By Jesse Marx
By Chris Parker
By Jake Rossen
By Jesse Marx
By Michelle LeBow
By Alleen Brown
By Maggie LaMaack
By CP Staff
T. Boone Pickens looks tired.
Standing in the sunken pit of a packed lecture hall at Houston's Rice University, he's hawking his Pickens Plan for energy independence from foreign oil by using more wind power and natural gas. The 80-year-old, with flesh-colored hearing aids set deep inside his ears and tanned bags drooping under his eyes, looks confused and momentarily loses track of what he's saying. He pauses, takes his gold Rolex off, slumps down on a stool, and announces in his trademark drawl, "I'm runnin' out of money." (Which for Pickens means he's still got untold millions, possibly billions, in the bank).
This visit to Rice in early January is just another stop for the long-running Pickens Road Show. He's been zigzagging across the country like a presidential candidate for eight months, spending more than $60 million of his own oil fortune on TV ads and lectures promoting greener, American energy, in which he is heavily invested. His companies have plans to erect the world's largest wind farm in west Texas, and have a significant stake in natural gas.
When he launched the Pickens Plan on July 8, gas prices at the pump had hit $4 a gallon and Americans were demanding a wallet-friendly energy policy that included long-term planning and alternative fuels. Leftist green-power organizations finally had a public-relations darling in Pickens—a Republican who famously funded the swift-boat attack ads that all but killed John Kerry's 2004 presidential dreams—with the money, power, and clout to get taken seriously on Capitol Hill and advance their renewable energy agenda in the business world.
It was as if the stars had once again aligned for the former wildcatter and corporate-takeover tycoon.
Since then, however, Pickens's precious winds have begun blowing all over the place.
Over the past several months, drivers filling up at the nation's gas stations have been happy paying less than a buck-eighty a gallon, and with the mortgage crisis, homeowners are more concerned with keeping their homes than with what powers them. Add the banking troubles and frozen credit markets to the mix, thanks to the worst U.S. economy in decades, and Pickens's task of getting his plan off the ground appears to be getting tougher and tougher.
Pickens makes no bones about the fact that global warming is not his main concern. For him it's all about importing less oil from "our enemies," becoming energy independent, and thereby shoring up national security. The thrust of the Pickens Plan calls for building wind farms that will generate up to 22 percent of the nation's energy, the creation of a more efficient and expansive electrical grid, and using domestic natural gas instead of imported oil as a transportation fuel, focusing on fleet vehicles and 18-wheelers. In 10 years, says Pickens, the combination can reduce oil imports by a third.
At the moment, though, the much-heralded $10 billion wind farm in the Texas Panhandle is on hold until at least 2011 because Pickens can't get the financing together in the tightened credit market. Plus, Pickens's vision for natural gas, despite a recent bump in public support from lawmakers, still has at least as many opponents as allies and was all but left out of the $787 billion stimulus package President Barack Obama signed into law in mid-February.
Financially, 2008 has not been kind to Pickens. His Dallas-based energy hedge fund, BP Capital Management, has been criticized by many on Wall Street for maintaining a bullish view on the price of oil throughout the year. The financial-information company Bloomberg reported in February that the fund lost some 97 percent of its value during the last three months of 2008 and sold off its positions in all but nine of its previously held 26 energy companies. The fund was worth just $40 million, down from nearly $1.3 billion at the end of September. Even by Pickens's standards, that's a lot of green.
Critics say that the entire Pickens Plan is nothing more than a public-relations campaign driven by Pickens's ego, and warn not to mistake the veteran oilman for a tree-hugger. They say the fortune this neo-Greenie stands to make if he can get his wind farms and natural-gas interests up and running could earn him the kind of money traditionally seen only when an oil well explodes in a geyser of black gold. Pickens dismisses this by saying that at 80, he's got enough money and just wants to leave a positive, lasting energy legacy for America. Unlike in the past, Pickens, a longtime free-market man, is counting on the federal government, tax incentives, and subsidies to help make his dreams come true.
Despite the economic crisis, cheap gas, and political bickering between Democrats and Republicans over the best energy policy, slowly but surely Pickens appears to be succeeding.
