BP Capital Management Chairman Boone Pickens: Gone With the Wind
January 30 2009 by Jennifer Pellet
Oilman and former takeover operative T. Boone Pickens begins the last chapter of his book, The First Billion Is the Hardest, with the cunning observation that “a fool with a plan can outsmart a genius with no plan any day.” Anyone with a TV has seen him pitch his “Pickens Plan” (PickensPlan.org) in 60-second spots: the country imports too much “foreign” oil, he says, and the only way to wean us off the addiction is to move natural gas from power generation into vehicle transportation and use wind for up to 20 percent of the country’s electricity generation.
Actually Pickens doesn’t mind “foreign” oil (Canada is the U.S.’s biggest oil provider) so much as he objects to oil from the Middle East and Venezuela, regions of the world that are hostile to American interests. In this he is not alone. In CE’s December issue, FedEx CEO Fred Smith underscored the national security threat posed by relying on such sources for imported oil.
The question is, what is the best way to reduce dependence on oil from volatile sources? As
During the 1980s and early 1990s Pickens lost much of his fortune in natural gas when prices failed to rise as expected. But the Oklahoman was not deterred. At the age of 80, Pickens is running a hedge fund and living with his much younger wife, Madeleine; displaying the energy of someone half his age as he travels from town to town; and extolling his deliverance message to both Obama and McCain during the presidential campaign. More recently he has sunk $10 billion into his 4,000-megawatt wind farm in
Recently he spoke at a Manhattan Institute forum in
In these pages, FedEx CEO Fred Smith took issue with your energy proposal, specifically your preference for using natural gas for short-haul transportation versus using hybrid electric vehicles. “This doesn’t make a lot of sense to me,” Smith said, “because you have to build a whole new infrastructure in order to distribute the natural gas. We already have an electric grid that could be improved to accommodate hybrids. It would make more sense to use natural gas to generate electricity.” How would you respond?
We can do both. We have as much as 750 trillion cubic feet of gas. That’s a lot. There’s enough natural gas to do transportation and power generation. Hybrid electric vehicles will be more expensive than if they were powered just on natural gas.
Hybrids will continue to use hydrocarbon-based fuels to work with the battery. So you’ll use gasoline or diesel, which today is a foreign fuel. So it doesn’t fix the problem I am talking about. Yes, it helps. So I am for plug-in hybrids. I am for anything that uses less foreign oil. That’s why I support wind energy. We have more wind in
I’m always reminded, the wind doesn’t blow all the time. Really? If you’re from
The more I got into studying the problem, the more convinced I became that
But experts contend that there’s a technical problem with wind. For one thing, even the best wind farms generate only about 30 percent of their theoretical capacity. In addition, most power generated by wind now is close to the electrical grid so it can go to where the electricity is consumed. The North Texas-to-the
Line loss is about 4 percent. And where, if we were going to put something safe in
Parts of what you say are true. But you’ve got to move to the problem. You can’t sit here and, like a guy said to me once, “You know, Pickens, the best time to have planted that tree was 20 years ago. But the second best time is today.” You better get a plan. We have to have a plan.
Does your plan price the cost it would take to improve our electric grid in order to carry out your wind plan?
Without question. I’ve been over this at length with Warren Buffett. He said, “Boone, we can do this. Private money can do the whole thing.” One thing will happen if you put in a national grid. Power will certainly be cheaper because an upgraded grid will be 20 percent more efficient. There isn’t any question that this is on the table with Obama now. He’s going to do this.
What do you think our President should do with respect to a call on Iraqi oil?
This came up at the White House last April when I got a chance to make a white-board presentation to President Bush and to Energy Secretary Bodman. Afterward, when we were talking informally. I said, “You’ve got to leave the country with a better energy legacy than ethanol.” I said, “If you gave me 10 things that I wouldn’t want to be tagged with, ethanol probably would be one or two.”
But, I said, “Something should be done to get a call on Iraqi oil.” Bush said, “If we tried to do something like that it’d look like we went to
The second thing I’d do would be to make a deal with the Canadians for a call on the oil at
If there were no subsidies for wind, and there were no renewable portfolio laws, which more or less mandate that states buy windgenerated power, and if we didn’t have these three- to five-year permit processes to build a nuclear plant, would you not be more interested in investing in nuclear power?
I’m for nuclear. No question. I have no problem with it at all. As far as the wind’s subsidies are concerned, if you want to build 200,000 megawatts, it’s going to be $15 billion a year for production tax credit. Okay, in the 10 years it takes to do the job it’s $150 billion. Compare this to the $700 billion we’re paying for foreign oil.Remember wind is not going to replace foreign oil. The only thing that replaces foreign oil directly will be natural gas. But we need the additional resource that wind provides. We need nuclear, too. But nuclear is going to be harder to do because the permit process doesn’t allow you to construct a plant quickly. The original cost when we built the big plant in