Is T. Boone Pickens Selling Off Some Wind Turbines?

It's amazing what you can pick up sitting up at the right luncheon table in New York. The herb-crusted halibut and fingerling potatoes had just hit our plates and we were waiting for Boone Pickens to give the keynote at Chadbourne & Parke's Green Business Summit II at the Hilton.

Pickens was the big draw thanks to tens of millions of dollars he been pouring into a campaign promoting -- what else -- the Pickens Plan. It's his grand energy plan and it goes like this:

1. Build lots of wind farms to generate electricity.
2. Then stop using natural gas to generate electricity.
3. Use that natural gas to power vehicles instead.
4. Get off foreign oil.

It's green. It's energy independent. And it's all-American. Too bad, as you'll see below, it's a dumb way to go about solving energy problems, and it will never happen. There are cheaper and more efficient ways to go -- only they don't enrich Pickens.

To prove his green bona fides and sell his plan to the public, Pickens announced he was building the biggest wind farm in the world in Texas. (And I fell for it. ) The Pampa Wind Project, as it's called, plans to erect 2700 wind turbines across tens of thousands of barren acres in the Panhandle to feed 1 million homes 170 miles away. Mesa Power, the company Pickens created to run the project, announced back in May that it had placed a $2 billion order for 667 wind turbines with GE. Terms were not disclosed. Still he earned the very public support of Carl Pope, head of the Sierra Club, and lunch with Al Gore (burger and fries).

So it was pretty surprising when the neighbor to my right, a guy who specializes in the sale of distressed assets -- let's call him Tim McGillicuddy -- started talking about Pickens selling off his wind turbines. We had spent a good part of the morning listening to a panel deliver bad news about how the credit crunch and plummeting oil prices are slamming renewable energy projects. Maybe Pickens had his own bad news to share about Pampa?

"You think that's what he's going to talk about?"

"Goodness, no," Tim said.

"Oh. Then you're just speculating?"

"Nope. I heard it from a banker friend of mine who was in the room when Pickens' people made the offer."

Poor Tim didn't know he was sitting next to a blogger. I was wearing a suit.

Tim didn't want to go on the record, and he wasn't about to out his banker friend. What was I going to do with this juicy rumor? I called a friend for advice, a former journalist from the old school. "You need two sources," he said, "or you can't go with the story. That's the way it used to be, anyway." Unless I wanted to be like Drudge, he added. Ouch.

There was certainly plenty of oblique confirmation that Pickens and his wind investors might want to bail: in the New York Times, in its story Alternative Energy Suddenly Faces Headwinds; and in the Wall Street Journal's blog, Environmental Capital: Green Meltdown: Credit Crunch Whacks Renewable Energy, Too. Even the American Wind Energy Association issued a bleak forecast.

T. Boone is having his own problems, too, and perhaps he's suddenly in need of liquidity. His hedge fund, BP Capital, which likes to park its money in crude oil, gas and tar sands plays, reported 2008 losses of $1 billion -- a quarter of it Pickens' own money, according to Forbes. In 2006 he was ranked the 101st richest man in America. He dropped to 131st in 2008 with a net worth of a bit over $3 billion. Who knows where he will be next year?

Maybe investors in Mesa Power want out of the project? Pickens hasn't disclosed who they are or how much they've ponied up. He hasn't disclosed terms of the deal with GE for buying 667 turbines. What was the down payment? When are progress payments due? Maybe the notion of the project sinking $1.5 billion into its own transmission lines -- so it could actually sell the wind power -- all of sudden seemed foolhardy, too.

So when T. Boone started talking as we ate dessert (fruit tart), what became crystal clear is that first and foremost he's an oil and gas man. In his trademark fashion, he wrote on a white board to reveal the hedge that gets his juices going: $7 worth of natural gas could provide the same energy for driving as $30 worth of gasoline from crude. Now there's a market opportunity even bigger than the state of Texas, and that's what T. Boone is after. He wants to put natural gas in every car in America. And of course, they'd have to get their gas from natural gas filling stations owned by the Clean Energy Fuels Corp. He owns 16.5 million shares of its stock that trades under the ticker CLNE.