He's crept into the nation's conscience, claiming that more than 1.5 million people have drafted themselves into Pickens's New Energy Army, a virtual and online militia of supporters who interface and spread the Pickens gospel on Pickens's social networking website, modeled after MySpace and Facebook. Pickens uses these masses to lobby politicians. He has received vital government help for wind farms and appears to be gaining ground with his idea of using natural gas to fuel trucks. The fate of Pickens's massive lobbying effort rests with the likes of Democratic Senate Majority Leader Harry Reid and Speaker of the House Nancy Pelosi, both of whom Pickens has been palling around with at every turn and referring to as his new, dear friends.
During his lectures, Pickens invariably rails against former U.S. presidents for not having an energy plan. Then he smoothly transitions to a story, told in the folksy style that Pickens easily employs, recounting advice his father gave him in the late 1940s when Pickens was a sophomore struggling at Oklahoma A&M, now Oklahoma State University:
"He said, 'Son, a fool with a plan can beat a genius with no plan. And I'm afraid that I have a fool with no plan.'"
Pickens has a plan now, and it appears, at least for the moment, that this self-anointed "fool" is inching closer than ever to genius.
"I think we've got the fish hooked," Pickens says. "Now we've got to get it in the boat."
For more than 30 years, Pickens has found sanctuary and solace at Mesa Vista, his sprawling 68,000-acre ranch in the Panhandle, near where he plans on building the world's largest wind farm. He's transformed the rolling hills, canyons, and creek beds along the Canadian River into what's been called arguably the best quail-hunting spot on the planet. This is where Pickens calls home, and he'll be damned if the sight of soaring industrial wind turbines is going to cast a shadow on his perfect country-boy oasis. That Pickens will not put windmills on his own land sits just fine with Ronnie Gill, a rancher from nearby Miami. To Gill, that just means there will be more turbines to go around for folks such as him.
"Everybody wants one and hopes they'll get one," he says.
Last year, Gill leased all 7,000 of his acres to Pickens to use for the proposed wind farm that will span up to five counties. At $4 an acre, that means Gill is already making $28,000 a year for nothing more than signing a piece of paper. And just thinking about the day when the turbines start cranking forces a smile from the hardened rancher.
Pickens has said that he can erect five turbines every 640 acres without interrupting existing farming and cattle operations, and that each turbine will produce $10,000 to $20,000 a year in royalties to the landowner. Gill figures that means, on the conservative end, that he'll pull in at least an extra quarter-million dollars a year.
Like almost everyone living in the area, Gill knows the criticisms circling Pickens: that the energy-baron is simply out to make money for himself. Gill could not care less.
"I don't mind him making a buck," says Gill, "because I'll tell you what, he's generous enough to share it with the rest of us. And I really need it because I'm getting old and bald-headed. I really hope it'll come to pass."
Gill is not alone. City officials in Pampa, the second-largest town in the Panhandle, are already looking at Pickens's wind farm as something akin to an old-fashioned oil boom. Keith Pittner, head of the Pampa Chamber of Commerce, says that in addition to income from the royalties, the expectation is that the project will create thousands of jobs and increase taxes for the school district by as much as $2.4 billion by 2018. A new subdivision is being planned in north Pampa to house all the new workers expected to move to the area, and the community college is preparing to start teaching wind energy and turbine maintenance classes.
Pickens's original plan in the summer of 2008 was to erect 2,700 turbines across 200,000 acres, generating 4,000 megawatts—enough to power between 1 million and 1.5 million homes. Pickens has already written a $150 million check to General Electric to build the first 667 of his turbines. They are not scheduled to be completed and delivered until 2011, which, given the economy, suits Pickens fine—he can't finance the project now anyway.
Still, locals insist the delay has not dampened their spirits.
"We're hoping for the best," says Pittner. "No one doubts Boone's word, it's just circumstances beyond everyone's control, and we're waiting to see what happens."
Pickens appreciates their confidence in him.
"If I can't make the wind go," he says, "I'll feel like I let everyone down. And I'm not going to let anyone down."
Even though Pickens can't get his wind farm up and running as fast as he'd hoped, overall the U.S. wind energy industry is hanging tough. In 2008, the United States surpassed Germany as the world's largest producer of wind energy, according to the American Wind Energy Association, and there were more than 80 wind farms under construction across the country at the close of the year. Texas by far leads all states with the amount of wind energy it currently produces, followed by California, Iowa, Minnesota, and Washington.
