T. Boone Pickens: the Face of the Future of Energy?

July 28 2008 / by Mielle Sullivan / In association with Future Blogger.net
Category: Energy   Year: General   Rating: 15 Hot

For 80-year-old Texas oil tycoon T. Boone Pickens the answer is blowin’ in the wind.

When you imagine of the future of U.S. energy, chances are the you don’t think of 80-year-old Texas Oil tycoons.  At least you didn’t until T. Boone Pickens began campaigning for the The Pickens Plan just a few weeks ago.  With oil prices heading towards $5 a gallon in the midst of a recession, an administration change on the horizon and the clean-tech debate drawing a great deal of attention and even more capital, the U.S. sorely needs a high profile spokesperson for energy policy change.  So is Pickens our guy?  And is the timing finally right for some serious energy policy change?

The Pickens Plan calls for a reduction in U.S. use of foreign oil by 38% in 10 years by greatly expanding wind power in the center of the country to be used towards electricity production, thus freeing up natural gas reserves to be used for transportation.  22% of U.S. electrical generation comes from natural gas.  The plan argues that if the current 1% (48 billion kWh) of power converted from wind can be expanded to 20% (960 billion kWh) then the more than 6.2 trillion cubic feet of natural gas used annually to produce electricity could be used for transportation starting with industry vehicles like trucks and buses.  Furthermore, unlike oil, natural domestic gas production can increase and actually did see a 9% rise from 2007 to 2008.  U.S. natural gas reserves are twice that petroleum.

But why has Pickens chosen to promote his plan at this exact moment?  U.S. dependence on foreign oil has been an issue for at least 20 years and it’s not as if the other selling points of his plan—lower CO2 emissions of natural gas, the need to expand renewable energy infrastructure, and the potential of wind power in the U.S.—are new to the political landscape.  Environmentalists and many Democrats have been shouting these points for years.  The only thing new to these ideas is that Pickens is promoting them.  Atop in all, Pickens is a particularly unlikely renewable energy spokesperson.  Besides being a billionaire oil tycoon, he has been an outspoken supporter of the Republican party and contributed $5.5 million to help defeat John Kerry elect George W. Bush in 2004.

But the times they are a changin’.  President Bush’s term is up.  The administration change in January coincides with a rising tide of forces that include the escalating oil prices, more apparent climate change, the rise of clean-tech and rapidly increasing public demand for energy policy changes.  All of this could herald drastic infrastructure changes catalyzed in large part by huge government investments and subsidies that now seem inevitable.  Such investments mean someone out there is going to make a hefty chunk of profit.  T. Boone Pickens is jockeying to grab the largest slice of that pie – or at the very least a seat at the big boys’ table.  And for him, the answer is, indeed, blowing in the wind.

Pickens’ company Mesa Power LP is already constructing the world’s largest wind power plant in Pampa, Texas.  When completed it will generate fourhundred thousand megawatts of electricity.  Pickens also owns a company called Clean Energy which is the largest provider of vehicular natural gas in North America.  If anything remotely similar to The Pickens Plan does become part of future U.S. energy policy, it is a safe bet that the companies Pickens owns, or has invested in, will stand to make millions.

Following that logic, Pickens move to champion for wind power begins to make a great deal more sense, especially considering that he’s famous for generating his fortune by expanding through acquisition and corporate maneuvering rather than behaving like a traditional oil tycoon.   He founded Mesa Petroleum which then acquired Hughton Petroleum, a company 30 times larger than Mesa.  He went on to be one of the famous Corporate Raiders of the eighties. Pickens then became notorious for making fortunes by bidding for undervalued companies, but not actually acquiring them.  As soon as the stock prices for the targeted companies went up, often as a result of measures taken to resist the bid, Pickens and the investors he represented would sell their stock and abandon the bid.  This was sometimes disastrous for the targeted company – as in the example of Gulf Oil.  In one way, the Pickens Plan is just another rapid, drastic expansion of one of his own companies – a risky but high-pay off business venture.

Pickens says it’s not all about the money.  Sure he’s bound to make a fortune, but who cares, as long as the plan is good for America?  He might be right.  The plan contains some seductive arguments and has gained high profile support including an endorsement from Carl Pope, Executive Director of the Sierra Club.

