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.
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