From 2007 to 2008, wind energy production in this country increased by 45 percent and provided more than 1.5 percent of the nation's energy needs, still a far cry from the 20 percent by 2030 that the Department of Energy claims can be accomplished.
The advantages of wind power are numerous, and virtually everyone from the power companies to environmentalists and politicians agrees that it will be a significant part of the nation's energy solution in the 21st century.
But how to make those windmills blow?
With private financing hard to come by, Pickens has looked to the federal government, most recently in the form of the stimulus bill. When it passed into law, Pickens declared a half-hearted victory. The bill includes tax credits, grants, and loan guarantee programs, but it's not enough to push Pickens's wind farm project over the hump.
The problem, says Tyler Tringus, a wind-energy analyst for New Finance Energy outside Washington, D.C., is that wind farms are capital-intensive and require tremendous sums of money up front. Most of the tax credits are applied on the back end, to energy that is already being produced, so if the wind farm doesn't make money, or even get off the ground, the tax credits are useless.
Financing is not the only obstacle in Pickens's path. Once his turbines, stranded way off in the Panhandle, start producing power, he still needs to transmit the electricity to where people actually live.
To solve the transmission problem, Pickens originally planned to spend billions stringing up his own power lines. To do that, he needed the power of eminent domain.
Years earlier, Pickens had begun buying water rights in the Panhandle. In fact, Pickens is reportedly the largest individual water rights holder in the United States. He planned on building a pipeline to the Dallas-Fort Worth area and selling those cities his water. To stick a pipeline underground cutting across the state, however, Pickens needed some help from the Texas Legislature.
As it has been reported by BusinessWeek and other media, state lawmakers passed a bill in 2007 that made it easier to create a water district. Under the old rule, the five required directors of a water district had to both own the land and live on it. But after the change was voted in, the directors no longer needed to live on the land. Pickens then promptly sold eight acres of his Mesa Vista ranch to his ranch manager, his ranch manager's wife, and three other employees who lived in Dallas and Houston, who then formed the Roberts County Fresh Water Conservation District No 1. Presto! Pickens now had the authority to condemn land under eminent domain and to sell bonds.
But Pickens wasn't finished. Next, through aggressive lobbying, his lawyers in Austin were able to get an amendment tacked onto a large water bill allowing a water district to transmit alternative energy using the same route as its pipeline. And with that, Pickens finally had the ability to claim the land he needed to build his transmission lines.
"I don't think creating a water district with the vote of employees is a fair way to use the process," says Tom Smith, director of Public Citizen Texas, an environmental advocacy group in Austin. "It's a huge abuse of the process."
Pickens has been unable to sell his water to any municipality and has put his water plans on indefinite hold. As for building his own transmission lines, that idea died along with the economy.
As luck would have it, however, the state of Texas was there once again to save the day.
In June, the Texas Public Utility Commission approved a $4.9 billion transmission plan that will run more than 2,000 miles of power lines with a capacity to carry 18,456 megawatts from the Panhandle to Texas's major cities. The project, says the commission, will cost Texas ratepayers an additional $4 a month. The new lines should be in service by 2013, and Pickens is excited to tap into them.
Pickens has not run into environmentalist bird lovers trying to stop his wind farm, as has been the case along the Gulf Coast and in New England, but there is another fundamental hitch in the plan: The wind doesn't always blow. What then?
In the Panhandle, turbines can produce electricity effectively roughly half of the time, and Energy Secretary Steven Chu said in late February that there is not yet a serviceable way to store wind energy for later use. At the moment, most wind farms are backed up by natural-gas power.
Thank goodness Pickens is in the natural-gas business, too.
One month after his visit to Rice University, Pickens is back in Houston again, this time at the Harris County transportation hub. He's dressed in the same black suit, white shirt, and orange Oklahoma State University necktie that have become his unofficial uniform when speaking in public.
After the presentation, a journalist in his 20s approaches him. Pickens asks the young man if he's a member of his army. The reporter, sounding nervous, stammers before saying that he thinks joining would be a conflict of interest. With a smile on his face, Pickens snaps back, asking if being pro-America is also a conflict of interest. The reporter turns red with embarrassment.