Of course, the plan isn’t flawless. Even if we are able to build and install all the turbines The Pickens Plan calls for – a big IF because capacity for building wind turbines is already very strained – just 150,000 vehicles in the U.S. currently run on natural gas.  If The Pickens Plan is to succeed in reducing foreign oil imports by 38% the number of gas powered cars would have to skyrocket in 10 years, which doesn’t seem all that likely, especially considering new competing fuel formats.

But I do think we are very likely to see many more old school energy investors flock to clean-tech and renewables in the near future.  There are huge profits to be made in the imminent change of energy infrastructure in the U.S. and capital all around the world is looking for a place to go and grow.  Thus, the near-term future of energy may indeed be ushered in by the old-school faces of the industry’s past.

Will old tycoons like Pickens usher in the future of energy?

or Show Results

Comment Thread (6 Responses)

  1. nice post… I do think Pickens can help push the incumbent side of energy into a new era of thinking about our future. My own preference is to invest heavily in moving beyond the combustion engine (and liquid fuels) as opposed to trying to convert natural gas into a liquid, or put a band aid on the oil-combustion engine problem.

    If we move quickly towards electric motors we open up the field of competition to renewables. Right now you can’t put solar/wind energy into a gas tank- but electric motors allow us to use electricity and hydrogen as standard electron carriers for transportation.

    I’m sure Boone is less likely to propose something so radical. But what I like most about his energy message is the need for leadership—so hopefully others will follow. I think the Texas energy industry could turn a corner soon and it might be because of people like Pickens.

    Posted by: Garry Golden   July 28, 2008
    Vote for this comment - Recommend

  2. I think it’s pretty cool that Pickens is standing up to the challenge. Although his main concern may be in turning a profit at a time when everyone is seeing the benefit in alternative energy…I don’t see many other oil tycoons being vocal and thinking up strategies to solve the oil dependency. I think stereotypically, Republicans are known to be less concerned with the environment, so…this may a good way to convince those stereotypical conservatives out there that a plan for real change is for everyone, not just green crazy environmentalists.

    Posted by: therae   July 28, 2008
    Vote for this comment - Recommend

  3. My own preference is to invest heavily in moving beyond the combustion engine (and liquid fuels) as opposed to trying to convert natural gas into a liquid, or put a band aid on the oil-combustion engine problem.

    Yes, garygolden, I couldn’t agree more. Natural gas combustion engines are still polluting, still green house gas emitting and still reliant on fossil fuel. Electric engines give us much more flexibility and have the potential to be completely clean.

    And I completely agree with both garygolden and therae that perhaps the most important thing Pickens brings to the current energy debate is the ability and willingness to lead. I hope others, including other republicans, get with the program and get in the field.

    Posted by: Mielle Sullivan   July 28, 2008
    Vote for this comment - Recommend

  4. Hopefully this plan is just the beginning of a generalized move towards environmentally-friendly and renewable energy.

    Posted by: jvarden   July 29, 2008
    Vote for this comment - Recommend

  5. I’ve previously written about this here and here.

    In the former I question his motives and intentions. In the second I point out that Pickens makes no effort to point out that the primary bottle-neck on further expansion of windmills is the lack of distribution infrastructure. Further, he fails to acknowledge that the Texas legislature just approved $5 Billion to improve this situation. To explicetly include expected eminent domain actions to force landowners to permit power lines and towers across their property. Pickens had to be aware this was being debated in Austin. I find his timing and silence on this issue particularly curious given his pointed refusal to acknowledge how his business investment only adds to the distribution problem without this taxpayer money.

    Pickins wants to divert his natural gas business to differently regulated markets – with differently regulated price structures – and wants his windmill’s output delivered to customers at taxpayer expense. To repeat myself, nice work if you can get it.

    Posted by: Will   July 29, 2008
    Vote for this comment - Recommend

  6. Thank you Will for shedding even more light on the distribution problem. It is a huge problem. I also certainly agree that Pickens portraying himself as a sort of savior is laughable given his history and how much money he stands to make—so is his call for an “army” of grassroots organizers to push his plan through.

    But I wonder if the wide spread use of eminent domain and large taxpayer funded distribution infrastructure is avoidable if oil prices continue to rise.

    Posted by: Mielle Sullivan   July 29, 2008
    Vote for this comment - Recommend