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T. Boone Pickens - Gone is the Wind

by joelado Sun Aug 9th, 2009 at 03:34:42 PM EST


Maybe I am the only person in the world to not be surprised by the announcement of July 8th by T. Boone Pickens when he announced that he would "temporarily" put his plans to build the world's biggest wind farm on hold.  I also wasn't surprised that he quickly followed that announcement by doing the only logical thing one does when one puts something "temporarily" on hold. He proceeded to announce that he was shopping for buyers of his $2 billion worth of wind turbines that he had already put on order. Because not having any wind assets in the pipeline is the quickest way to get back to providing wind power once your "temporary" hiatus is over. Having followed T. Boone Pickens' wily ways in the oil markets have made me suspicious of his wind power aspirations. So I looked into it.

T. Boone Pickens is a business man to the core. From what I know of him it seems to me that his credo has always been, "I ain't gona do nothing if there ain't big bucks in it for me." Where did that fit in to wind which for years has been more like, "I am doing something for the planet," kind of stuff. When he started throwing out numbers of spending $10 billion on a wind farm that could serve as many as 1.3 millions homes, I started asking myself questions like. How much money does that turn out to be per house? It turns out that $10 billion divided by 1.3 million households equals $7692.31. What is the average household use of electricity? In 2005, the average monthly residential electricity consumption was 938 kilowatt hours (kWh), according to the Energy Information Administration (EIA).

How much do people pay for electricity in Texas? They pay on average $.1045 or 10.45 cents per kilowatt hour according to EIA. That translates into $98.02 a month on average and $1176.24 per year on average per household. In the larger picture if T. Boone Pickens were able to get somewhere around a 7% rate on $10 billion, he could collect nearly a 50% return per year on his investment if he were able to sell directly to customers. Of course he wouldn't be selling into the residential market directly. There would be a utility company between him and the customer. Granted there would be other costs such as maintenance, transmission lines, paying people to flip switches and other things, but these costs for wind power are relatively minor and remember their isn't any continuing fuel cost such as other forms of non-renewable energy.

The margins from my perspective look good. So why abandon this enormous project? It very well could be that he simply wasn't able to get the financing. I find that hard to believe since T. Boone Pickens has been able to raise huge sums of money for his corporate raiding and oil speculation, all, I might add, were extremely risky investments when compared to the staid and true "widows and orphans" type investment electric generation and utilities represent. Plus there are the added government support funds and subsidies from local and the federal government, financing at this point can be done through the Department of Energy for wind power, there is a premium that utilities are willing to pay for wind power so Mr. Pickens would get more for his electricity over that produced by a fossil fuel and there is the extra money that can be made by selling clean air credits to polluters in the cap and trade systems that exist and those coming up. So why would he bail out when the prospects for wind seem so very good right now? I think the answer lies in understanding T. Boone Pickens more fully.

T. Boone Pickens started his business life in the oil industry. Knowing the oil business and discovering that he could raise big money with junk bonds moved him from being a productive oil well driller to a corporate raider of oil companies. Raiders barrow money on the basis that a particular oil company's assets are more valuable than the value of the company's stock. He would purchase stocks with this money in amounts to sufficiently control the company, fire the board members and management, replace them with himself and his people and then proceed to sell the company's assets to satisfy the loan and to line their own pockets, all the while paying themselves big salaries. This in effect destroys companies and saddles the companies that survive with large amounts of debt. It was a practice that has fallen out of favor mainly because it had such an astoundingly detrimental affect on the American economy without benefiting anyone other than the corporate raider. Unfortunately, such behavior hasn't been regulated out of existence.

T. Boone Picken's has been asked many times why he continued to do business with such zeal for making large sums of money when he was rich enough to live the most comfortable life imaginable. He would respond by saying that making the huge sums of money wasn't about the money at all. For him money was just points on the score board of a game. The higher the score the greater sense of accomplishment he felt. Money for him wasn't something to spend on a lavish lifestyle but something that indicated how well he was doing. What made him happy was playing the game and trying to figure out how to get a higher score.

T. Boone Pickens is not, and I repeat, is not in any stretch of the imagination an environmentalist. He is and has said on record that he is a life long Republican. He backed the campaigns of right wing conservative Republican candidates. He has spoken openly that he believed that the concerns about humans causing climate change were overstated, and, for a while was considered the antithesis of Al Gore and was proud of the title. What changed him? He changed his tune a little after his announcement that he wanted to build his massive wind farm. The disconnection between what he said and his investment felt peculiar not only to me but to others as well. However, this investment into green renewable energy while trying to maintain his conservative street creds gave me a clue that there was something else going on with T. Boone Pickens, especially when he realized that he couldn't do one, advocate for wind power, without being the other, concerned about pollution, without people focusing on his other activities. I believe to keep the focus on his wind and not his other activities he suddenly changed his attitude towards climate change.