While Pickens was clearly joking, critics argue that this is Pickens's modus operandi: inspiring fear, making personal attacks, and wielding patriotism like a cudgel.
The Wall Street Journal reported an incident in which Pickens was having breakfast with former Kansas Gov. Bill Graves, who now heads the American Trucking Association. Graves was telling Pickens his concerns about using natural gas in trucks when Pickens reportedly said, "Bill, I just want to warn you on this. I'm going to make you look unpatriotic for supporting foreign oil. I just want to make sure you understand that."
Clayton Boyce, spokesman for Graves, says the former governor was mystified by Pickens's statement.
"Governor Graves has known Mr. Pickens for many years and knows that he's an unusual guy, to say the least," says Boyce. "To say that we're un-American because we're not supporting his plan doesn't make sense."
Or as Joseph Romm from the Center for American Progress said, quoting Samuel Johnson, "Patriotism is the last refuge of a scoundrel."
Energy consultant Anthony Rubenstein says he's seen Pickens's tactics firsthand and, like John Kerry, feels "swift-boated."
Rubenstein went up against Pickens last November in the battle over California's Proposition 10, which asked voters to spend $5 billion in taxpayer money on incentives to purchase natural-gas-fueled vehicles and fund alternative fuel research. The "Yes on 10" campaign was backed heavily by Pickens and his California-based company, Clean Energy Fuels, one of the largest providers of natural gas for vehicles in the country. According to news reports, Pickens and other natural-gas companies funded 98 percent of the nearly $29 million spent promoting the proposition. Rubenstein worked free of charge for the underfunded opposition, which reportedly only spent $173,000, and in the end, Rubenstein's team won when the measure failed 60 percent to 40 percent.
Though he says he can't definitively prove it, Rubenstein accuses Pickens and his operation of launching a smear campaign against him after the Los Angeles Times published Rubenstein's op-ed piece, titled "T. Boone Pickens's Clean Secret," in July, which argued Pickens was trying to raid state coffers to help his company. Rubenstein is convinced the "Yes on 10" campaign hired a political consultant in Sacramento to create and then tell the media about a new website, Tonytherube.com, aimed at disparaging Rubenstein's reputation and destroying his credibility on the issue.
The political consultant "sent out a press release saying he's starting a blog because 'Tony Rubenstein is a dickhead,'" says Rubenstein. "If you're telling me he did that for fun and for free, well, that's an interesting hobby that guy's got."
The consultant and the "Yes on 10" campaign have since denied any connection to each other.
Other critics, such as Robert Bradley of Houston's Institute for Energy Research, accuse Pickens of creating the Pickens Plan simply to satisfy his vanity.
"What's at work," he says, "is his gargantuan ego, and this is how he gets in the news."
Rubenstein believes the Pickens Plan is nothing more than the invention of some of the best public-relations minds in the country.
"What the Pickens Plan is," he says, "is a political campaign to exact from the government taxpayer monies to favor his investments. It's a PR plan to wrap himself in a halo of patriotism and philanthropy to make himself unassailable, so that anyone who criticizes him is now subject to vicious ad hominem attacks."
When asked about using fear and patriotism as a sword, Pickens says, "That's probably true. I think we do have something to be afraid of here, and yeah, it's patriotic to be for our own resources instead of foreign oil from the enemy."
Criticisms don't appear to have hurt Pickens's popularity much. Even his adversaries can't help but tip their hat to the aging oilman.
"I've always admired Pickens's gall," says Tom Smith. "He has the capacity to figure out enough things and, like a well-trained quarterback, run through all the holes."
Says Rubenstein, "Objectively, he is a genius. I think there's probably some Ph.D. student out there in communications who should write a thesis about what he's doing, because it is genius."
With his wind farm stuck in irons, Pickens is putting the pedal to the metal on his plan for natural gas. Since January, he's made scores of appearances alongside auto industry executives and other businessmen, reciting the same basic mantra: Natural gas is clean, it's abundant, it's American, and it's the only domestic fuel with the power to move an 18-wheeler.
