T. Boone Pickens Has Big Plans For Our Money
T. Boone Pickens thinks big. Imagine the world’s largest wind farm on his land, a $10 billion, 2,700 turbine venture producing enough electricity to support one million homes. All that’s needed for that to happen is a few hundred miles of utility easement obtained from private property owners using government powers of eminent domain. Well, actually there is something else also. There will need to be a few billion dollars more for a long extension cord connecting the turbines with the users’ electric car rechargers, hair dryers and toasters. And maybe lots of water pipe too?
Back in the 1980s Boone was known less as a green player, and more as a “greenmailer,” or corporate raider. He acquired this reputation when he led his company Mesa Petroleum in a 1981 takeover of the Hugoton Production Co., which was about 30 times larger, followed by attempted takeovers of Cities Service, Gulf Oil, Phillips Petroleum and Unocal. He was later successful with acquisitions of Pioneer Petroleum and the mid-continent assets of Tenneco. These activities were often backed by junk bonds offered by Drexel Burnham. Pickens profited by driving target companies into mergers with others that drove stocks skyward along with his shares, or by receiving financial offers to leave them alone.
Boone later formed a company called Mesa Water. In 2006 he purchased rights to draw from the huge Ogallala aquifer under 200,000 acres of land in Roberts County, Texas, near Amarillo, for $75 million. He now owns more water than any other individual in the nation. There, he created Roberts County Freshwater District No. 1, a “government entity” composed of five people, all his employees or associates. He controls the district through various shells identified in filings with the Public Utility Commission, also making him the only U.S. person to own a government entity.
Obtaining local authority to establish the water district didn’t pose any problem. By law, the only people allowed to vote were required to actually live on the district’s 8-acre spread. That narrowed it down to two people: the manager of Pickens’ Mesa Vista ranch and that fellow’s wife, who both sit on his board.
But there was one difficult problem: What do you do with all that water way out there in a remote corner of the Texas Panhandle? Maybe sell it to the Dallas-Fort Worth metroplex? Possibly, but that’s about 328 miles away, across 11 counties and about 650 tracts of other folks’ land. Hmm. What to do?
Well, in the mean time, there was an awful lot of land on that acreage that could still be put to good use. How about a wind farm?
Pickens’ planned wind farm had the same problem as his water. Both were a long distance way from the users, and that long trek was over many other peoples’ private property. But, hey, wouldn’t it be great if both utilities could run along the same corridor and even get much of it financed by those same folks and others who buy power and pay taxes?
In 2007 Pickens successfully influenced last-minute passage of an amendment to a Texas House bill that allowed a fresh water supply district to host transmission lines for wind-generated energy.
On July 15, 2008, another Pickens company, Mesa Power, announced it had placed an order for 667 1.5 megawatt turbines from General Electric (NYSE:GE) to be delivered in 2010 and 2011. Then on July 17, the Texas Utilities Commission approved ratepayer funding of $4.98 billion in electric transmission lines to connect the Texas Panhandle to the electric grid, implementing provisions of a 2005 Texas law designed to promote wind energy projects. Pickens figured he could get all the land he needed for the corridor for about $30 million in order to begin building a $1.5 billion water pipe with a $2.2 billion electrical transmission line above. A lot of that money could be raised by issuing low-interest, tax-exempt bonds as authorized through his water district.
Of course, there would be some stubborn land owners along the proposed corridor who probably wouldn’t want to cooperate, and even a few could really mess up the plan. So Pickens began to do what any self-respecting government entity would probably do–seek state-mandated powers of eminent domain to annex the land as needed “for the common good.”
These ambitions weren’t limited to the Lone Star state. No-sir-ree Bob! On June 19, 2008, Pickens testified before the U.S. Senate Energy and Natural Resources Committee, asking Congress to expand eminent domain right-of-way controlled at the state level so that companies like his Mesa can operate across state lines.
In July 2008 Pickens launched a $58 million multi-media sales campaign (the Pickens Plan) to sell the country on the idea of his proposed energy corridor as part of an opportunity to provide 20% of U.S. power. One year later on July 8, 2009, The Wall Street Journal (NASDAQ:NWSA) reported that Pickens had postponed plans to build his Texas wind farm because necessary transmission capacity wasn’t yet available. His company had not been successful in attracting financing to build the new lines.
It would be wrong to assume that T. Boone Pickens only cares about selling water and wind power. Don’t forget that he is a big player in the natural gas business–and wind power creates a terrific natural gas market. Since wind is highly intermittent, a “spinning reserve” of backup power capacity is needed to immediately balance fluctuations in the power grid. Backup sources are typically fueled by natural gas or coal.
A more promising and cost-effective application for natural gas is for use to fuel vehicles. In January 1997 he founded the Pickens Fuel Corp. to purchase about 30 natural gas filling stations from Pacific Enterprises’ Southern California Gas Co. unit, and began touting natural gas (NYSE:UNG) as the best fuel due to its clean-burning properties and potential to reduce dependence on foreign oil.
Pickens announced on January 13, 2009, that he was seeking as much as $28 billion from the Obama administration’s economic stimulus plan to convert 350,000 heavy-duty trucks from diesel to gas engines ($75,000 per vehicle), estimating that it would create about 454,470 new jobs. But it didn’t happen.
His company Clean Energy Fuels (NASDAQ:CLNE) received another setback when the U.S. Congress failed to reinstate an alternative fuel tax credit prior to the December 2009 expiration date.
By April 10, 2010, it was becoming clear that the Pickens’ plan to obtain subsidies for natural gas-fueled trucks wasn’t receiving the love he had hoped for in Washington. Despite high margins on natural gas fuel sales, the company stock value had dropped 35% to around $14 over a six-month period.
Never count T. Boone Pickens down-and-out–at least not so long as green power politics prevails in our nation’s halls of carbon regulation bureaucracy. He even appeared to mend a patch of fence with former archenemy Sen. John Kerry during a February 2010 meeting, after having spent $2 million to bankroll Swift Boat ads that were credited with causing significant damage to Kerry’s 2004 presidential bid.
But the complications and uncertainties associated with passing a Congressional bill may not be necessary at all. The Environmental Protection Agency, for example, can work wonders in this regard. Asserting authorization claimed under the blanket of its Clean Air Act “Endangerment Finding” it can use CO2 emission restrictions to leverage a transition from diesel to natural gas for heavy-duty trucks, and eventually for all internal combustion vehicles.
Then there’s also the Federal Energy Commission’s new scheme to subsidize wind and solar power by passing transmission line costs to all rate payers, whether they use electricity from those sources or not. The costs of transporting electricity to end users have traditionally been paid for through competitive rate pricing to industries that earn them.
This FERC proposal is even unpopular with many renewable-energy advocates. Eleven eastern governors have argued that the policy would “undermine the significant renewable energy potential along the East Coast by subsidizing distant terrestrial wind resources which would stifle economic recovery in the East by destabilizing competitive electricity market structures and increasing energy prices in regulated markets.” One of the biggest losers would be economically ravaged Michigan, where rate payers would have to subsidize about 20% of the $16 billion transmission costs outside the state.
And the winners? They will be those with very expensive projects in remote locations which already enjoy large public subsidies and utility-purchase mandate advantages.
You can bet it would be a big boon for Boone.
Larry Bell is a professor at the University of Houston and author of Climate of Corruption: Politics and Power Behind the Global Warming Hoax, which can be previewed and ordered at climateofcorruption.com. He is a contributor to Forbes.
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