I can't recall that he said a single word about the biggest wind farm in the world that he is building.

Plenty of blogger ink has been spilled explaining why the Pickens Plan is bogus, and especially why the wind part of his equation is a greenwash. Natural gas plants are fired up to meet peak demand and so it won't work to substitute wind for natural gas. When you really need to, you can't just flip a switch and say "let there be wind!" What's more, what are you going to do with the natural gas plants built over the last decade or two? Tell the owners to shut them down because the Pickens Plan is here? And most damning of all, do the math -- as Climate Progress did -- and it turns out that it would be far cheaper and more efficient to move the US auto fleet to plug-in hybrids than to natural gas by a 2:1 margin.

I checked in with the American Wind Energy Association. They hadn't heard the rumor about the sale of Pickens' wind turbines. I called a reporter down in Texas who's been covering the project for the Pampa News and sent him an e-mail. He hasn't responded. Then I listened to the garbled tape I made of Pickens talking at the luncheon, but it was clear enough for me to realize it doesn't matter whether Pickens is selling off his wind turbines or not. The rumor is not about Pickens or his plan, really. That's the sideshow.

It's about something much bigger -- the power of incumbent fossil fuel interests as exemplified by Pickens -- whose support for and involvement in renewable energy is fickle and dangerous. Pickens has always said he's getting involved with wind for the money -- not because he's an environmentalist or because he cares about global warming. In his remarks he said he told Al Gore "global warming is on page two" -- what's on "page one" is energy for America from domestic sources. And what that really means is an endless fossil future.

The world's biggest wind farm just might turn out to be Texas-sized braggadocio and a big bait and switch. Go to the Pickens Plan and you'll see an article about why exploiting oil shale is such a great idea. We've written here about why it would plunge us into an abyss from which no amount of patriotism could extract us. And although Pickens said nary a word about his wind farm, he was transported with excitement when he spoke about all the natural gas that's out there waiting to be exploited -- in Appalachia, in Louisiana, in Arkansas, in Oklahoma, in West Texas, even in British Columbia.

And all that gas is now for the taking because of the development of technology that can "hydraulically fracture the carboniferous shale, and with that you get a good flow of gas." No mention of the fact that there is great concern that the technique imperils supplies of drinking water. Pre-emptively, the industry made sure the Energy Bill of 2005 included a provision that exempted hydraulic fracture from regulation by the Safe Drinking Water Act, and the Bush-Cheney EPA has been playing along as lapdog instead of watchdog.

It turns out that California is on the front lines of the Pickens Plan right now more than anywhere else, thanks to a ballot Initiative called Proposition 10. It's an initiative that was largely funded by Pickens' company -- the Clean Energy Fuels Corp -- CLNE. So far CLNE has dropped $10 million on Prop 10 -- which is officially called the California Alternative Fuels Initiative. Sounds like something voters in California would want to support. The day before I saw Pickens speak, CLNE had made the news for contributing the latest chunk of change: $3 million.

The main thing the measure does is authorize California to issue $5 billion in state bonds, and make $3 billion of the proceeds available in the form of rebates for alternative fuel vehicles -- i.e. natural gas vehicles. After accruing interest, the bonds will cost California taxpayers $10 billion over the next 30 years -- all so Boone Pickens can get help from citizens in a state where he is not resident to create the need for the natural gas filling stations CLNE is in the business of building.

Here's what's really odd. Proposition 10 goes by the nickname "Big Wind." It's not because with Proposition 10, Pickens is both passing gas and breaking wind, and when you see what's going on, you want to hold your nose. This man wraps himself in green goodness and the American flag, and he's got folksy charm. He had us all laughing repeatedly with his round-about way with making a point, and half the audience gave him a standing ovation when he was done.

Not me. I couldn't help thinking about the rumor that he's shopping his turbines -- which despite lacking another source has revealed a larger truth: how we have our work cut out for us in this country to establish a clean energy economy far away from the business-as-usual world of the fossil energy present and wildcatters like T. Boone Pickens.

Comments

[cyc4fave]

Environmental groups including the California League of Conservation Voters, the Sierra Club, the Natural Resources Defense Council, the Union of Concerned Scientists, and Environment California have urged voters to Vote No on Proposition 10!