Pickens's idea of using natural gas to fuel passenger cars took a knife in the side when California residents rejected Proposition 10. Voters decided there are just too many problems with converting to natural gas, starting with cost.
Another problem, says Pickens, is that only one natural-gas car is being sold in America, as compared to at least eight different cars produced by automakers in Europe.
Pickens has moved on to focus on heavy-duty trucks and fleet vehicles that return to a central fueling station every night, such as garbage trucks, city buses, taxis, and commercial vehicles owned by companies such as Wal-Mart and UPS. This approach has landed Pickens far more supporters than did his original plan, but it still faces considerable criticism.
For starters, says Tom Smith, while natural-gas vehicles run 90 percent cleaner than their conventional-fuel counterparts, they only reduce greenhouse gas and CO2 emissions by 20 percent, compared to a 50 percent reduction by hybrid-electric vehicles. Then there's the price of natural gas, and while it currently costs less—about $1.60 a gallon versus just over $2 a gallon for diesel—it is volatile, and the price will most likely increase if use and demand rise.
Pickens points out that in the last several years, huge supplies of natural gas have been discovered in Texas, Louisiana, and West Virginia. With such a vast domestic supply, he argues, why not use it? After all, for the last several years it's been thought that the hydraulic fracturing method of extracting the gas, whereby enormous amounts of water and chemicals are shot miles into the ground to split the rock and release the gas, was perfectly safe. The Environmental Protection Agency said as much in a 2004 report.
However, a recent investigation by Pro Publica finds that this process may in fact pose serious risks to the country's increasingly dwindling drinking-water supply. According to the report, "contamination in drilling areas around the country is far more prevalent than the EPA asserts...[and] the 2004 EPA study was not as conclusive as it claimed to be."
What this means to the future of natural gas is unclear, but it seems sure that environmentalist groups will continue to investigate and potentially obstruct drillers.
One of the more vocal opponents to Pickens's plan for 18-wheelers is the American Trucking Association. The vice president of the group, Rich Moskowitz, argues that the cost of a natural-gas-engine truck runs between $40,000 and $70,000 more than a diesel truck and that most companies cannot afford them. Other problems, he says, include a limited operating range for natural-gas trucks and extremely heavy gas tanks that can add an extra 300 to 400 pounds. Due to weight restrictions imposed on trucks, that means they would have to carry that much less cargo.
The largest obstacle, though, is the fact that there are so few natural-gas pumps across the country, meaning an entirely new and costly infrastructure system would have to be built. That's a daunting task given that the existing infrastructure for gasoline and diesel took the better part of a century to create.
"You can't just put one natural-gas fueling station every so many miles," he says, "because without multiple stations competing, the prices will go up."
Moskowitz points out that Pickens's company, Clean Energy Fuels, is one of the largest manufacturers of natural-gas fueling stations in the country.
"Mr. Pickens is a very successful businessman and I'm sure there's nothing better, in his mind, than to have a monopoly selling fuel to a captive audience," Moskowitz says.
That leaves fleet vehicles, and on this score, Pickens seems to be making the most headway.
The trash-removal company Waste Management is reportedly investing tens of millions of dollars in natural-gas vehicles and recently announced plans to build a $7.5 million fueling station in Seattle with the goal of converting its entire Seattle fleet to natural gas within five years.
Wal-Mart has said it will begin testing natural-gas trucks, and at a February clean-energy conference in Washington, D.C., CEO Lee Scott joked, "So Boone, please don't call me anymore."
Pickens admits he's been contacting key business leaders like Scott, whose companies have large fleets, to convince them to change over to natural gas. Pickens won't say who he's been phoning, but says he feels hopeful.
"I don't think Wal-Mart is ready to do it yet," he says, "but I'm hoping someone will. But when we get a real high-profile company to say, 'We're going to go with a domestic fuel,' that's going to be real leadership."
Pickens is also looking to politicians on Capitol Hill to guide the way.
The stimulus bill didn't do much for natural gas other than to provide some tax incentives for installing fueling stations—just a peck on the cheek rather than the committed relationship Pickens was hoping for.
He was pushing Congress to include a $28 billion pilot program to convert 380,000 of the nation's roughly 6.5 million heavy-duty trucks to natural gas. Pickens claims it would cost $75,000 per vehicle and create more than 450,000 jobs.