Given his background I simply don't believe T. Boone Pickens was interested in wind power in the first place. Even though wind in my opinion is a good investment, its return on investment is a slow and steady, secure kind of way of making money, something that our oil booms and busts, former corporate raider Pickens is unfamiliar with, and which frankly I don't believe he has the patience for.

T. Boone Pickens likes oil because we have structured our economy so that we can't live without it. He knows enough that when you hold back on something that has become a "need" people will pay just about anything to get it. The highs of oil however are not as high as a true "need" because if prices get too high, people first respond by rationing, they start using less of it. They switch to smaller cars, combine trips to the store with other activities, and they car pool. The next step they take is they begin to look at using alternatives. First they will do things like take the bus or train to work, some may walk or ride bicycles, they push for legislation to have alcohol added to fuel, they purchase hybrids and begin seriously thinking about using plug-in power for their cars, and they look at things like natural gas as possible alternatives. In the end if T. Boone Pickens wants to fully satisfy his greed in the oil market he will end up destroying the market in oil since people can and will switch to alternatives. So oil simply isn't good enough a product for T. Boone Pickens to do what he wants to do. It's close, but not perfect. What would be something that we all truly need and there isn't a substitute for? Could it be food? Could it be water?

According to Zaproot.com, T. Boone Pickens has, amazingly, been busy buying up the water rights to the largest aquifer in the United States, which just happens to be under his massive planned wind farm in north Texas. He wants to pump the water out in north Texas and sell it to the Dallas area. This water plan actually precedes his wind interests by many years. He first tried to purchase a corridor for his pipe line all the way to the Dallas/Fort Worth area, but ran into problems with people not wanting to sell him their land or sell him the right to put pipeline through their land. Pickens had to adjust his strategy. He persuaded local Texas politicians along his route to form a water district so they together could impose eminent domain and force his pipe through. The harder he pushed the stiffer opposition became. The politically connected land owners effectively blocked Boones' plans. Not to be outdone by these pesky landowners, Pickens pushed an initiative at the state level to amend an energy bill to allow for water pipelines to be laid along side power lines, which would skip the entire battle with the land owners. At the same time he pushed for state statutes that would strengthen the eminent domain power of water districts. With the amendment to allow for water to go along electric lines passed T. Boone Pickens didn't want to fight the same battles over power lines that he had fought with water rights. He must have figured out that there would be much less opposition to the power lines if they came from a wind farm rather than a fossil fuel. From my perspective T. Boone Pickens' love of wind really isn't a love of wind at all, but rather comes out of his personal desire to hold a monopoly advantage of something that is vital to life over the heads of the thirsty people of the greater Dallas, Texas area.

And the pesky people say, "Mr. Pickens we need water to live give us water." And Mr. Pickens says, "How important is it that you don't die from dehydration in the hot Texas sun?" And the pesky people say, "We don't want to die Mr. Pickens." And Mr. Pickens says, "Then give me all you own. That isn't a price too high to pay to live, now, is it?"

The dialog above is indeed harsh and I don't believe that T. Boone Pickens thinks in this way, at least I hope he doesn't, but the reality is that there is an aspect of economics that I call "desperation economics" that makes such a scenario possible. Desperation economics only shows its ugly head when people are desperate to have something they believe they really, really need. It is the affect that made English nobility trade manors for plates of food on the Bataan Death March. A manor for plate of food is only an example of the most extreme example of desperation economics; however, there are many degrees of this phenomenon. Hording in a supply challenged market would be an example of another, one all too familiar to a person like T. Boone Pickens in his dealings with oil.

