When I think of top tier investors, two people instantly come to my mind: Warren Buffett and T. Boone Pickens. And while I could talk ages about Buffett, today’s focus is going to solely be on Oklahoma native and born again environmentalist Pickens.
Pickens is well-respected but often despised for his decades of being a ruthless capitalist, giving a new meaning to the term corporate raider during the 1980s. However, he’s obviously done something right as his current net worth is about $1.4 billion and he is ranked by Forbes as the world’s 880th wealthiest person. In addition, financier websites like Seeking Alpha continuously monitor Pickens’ stock options (Our Four Favorite T. Boone Pickens’ Energy Stocks).
The investor released the Pickens Plan in 2008 which aims to decrease the US’ dependency on foreign oil by utilizing the country’s wind power and natural gas resources. The plan calls for the building of new wind generation facilities that will produce 20% of the US’ electricity while using its domestic natural gas supply for transportation fuel and power generation. The Pickens Plan website said, “The combination of these domestic energies can replace more than one-third of our foreign oil imports. And we can do it all in 10 years.”
Pickens created the proposal as a lobbying mechanism in Congress, hoping to persuade the Obama administration and legislative leaders to expedite clean energy to ensure energy independence. The plan is also a far cry from Pickens’ humble beginnings in the oil sector.
But then Pickens – one of the most respected investors in the business – withdrew his support for wind energy. The financier has tabled his renewable energy portion of the Pickens Plan and turned his focus solely on increasing the development of the US’ natural gas resources. Unfortunately, this shift has created a rift between the previous alliance, dividing environmentalists and industry groups while questions are being raised about Pickens’ involvement in the energy debate in Washington DC.
Sierra Club deputy executive director Bruce Hamilton said that excitement “about the fact that there was a major fossil fuel kingpin saying we’re addicted to oil and we need to be massively investing in wind power” has faded.
In an interview with Roll Call, Pickens said, “You can’t do wind because natural gas is too cheap.” He defended his new stance as the only practical way to move forward. And thus, Pickens cancelled most of the $1.5 billion wind turbine order from GE that was made in 2010. He said that wind power would not be profitable until the cost of natural gas rises from $4 to $6 per million British thermal unit which he predicts to happen by 2016.
The wind turbines already purchased will head to Minnesota as well as Canada (which seems like a far cry from making the US energy independent). Pickens says that he is still interested in wind power in the long-term. “You have no way to force wind [energy] in unless it makes economic sense. [The US] is sitting here on an abundance of the cleanest of all hydrocarbons. You’re a fool if you don’t use it. If you turn it down, it means you’re for foreign oil.”
It isn’t a secret that renewable energy is currently not cost competitive with the hydrocarbon sector, but even if Pickens believes that natural gas prices will rise by 2016, why pull wind energy from the Pickens Plan? Playing both sides of the fence with wind energy supporters plus natural gas enthusiasts seems like a stronger hand to play when lobbying Congress.
Instead the financier has turned his focus to lobbying Congress for the NAT GAS Act, a bipartisan bill that will provide incentives for fleet vehicles to switch to natural gas. He estimates that the US’ reliance on foreign oil will be slashed in half if eight million 18-wheel trucks switch to natural gas. Switching the fleet vehicles to natural gas from diesel will require a gas conversion kit which could cost around $3,000 or more per kit, according to Dr. Mohamad Hassan, American University in Cairo associate professor at the School of Science and Engineering Energy and Petroleum Engineering. In addition, converting eight million 18-wheel trucks is a highly ambitious project which will still require the use of petrol to initially start the vehicle. So why not still put some eggs in various baskets and keep wind power in the mix?
The Pickens Plan isn’t about creating an energy independent nation as it claims. It’s about the bottom line: money. Natural gas will beat wind when it comes to earnings, but that isn’t to totally disregard wind or other forms of renewable energy. Since 2016 is just around the corner, getting wind farms up now would make sense just as well as lobbying Congress for tax breaks or even small subsidies.
LeAnne Graves, Editor
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