T. Boone Pickens has spent a lifetime in the oil business.
Shortly after graduating from Oklahoma A&M (now Oklahoma
State University) in 1951, Pickens went to work for Phillips
Petroleum and he has been in the energy field ever since. In
recent years, Pickens has turned his focus toward investing in
and advocating for alternative sources of energy to end America’s
dependence on foreign oil. As part of his efforts, he funded a
$62 million ad campaign to promote his Pickens Plan to accomplish
that goal.
Through the T. Boone Pickens Foundation, Pickens has become one
of the largest philanthropists in America. He also is the
benefactor of The American Spectator’s Young
Journalism Training Program.
In the May 2008 print edition of TAS, Pickens
discussed wind power. This Tuesday, TAS spoke with
him over the phone about why he believes in broader adoption of
natural gas in the United States.
TAS: When we last spoke,
you were talking a lot about wind power, and now you’ve shifted
emphasis more toward natural gas. If you could explain the
evolution of your thinking on alternative energy…
T. Boone Pickens: Wind is renewable, and natural
gas is alternative. But the wind is priced on the margin. And the
margin is natural gas for power generation, since they’re both
doing the same job. And so the wind is priced off the natural
gas. And natural gas has been so cheap, it’s been hard to really
finance a wind deal. So I haven’t lost any enthusiasm for that.
In fact, we’re getting ready to announce more wind deals within
the next two to three months that are very far along. So wind is
good, but wind is not going to move an 18-wheeler. Natural gas is
so versatile, you can use it for power generation, but you could
also use it for transportation fuel. So natural gas is the only
thing we have that can reduce foreign oil imports.
TAS: Now, if I remember
correctly, your broader plan talked about using wind for
electricity generation to free up more natural gas for
transportation fuel…
BP: Actually, what happened to us is we have so
much natural gas, more than I thought at that time.
TAS: So you’re saying we
have enough natural gas to address the electricity generation
needs, and transportation fuel needs?
BP: Yes, but I want to keep using wind too. The
overall concept that I have is, let’s get on our own resources.
And that means you’re going to use natural gas, wind, solar,
ethanol, nuclear. I don’t care what it is, but get on our own
resources.
TAS :Some economists
would say that economically, it’s not a big deal whose resources
we’re on. That oil is a fungible commodity, and the only thing
that matters it to decide what is the most economically
advantageous energy source for us to use at any given time. So,
they’d argue that right now, oil is still the most economically
efficient. And they question this whole idea of getting off our
dependence on foreign oil. How would you respond to that economic
argument?
BP: Well, the first thing is, no question, is in
a global market. You go into to buy oil, you don’t know where
you’re getting it from or anything. But we import five million
barrels a day of oil from OPEC. That’s five million barrels that
I think is a security issue for the country. Then, to that person
who asked me that question, I’d say, how much do you consider
security to be an issue? Well, you’re buying oil, and you don’t
know where it’s coming from. Because international oil companies
buy oil from any place they can get oil. And so the argument is
not unreal. The point is, you need to replace oil from the
Mideast, the OPEC oil, and you replace it with the one resource
you have in America, which is natural gas. We don’t have any
other resource that will replace that oil. Now, you say it’s more
expensive. Well, no it’s not, it’s infinitely less expensive. One
Mcf of natural gas is $4.50. It’s the equivalent of 7 gallons of
diesel. They’ll do the same job. One Mcf at $4.50, or 7 gallons
of diesel, and $21. So it’s very easy to say which one is the
cheapest. They’ll say, well, let the markets take over. Let the
free market dictate what fuel to use. Well, if you think OPEC is
a free market, you’re kidding yourself. It’s that OPEC sets the
price of oil. And if they told you this year they wanted $70 to
$80 oil, what do we have? $70 to $80 oil. They are accommodating
in telling you what oil is going to cost. So you can call it a
fungible global market, or whatever you want to. It is not a free
market for a commodity. So get on your own natural gas, and try
to control it one way or another if you want to eliminate oil
from the Mideast. With that, if you look at the cost of oil, and
you factor in for our military, you’re probably paying $300 or
$400 a barrel for oil from that area. So, it’s pretty easy for an
economist to just dismiss it by saying, well, just let the free
market dictate. But it’s not a free market.
TAS: To translate it into
terms for an average person, when you talk about how much it’s
going to cost, and how it translates with diesel, doing the rough
math (if $4.50 of natural gas is the equivalent of 7 gallons of
diesel), does that mean that a gallon of the natural gas
equivalent would cost around 60
cents?