On the flipside of the dark picture that I have painted here is the possibility that I hope is the core of what drives T. Boone Pickens today. I simply wondered to myself, what would I do if I had tons of money and were in the twilight of my life? My interests are pretty simple. I would like to leave the world a better place for the children of the future. Moving the nation to pollution free renewable energy would be one thing that I would like very much to leave behind as my legacy. The nation would be cleaner, freer, more independent and more economically secure. I sincerely hope that T. Boone Pickens when he looked at his grandchildren started to think that maybe he should do something to make things better for them. The games all time high scorer title becomes meaningless when overtime the world becomes so plagued with problems that it doesn't have time to care about that sort of thing. At least a wind farm would be there for decades after he was dead and gone, and that everyday it would generate electricity providing an alternative to putting pollutants in the air. I am hoping that this is T. Boone Pickens' true motivation for getting into wind power, no matter how hard capital markets harden. I hope the health of the planet has really become something important in T. Boone Pickens' mind, since the state of Texas has decided to build the power lines from Dallas/Fort Worth to north Texas allowing him to build his water pipeline with out the fights that have stopped him so far. I hope T. Boone Pickens truly believes that his wind investment is still needed even though he may have strengthened the ability of water districts in Texas to impose eminent domain. Finally, I sincerely hope that T. Boone Pickens has come to the understanding in his twilight years that being good is its own reward despite the ever improving prospects for making money in wind power. Wind power for T. Boone Pickens in my opinion would be the ultimate win win in his life. He would win in profitability, he would win in his stewardship of the planet, and he would establish a legacy of good that would live far beyond his time on Earth. He would be known as the man who made wind power king.

Originally published on EVWorld.com. T. Boone Pickens - Gone is the Wind

He holds tons of gas assets, and part of his "wind" plan has always been to say that wind could replace gas-fired plants so that gas could be used to fuel passenger cars (via CNG, compressed natural gas). The replace-gas-by-wind for power generation has always been a flimsy excuse to looby government to invest on CNG vehicle fleets and create captive demand for his gas.

Water is relevant only in so far as gas production now requires huge vlues of water, I think.

In the long run, we're all dead. John Maynard Keynes

by Jerome a Paris (etg@eurotrib.com) on Sun Aug 9th, 2009 at 04:21:19 PM EST
I read your stuff all the time. Thank you for leaving a comment. You are right about the gas thing. I have another blog coming with T. Boone's working in his natural gas to make himself filthy rich at American's expense. I just haven't settled on a title yet. You've got to understand when you are working with the words "Wind" and "Gas" the sophomoric side of a person's humor comes to the fore.
by joelado on Sun Aug 9th, 2009 at 06:30:19 PM EST
[ Parent ]
Wow. Good article joelado.

It was always a bit troublesome that wind would take a boost from a cult of personality guy like Pickens. Dog who brings a bone will also take one away.

Looking forward to the next article.

Never underestimate their intelligence, always underestimate their knowledge.

Frank Delaney ~ Ireland

by siegestate (siegestate or beyondwarispeace.com) on Thu Aug 13th, 2009 at 06:51:18 AM EST
[ Parent ]
Part 2 is going up tonight.
by joelado on Sun Aug 16th, 2009 at 08:49:03 PM EST
[ Parent ]
Pickens seemed to be saying that he wanted to divert natural gas to passenger vehicles but later clarified his position by saying that he wanted to divert it to trucks.  Better but still not good enough.  As Jim Kunstler reminds us, rail (and water transport) are much more energy efficient.

Solar IS Civil Defense
by gmoke on Mon Aug 10th, 2009 at 10:42:04 PM EST
[ Parent ]
If combined with an enhanced and electrified rail freight system, CNG powered trucks for the last 100 miles would be a real improvement for the next few decades.  I do not know if he has sufficient holdings to control the price of gas in the USA, but it is the least polluting form of fossil fuel.

It seems to me that replacing natural gas in electricity generation with wind power is problematic in that gas has the advantage of being readily and reliably available on short notice and thus is good for peaking power, while wind should be considered part of the base load, the average cost of which it could eventually limit.

I did very much appreciate TBP paying to run the widely viewed advertisements last summer noting how dangerous it was for us to be paying as much as $700 billion annually for imported oil, the supply of which is declining.  I hope he seeded that thought deep into the popular mind.  That, and that wind power could be used to reduce our dependence on imported oil.  Fortunately, he doesn't seem to care if wind puts a ceiling on the price of coal.  Then with a carbon tax we could just shift from coal to wind.  Just that.  At least Cheney is no longer convening National Energy Policy meetings in the office of the Vice President.

"It is not necessary to have hope in order to persevere."

by ARGeezer (ARGeezer a in a circle eurotrib daught com) on Thu Aug 13th, 2009 at 10:36:00 PM EST
[ Parent ]
Part 2 of Pickens is going up tonight.
by joelado on Sun Aug 16th, 2009 at 08:50:33 PM EST
[ Parent ]
Part 2 is being published tonight.
by joelado on Sun Aug 16th, 2009 at 08:48:02 PM EST
[ Parent ]

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