Open Letter to Boone Pickens

 |  Includes: CLNE, HMC
by: Michael Fitzsimmons

Dear Boone,

I was very excited when you brought high-profile support for natural gas transportation and wind energy. I enthusiastically joined your “army” and still participate regularly on the PickensPlan website. We certainly could use more wealthy Americans helping to solve our foreign oil addiction crisis by patriotically supporting such critical energy initiatives. Buffett, Sergey & Larry, and Gates - are you listening?

Overall, Boone, you’ve done a great job! I heartily applaud your efforts. However, each of us can always improve, right? Therefore, I am writing you today in order to offer some constructive criticism.

You often say that natural gas transportation is critical in solving the economic and national security challenges facing the United States due to its 65% addiction to foreign oil. I totally agree with you (I’d also add environmental challenges to the list). That being the case, let me suggest that you begin by supporting political candidates that agree with your viewpoint. After all, as you yourself say, energy independence is such a critical matter it needs governmental support and encouragement. So why vote to elect politicians who disagree with your vision and oppose the necessary legislation? We need politicians who will craft legislation that removes the subsidies enjoyed by the oil and coal industries in order to level the playing field and allow greater adoption of natural gas for transportation.

Secondly, if you really want to reduce foreign oil imports and greenhouse gas emissions, you should support natural gas transportation for everyday cars and trucks. Why limit the effort to fleets and large trucks? There is a 2.2 million mile natural gas pipeline grid in America connected to 63,000,000 homes where 130,000,000 vehicles park every night. Doesn’t it make sense to utilize this tremendous and existing American asset to reduce foreign oil imports, reduce CO2 emissions and create millions of American jobs at the same time? What better way to prepare all Americans for the next peak-oil price spike (which will probably make 2008’s $145/barrel oil look like child’s play) than to enable them to refuel their cars and trucks at home with US produced natural gas?

My third piece of advice: support natural gas electrical generation. You keep saying you want to build wind farms so it will “free up natural gas for transportation”. But the US has an abundant supply of natural gas! So I suggest you begin supporting replacing dirty coal fired plants with natural gas generators. Although it is a bit too late, a bold statement would be to start with the Kingston Fossil Plant in TN where on Dec. 22, 2008 1.7 million cubic yards of toxic coal ash and sludge was spilled. Much of it ran into the Emory River, which feeds the Clinch River, which runs into the Tennessee River…but I am getting off topic here - back to NGVs.

In order to use existing home natural gas connections to refuel a vehicle in the garage, the consumer requires a home refueling device. The problem here is the only company to make such a device (the “Phill” by the Canadian firm Fuelmaker), does not service many states. Most people simply cannot buy a Phill no matter what the cost. That said, even if they are lucky enough to be in a state where the Phill is sold and serviced, it would cost around $4,000 uninstalled (!).

The engineer in me said, hey, I bet I could design a similar device, order 500,000 units from China (after all, we can’t seem to make anything in the US any more), sell them for $1,250 and still make a profit. Before starting the detailed design work, I thought it wise to research any patent protection the Phill might have in place. The first thing I learned in the patent search was that Fuelmaker is still owned by American Honda Motor Company (NYSE:HMC). Apparently, last year’s attempted purchase of Fuelmaker by your firm, Clean Energy Fuels (NASDAQ:CLNE), fell through.

There is a rumor in the NGV world that Honda is very close to finalizing a deal to sell Fuelmaker but the buyer is not confirmed. With 18 US patents and applications and 75 international patents and applications, Fuelmaker looks well protected by critical IP. The barriers to market participation by competitors are therefore quite formidable. Still, it is amazing there can be so many patents protecting a process (compressing natural gas) that man has been doing for nearly 100 years.

In summary - I can’t design my own refueling device without potentially getting sued, I can’t buy a Phill in my state, and even if I could buy a Phill it would cost me over $4k, probably closer to $5k installed. This is a very sad state of affairs if the goal here is to transition Americans off of foreign oil and onto US produced natural gas. Would you not agree?

In light of these realities Boone, my advice to you is: buy Fuelmaker, lower the price of the Phill, and expand its availability to all 50 states. Home refueling of NGVs is imperative to solving the chicken-n-egg problem of NGV/refueling. Alternatively, after purchasing the Fuelmaker, you could give me a written patent waiver absolving me of any competitive liability. Competition is what is needed here to make the device affordable for all Americans! After all, it’s critically important and patriotic that we get Americans using natural gas transportation, right?

The Phill is only one of two formidable availability issues in my state. I can’t even buy an NGV here! Of course there is only one NGV for sale anywhere in the US today, the Honda Civic GX, but only if you live in California or New York. So, how come I don’t hear you mentioning this fundamental barrier to widespread natural gas transportation? Please use your bully pulpit to mention this obvious barrier to natural gas transportation: most Americans simply cannot find an NGV to buy! What a sad commentary it is that Americans cannot buy an NGV at the same time that both Ford (NYSE:F) and GM sell NGVs in Canada - a country that exports tar sands oil to the US! What a country… At the same time, conversion kits are very expensive and hampered by the EPA as well as federal and state regulations and certification issues.

In conclusion, in order to reduce foreign oil imports, CO2 emissions, and to enable the transition to natural gas transportation and NGVs, you can and should:

  1. vote for politicians that support natural gas transportation
  2. support natural gas for fleet AND non-fleet cars and trucks
  3. buy Fuelmaker, reduce the price of the Phill, and expand availability nationwide
  4. publicly chastise the automakers for not making NGVs available nationwide

It’s ironic the simple changes you yourself could make in order to better promote the policies you say are so critical to solving US economic, environmental, and national security problems. All that said, keep up the good work Boone!

Best regards,

Mike Fitzsimmons

Ps. Boone, once CLNE purchases Fuelmaker is there any chance you could send me a Phill for my birthday?

Pss. Then all I’ll have to do is find a Canadian with an NGV on eBay (NASDAQ:EBAY)…

Psss: You-tube video of the Phill refueling a Honda Civic GX:

Disclosures: the author does not own Clean Energy Fuels or Honda Motor Corp, but he would invest in both companies if the Phill and the Honda Civic GX were available nationwide. He would also load up on Toyota Motor (NYSE:TM) stock if Toyota would manufacture their electric/natural gas hybrid concept vehicle in volume for sale in the US.