Richardson Highway. Rex Beach wrote the pot-boiler novel The Iron Trail (available for free on Guttenberg) based upon a loosely fictionalized history of these events. That half-built tunnel should be an object lesson to Alaskans. Not every promotional scheme will work, not every idea is a good idea and not every promotor is to be entrusted with your money.

If WC were to try and promote a plan for ownership of a chunk of the gas line, WC would have to register the deal and a develop a prospectus, a kind of detailed disclosure of the risks, benefits and chances associated with the plan. It’s a serious amount of work. The idea is to give the potential investor enough information to intelligently evaluate whether or not to buy in. It’s a felony, punishable by 5 years in the slammer and serious fines, to offer an unregistered security or tout the “investment opportunity” without an approved prospectus. Candidate Berkowitz is a lawyer, of course, so he knows all this stuff.

And maybe this securities law stuff doesn’t apply to campaign promises, which, after all, never seem to happen. Particularly in the case of Alaska governors, Alaskans simply don’t take them seriously. And WC may still end up voting for Ethan Berkowitz, because all of Governor Parnell’s problems are still there.

But you have to think about the Alaska Home Railroad and that half-completed tunnel in Keystone Canyon, too.


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