[TexasAnn]

I live in the Texas Panhandle and the local news reported last week that Mesa Power is "scaling back" on the wind project. The water pipeline project has been "suspended" as well. Ironically, a different, previously uninvolved company announced a new wind farm last week in roughly the same area.

Boone Pickens is an attention junkie. He wants to leave a legacy to the world, and he has the money (even though he lost $3 billion) to buy it. Of course, he has a problem with following through on many of his legacy purchases (ask OSU or WTAMU)

[FreeEnergy]

People this past year have had to tighten their belts to make up for the exorbitant cost of fuel.The high cost of fuel in turn raised the prices of every consumer product from farming &shipping food, to producing and shipping other products.Electric companies passed on their higher production costs with large rate increases. We have spent less because we had less to spend. Spending less because we have less to spend in turn creates more job losses. It is a real economical catch-22. Now reports of people who can't afford their necessary medications are added to the list of the suffering. Just as gas prices start to fall some and they are still no where near cheap, OPEC cuts production of oil by 1.5 million barrels a day. There is no end in sight in this situation. We spent 168 Billion on the last stimulas pkg. That could have gone a long way toward getting some alternative energy set up such as wind or solar or getting the price of electric cars more affordable to buy. It would cost the consumer the equivalent of 60 cents per gallon to charge and drive an electric car. Why doesn't our country invest in getting us out of this mess instead of their quick fixes that don't work? Just read a fascinating book The Manhattan Project of 2009 by Jeff Wilson . Every member of congress to read this book too, and fast! www.themanhattanprojectof2009.com

[Clynton]

David,

Your reporter friend was on the money - as the old ones always were. They put getting it right before getting ahead and probably suffered for it over the years. For that integrity they are still well respected!

This is a new era (hopefully), where anyone worth his salt should showing himself. This might be my last post, but I'm not afraid to do it. Neither should they be afraid to put their name out there - even if they don't turn in their banker friend.

So, in order to spread the rumor you've now done the "I have a friend who told him that his friend was in a bathroom when someone said..." You see where I'm going? Mr. Pickens is very open and honest - which has probably gotten him into trouble with people who hate capitalists. I suggest that the smarter thing would have been to confront him right there, so that there wouldn't be excuses later when people didn't return your calls. He would have told you yes or no I'm sure.

Who cares if he sells everything to recoup losses. Hopefully it's to another American investor. But again - that's even if your story is true. I ask, does that negate the fact that we need to get off of foreign oil? Kennedy said we'd go to the moon. He didn't build the rockets himself. That's for people like me...

You could have done better.

[David Sassoon - Huffpost Blogger]

I should have called Pickens. Point taken.

Not sure I'm 100% in agreement with you or my old school friend. There is a role for blogs and citizen journalists in opening territory that mainstream media avoids. The 60 Minutes segment on Pickens last Sunday that Charlie Rose did was a puff piece (at least the transcript read that way to me.) So there's a necessary change afoot in the old rules which I made sure to call attention to.

The foreign oil thing is not entirely accurate. We need to get off oil, period. Oil is sold on a single global market isn't it? So you can't just buy oil from countries you like if you consume 25% of global supply and produce only 3% of it.

You can cut out the wind part of the Pickens Plan and it doesn't change a thing. It's essentially a plan to increase reliance on natural gas, and Pickens is the prime beneficiary -- not America.

Have a look at this analysis of how quickly we can realistically reduce oil consumption using electric vehicles. http://solveclimate.com/blog/20081003/electric-cars-and-energy-independence-part-i

Pickens claims his plan will reduce oil consumption 38%. By when? And at what cost? He should explain why and how his plan is better than PHEVs.

Instead he's dropping $50 million into PR and getting himself on 60 Minutes, and dropping $10 million in California on Proposition 10 to feather his nest at taxpayer expense.

[theDoctor912]

2 things need to be kept in mind:

* Wind technology is not "pie in the sky". European nations use wind to produce over 20% of thier power generation...some countries more than that. In the US we use only 1% wind

* NG is already a great transportation fuel with 8 Million vehicles worldwide using it. Only 142,000 in the USA.