BP: I look at it that it would be $1 to $1.50 a
gallon cheaper. So if you’re paying $3 for gasoline, that get it
to about $1.50. It would bring it down to $2, or maybe $1.70 or
$1.80. These are not hypothetical numbers I’m throwing out there,
because you have that here in California. I mean, they use
natural gas out here. I mean, the LAMTA is on natural gas, has
been for 20 years. And that’s an air quality issue. It was a
cleaner fuel is the reason why they used it.
TAS: In trying to convert
to natural gas, don’t you run into a chicken and the egg
phenomenon? In other words, in order to build more fuel stations,
there would have to be a demand fuel, so you’d need vehicles that
are equipped to run on natural gas, yet people aren’t likely to
want to convert to natural gas to natural gas vehicles unless
there are enough fuel stations to service them.
BP: Yeah, see, I’m not talking about your car.
I’m not interested in your car. I’m interested in 18-wheelers.
Because they use 20,000 gallons a year. So if I could get the 8
million 18-wheelers to natural gas and away from diesel, that’s
2.5 million barrels a day. So that cuts OPEC in half with 8
million vehicles. And there are 250 million vehicles in America.
So, the stations will come with the vehicles. That’s a no
brainer. If you set it up so the heavy duty is going to go to
natural gas, and they’ll put the islands into the truck stops,
would be one way to work it. The other way it works, Southern
California decided they would go to natural gas because it was
cleaner than diesel. And so with trash trucks, they said, if you
buy a new one, it has to be natural gas. And the incremental
difference was $50,000, so they gave a $50,000 grant for when you
bought the natural gas trash truck and now 70 percent of them are
on natural gas. And the fueling stations just came with the
vehicles.
TAS: What do you think
needs to happen at the federal level in order to achieve what
you’re arguing for, which is to convert heavy duty trucks to
natural gas?
BP: Well, see it’s already in the legislation.
In the House, it’s H.R. 1835, the natural gas act. And they give
a $65,000 credit when you move from diesel to natural gas. It’s
the same thing in Senate bill 1408. But in Senate bill 1408
they’re working on it now, and they’re adding different things to
the bill to see if they can get it passed. The natural gas will
pass quickly. We have 144 co-sponsors in the House on 1835, and
if it goes standalone on the first vote you get 350 votes for it,
so no question it will pass.
TAS: The thing that makes
a lot of conservatives wary about a lot of the alternate energy
is the idea that it translates into subsidies. Even if it’s
called a “tax credit,” effectively it’s the same as the
government subsidizing a certain kind of energy. And a lot of
conservatives who don’t want to see the government handing out
subsidies and picking winners and losers in the energy market
have a lot of skepticism about this, and that’s why they’re
reluctant to embrace these sorts of ideas. How would you respond
to them?
BP: Well, if that’s the best way out, then
you’re going to use foreign oil. So you’ve got to help it get
started — and here you’re only talking about $7 billion, would
lead to 143,000 18-wheelers — and then the
incremental (cost) in California with the trash trucks went from
$50,000 down to $10,000 once you got up to scale. So if you don’t
like that idea, we’ll just use foreign oil.
TAS: The question would
be, that if, as you’re saying, that the economics make so much
sense in terms of how much cheaper it would be to fuel on natural
gas than with diesel, then why wouldn’t trucking companies
themselves want to convert to natural gas to save the fuel costs?
BP: You’re saying, let the free market work.
TAS: Well, the basic question is that if oil
prices get to the point where it’s no longer economically
feasible for companies to use oil-based fuel to fuel their
vehicles, then wouldn’t the free market naturally convert
everything to natural gas over time, if that’s the economically
more efficient product?
BP: Well, it’s going to take a long time to do
it for one thing, and you need the leadership to take you in the
direction that is best. And this is clearly better. You’re
dealing with a domestic fuel that’s 30 percent cleaner and
cheaper in preference over a foreign oil that is dirtier and more
expensive.
TAS: But if it’s so much
cheaper, what would be preventing, right now, a trucking company
from wanting to convert over time its fleet to vehicles that are
able to take natural gas? Why would they need a government tax
credit to do it?
BP: Well, because it’s $65,000 difference in the
truck. So, until you get up to scale on the natural gas engine,
it’s more expensive to buy the natural gas engine. So you’ve got
to get some help to get it started. But you’re spending $1
billion a day on foreign oil. So you start turning some of that
around, the money’s here. The money is creating jobs, profits are
made, taxes are paid, and the economy is helped by it. And right
now, you’re just pouring money out of the country.