Now that Congress has moved past the stimulus bill and is turning its attention to drafting a comprehensive energy bill, Pickens's proposal appears to be gaining steam.
U.S. Rep. Ed Markey, a Democrat from Massachusetts and chairman of the Commerce and Energy Subcommittee on Energy and the Environment, shocked energy insiders in early February when he said, "And I guess the headline is: I agree with T. Boone Pickens."
Sen. Harry Reid also says he's onboard, declaring on a conference call with Pickens that he supports the pilot program.
Pickens knows he needs the support of lawmakers such as Reid and Markey and says he's prepared to apply as much pressure as it takes.
"Pressure," he says, "I can assure Washington has not seen before."
In contrast to his January appearance at RiceUniversity, Pickens has the energy of a foxtearing through a henhouse during a star-studded clean-energy summit one month later at the Newseum in Washington, D.C. He is beaming as he takes his seat between Al Gore and Energy Secretary Steven Chu.
John Podesta and the Center for American Progress assembled a Who's Who list of Democrats and business leaders for the event, and all of them are treating Pickens like the cute girl in the room.
Al Gore compliments Pickens's leadership, Bill Clinton laughs at Pickens's folksy jokes, Carl Pope of the Sierra Club thanks Pickens for publicizing clean energy, and Harry Reid gushes.
"The glue that's been holding all this together for months," says Reid, "is T. Boone Pickens. He's put his money where his mouth is."
Pickens has been pouring most of his time, energy, and money over the past several months on Washington, D.C. He and his interests, PickensPlan.com, Mesa Power, and Clean Energy Fuels, spent more than $1 million on lobbyists in 2008, according to the Center for Responsive Politics.
Pickens is not shy about reminding politicians about the more than 1.5 million online army members he claims to have, saying that in 30 years of lobbying on Capitol Hill, "I'm a hell of a lot more powerful today" than he's ever been.
Pickens is mobilizing his troops and organizing a virtual march on Washington for April 1-3 titled, "Three Days That Will Change America." Along with several corporate sponsors, including AEP, Owens Corning, and the American Lung Association, Pickens is urging Americans to either email, write a letter, or go visit their Congress member. Public-relations man Elliot Sloane, who is promoting the event, says Pickens expects politicians to receive more than a million communications aimed at getting them to pass a favorable energy bill.
Washington insiders, however, say it's tough to gauge how effective Pickens's lobbying efforts have been thus far.
Senate staffers, who would only comment on condition of anonymity, say that while Pickens has a talent for drawing attention and getting news coverage, there's little to no evidence that he's influenced actual legislation.
While Pickens has shown he can get through virtually every door in Washington, Joe Romm of the Center for American Progress points out that if you look at recent legislation, Pickens has not done a great job swaying Republican lawmakers. After all, no Republican House members voted for the stimulus bill, and only three Republican senators voted for it.
"Anyone who's willing to spend their own money, has a famous name, and is doing counterintuitive stuff can always get media coverage," says Romm. However, "he can't be a serious player if he can't bring his own side to the table."
Lobbyists say Republicans have been receptive to the Pickens Plan, and Pickens says he's trying hard to persuade them his idea is the way to go.
"I'd say that three or four months ago they were pretty cold to me," says Pickens, "and now they're more willing to come along. The further I go, the more I think [Republicans] realize that the plan has real merit."
The next step, says Pickens, is working to get additional legislative help for the natural-gas side of his plan.
"I think it's going to show up in the energy bill pretty quick," Pickens says one morning, several hours after his routine 6:30 a.m. workout. "There's no question we've got the wind started and we've got the energy grid going, and there's no question we're on our way to the last piece of the plan."
Critics accuse Pickens of being a hypocrite, morphing from a free-market capitalist into a panhandling socialist when it fits his financial needs. To that, Pickens says, "the free market is fine, but waiting on the free market can sometimes be disastrous."
Instead, Pickens chooses to wait on Congress. Only time will tell if the veteran hedge fund manager has made the right bet.
"I feel great," says Pickens, "but until all the horses are in the barn, I'm not going to be tipping my hat or taking credit for anything."