For over two decades I was part of a conference series discussing international financial reform and economic development.  Eventually, I was hired by the State of Alaska as the primary legislative assistant for writing the legislation to create the Alaska State Bank as a development and infrastructure bank.

During my years in the conference series, I witnessed a never-ending parade of economists and political leaders who testified to the injustices and mistakes made in financial systems.

One of the lessons I learned is that financial systems are inherently predatory and in recent years increasingly less able to make investments in physical production so national and state leaders must be very careful to avoid debt pyramiding traps.

One of these traps is to build infrastructure using excessively large foreign currency originated loans that create extreme exchange rate risk such as in the China agreements signed by former Alaska Governor Bill Walker in his attempt to build a gas line from the North Slope—Walker should have specified the use of foreign owned USD already on account at the United States Treasury and Federal Reserve before signing the agreements.

Another mistake is to build massive private projects that do not have the required contracts that provide the cash flow necessary to make debt service payments such as what is currently being attempted by Alaska Governor Mike Dunleavy with his proposal to build a gas line from the North Slope—without the contracts Dunleavy should have primarily advocated for Congressional support for the project.

There are many other mistakes that are too numerous to detail here but the general principle is to avoid debt pyramiding by focusing on credit guidance in locally assessed loan origination using the credit creation method in private and public banks in combination with the protection and subsidies from the nation’s sovereign issuer of the currency.  The is the genius behind the Alaska State Bank.

Alaska is faced with stranded gas that is over 800 miles from an ice-free port that competes worldwide with gas that is at port or near a port—the rate of state taxation cannot change this basic fact.  Because of this extreme disadvantage the best non-debt pyramiding solution is for the United States Congress to identify the Alaska gas pipeline from the North Slope as a national security requirement under the protection of Congress. 

Without the support of Congress, a gas line from the North Slope can never provide international or statewide competitive pricing because of the excessive overland transportation costs and the decline in our financial system’s ability to create credit for physical production.

Without Congress, one alternative solution is to buy and install LNG modules on the North Slope and contract for ice-breaking LNG carriers.  A stronger non-Congressional alternative solution is to install modules on the North Slope for extracting methanol, propane, and hydrogen and produce low sulfur diesel for instate use and export.

The best alternative is to develop the Susitna Basin gas fields so very inexpensive gas can fuel populations and create an LNG export potential while creating an incentive for new industrial productive capacity.  Gas fields exist in many locations in Alaska that do not require over 800 miles of pipeline—the institutional hostility toward small producers should come to an end.

The key to Susitna Basin development is the public and private building of water and hydrogen processing and environmental cleanup facilities in the Susitna Basin and at Port MacKenzie.  The gas extraction from the Susitna gas fields and all modern industrial productive capacity requires water and hydrogen processing to maximize profitability so these new facilities will help lay the foundation for Alaska’s long-term employment goal of the primary reduction strategic minerals and strategic materials manufacturing.

There are many exciting opportunities for the future of Alaska but let us consider mistakes that can be made by political leaders who may have the best of intentions but instead open the door to debt pyramiding that destroys the living standards for Alaskans. 

The economic fact is that if gas prices continue to rapidly rise and there are no new investments in affordable gas there will be death in Alaskan populations.

If importing LNG is required in a last-ditch emergency attempt to protect Alaskan populations this will be a clear sign that Alaska’s political leadership is a complete failure at economic development and most politicians in Alaska should never be reelected.

Let Alaskans expand the process of demanding federal assistance in building the gas pipeline from the North Slope, and at the same time consider North Slope LNG tanker exports, produce low sulfur diesel, and most important, develop water and hydrogen processing and productive capacity gas facilities in the Susitna Basin that helps bring new manufacturing industries to Alaska using the newly created Alaska State Bank.

Charles Duncan