As to your lack of a "real live" second source to confirm your story. How about Boone? Call him up and ask him. He'll tell you. Why all the guess work? Personally, I think the guy just really hates Foreign oil. So do I. Everyone seems to be more concerned with how much coin he's putting in his pocket than stopping to consider how much cash we a transferring to the Suadi's and Dubai via our gas tanks and the devaluation of our homes.


In my business, which is capital intensive manufacturing not unlike wind, I don't own the equipment either.

And when did Carl Pope become a stooge? He's an extremely intelligent man with a huge fiduciary responsibility to his membership. Maybe you should call Carl and ask him that question yourself too.

[degenerate1991]

"European nations use wind to produce over 20% of thier power generation"

Really, this is news to me.

And, as far as I'm concerned, a rich Saudi or a rich man from Dubai are no different than T. Boone Pickens. In fact, the Saudis are more indebted to the USA than Pickens will ever be.

[theDoctor912]

Well if Boone's plan is to drive up demand for NG, then he's going about it the wrong way. His plan swaps the NG used in power generation with wind...then diverts it to transportation. No greater demand in total. Are you suggesting that the producers will get more per MCF by selling it to the transportation market than selling it more cheaply to the power generation market? If so...who cares. NG is a great transportation fuel...it's a waste to use it for power generation anyway.

There may be infrastructure (although in very poor condition and itself wasteful) for plugs in...but the technology and the battery capacity isn't there yet. You can't go more than 40 miles on all electrical in a Hybrid, (which btw still burns foreign oil) and all electric is not there yet. Electric won't do the heavy work that NG can do. Even if the technology was there, with what you are suggesting, we won't have developed wind to get off of the fossil fuels that we are "plugging into". If I understand Mr' Pickens, this is a bridge to get to the next generation fuel. None of the assets put in place are under the Pickens Plan are a dead end. The Windmills won't be "abandoned later"...and the $$ spent in infrastucture needs to be spent anyway. We have no infrastructure. Ask our pals at the DOE what there assessment is.

[arizonaundecided]

It remains to be seen if the technology for vehicle to grid communications will be ready when the vehicles are--it all depends on where you live. Check out Mr. Pickens interview on Forbes.com. Mr. Pickens says he bought 2 billion worth of turbines from GE scheduled to be delivered in 2010--sounds like he's building a wind farm.

Keep in mind--the Pickens Plan does not promote a replacement of all energy with wind--just about 20%. The 20% natural gas that is replaced will be utilized for "fleet vehicles"--trucks, buses, garbage trucks etc. I'm not a kool aid drinker of the Pickens Plan but elements of it certainly make sense--even to the most cynical of us out there.

[David Sassoon - Huffpost Blogger]

Wind cannot replace natural gas. The reasons why are explained in the post.

I'd like Mesa Power to disclose the terms of the deal with GE. They haven't spent $2 billion yet, just a down payment of an undisclosed amount. All we can say is that they've bought rights to future delivery of a commodity they can resell, and it's allowed Pickens to wrap himself in a green mantle.

I counsel caution.

[JustAnotherJoe]

What about natural gas powered plug-in hybrids?

[David Sassoon - Huffpost Blogger]

One simple reason: There's an infrastructure already in place for plug ins -- the grid, and common power outlets. There's no natural gas infrastructure for autos, and a home compressor to pump gas from gas mains costs $4000 or so. Not to mention the extra cost of natgas vehicles, which nobody is manufacturing.

[theDoctor912]

That infrastructure is old...some of it the original put in place 50+ years ago. You loose more power trying to send it through the darn thing.

Nobody manufactures a Natural Gas vehicle? Wonder who made the 8 Million in use worldwide? Gm makes em. There's 1. Honda Makes em 2. Not sure who makes all the NG trucks...the Germans no doubt...crafty buggers. They make Wind Turbines too.

Who makes your ALL electric plug in vehicle, Tesla? How much was that car? And I also heard they too have posteponed thier vehicle launch.

and how does plugging into this grid get us off of Fossil Fuels.....if not for Wind?

[degenerate1991]

And imagine all of the blackouts we will have if people start plugging in their cars; unless folks are willing to return to reality and allow some good old fashioned coal plants to be built.