Natural Gas & Wind Power - The Pickens Plan 41 comments
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While many billionaires are enjoying retirement on a super-sized yacht in the Caribbean, T. Boone Pickens is doubling down at the age of 80. Over the last three decades, investors who have followed his lead have made millions.
Pickens doesn't work because he wants to move up the Forbes' list of billionaires. Since last year, he's given away over $200 million to his favorite charities. Instead, Pickens is a man on a mission and with a simple message: Ditch foreign oil and rebuild America's domestic energy industry for a green and happy future.
Educated as a geologist, in 1951 T. Boone Pickens joined Phillips Petroleum and by 1956 he struck out on his own as a wildcatter with $2,500 of borrowed money. Pickens has been in the oil and gas business ever since. His company, Mesa Petroleum (MSEG.PK), became one of the largest independent oil firms in the world by 1981. Then he shifted his focus to shareholder advocacy, attacking rivals that he felt were shafting investors, and making unsolicited bids for Unocal, Phillips, Gulf Oil and others.
Many of his bids weren't successful, but he usually walked away a much richer man - besides having improved management's focus. Today, Pickens runs a multibillion-dollar commodities hedge fund out of Dallas. And now he's making the biggest bets of his career. So let us look at how Pickens intends to profit now…
T. Boone Pickens & The Peak Oil Theory
T. Boone Pickens is a proponent of the much-debated peak oil theory. He believes the oil price shocks we have experienced this year are only the beginning. He sees much tighter supplies in the future.
"America is in a hole," he told CNBC last month, "and it's getting deeper every day. We import 70% of our oil at a cost of $700 billion a year - four times the annual cost of the Iraq war. I've been an oilman all my life, but this is one emergency we can't drill our way out of. But if we create a new renewable energy network, we can break our addiction to foreign oil."
"In 10 years, $5 trillion goes out of the country for oil. It's nuts. It's the greatest transfer of wealth from one area to another in the history of the world."
Instead, he wants this money to stay in America - with a good portion of it going into his pocket.
His plan is simple: Cars need to be converted from crude oil and gasoline to compressed natural gas as soon as possible. And to replace the natural gas used in electrical generation, he advocates a giant wind farm stretching from Texas to North Dakota.
"America is the Saudi Arabia of wind," he likes to say.
T. Boone Pickens Has An Energy Plan to Save Our Economy
To be sure, Pickens has an energy plan to save our economy - he is building the largest wind farm in America. It will generate as much clean electricity as two nuclear plants, and, best of all, with little negative effect on the environment.
His commitment to clean fuels has impressed the environmental community, prompting the Sierra Club's director Carl Pope to say, "To put it plainly, T. Boone Pickens is out to save America."
But don't believe that he's lost his focus on making money because he is in his 80s. "Money! First thing, it's about money," Pickens told Fast Company magazine in June.
"Of course, I'm also a good environmentalist. I can pass the saliva test. But I'm not going to go do a 4,000-megawatt wind farm for the environment first and money second. I'd rather go give money someplace else. You're talking about $10 billion." And what kind of return does he expect? "A minimum of 15%; it'll probably be closer to 25%."
Last year he also brought Clean Energy Fuels (CLNE) public - a company that markets natural gas for vehicles. It designs, builds, finances and operates 170 fueling stations and supplies compressed natural gas and liquefied natural gas. But what it doesn't have is profits.
With Mr. Pickens owning 16 million shares, don't expect that to slow this company down. Management is growing revenues at a rate of 25% per year.
I don't have much taste for the shares of any company without positive earnings, such as Clean Energy Fuels. But the current downturn in natural gas prices has hit stocks in this sector hard. Today a number of these gas stocks are cheap for the first time in over a year.
Natural Gas Stocks & Wind Power - The Pickens Plan
Two firms that specialize in natural gas exploration and production that have recently pulled back from elevated highs include:
- Chesapeake Energy (CHK), with a forward price-to-earnings ratio (P/E) of only 9.
- Devon Energy (DVN), which has a P/E of 9.
In terms of wind power:
- General Electric (GE) is one of the world's largest manufacturers of wind turbines. With over 8,400 installed worldwide, it provides power generation capacity of more than 11,300 megawatts. GE currently trades at a very attractive P/E ratio of 13.5 and a 4% dividend yield. It pays you to hold its stock.
- FPL Group (FPL) is the diversified utility and power generator that grew out of Florida Power and Light. It leads the nation in the development and operation of wind power. With more than 45 facilities located in 15 states, it has a generating capacity of more than 4,000 megawatts of electricity.
This represents approximately 35% of the nation's wind-generated power.
There are many ways that our country is working to free itself from its energy shackles, and I don't know if America will embrace the Pickens Plan above all others.
But T. Boone Pickens has a history of being in the right place at the right time, and profiting handsomely. By following in his footsteps and investing like him, you stand to make a bundle as well.
There's no shortage of news coming out from producers of wind power and renewable energy…
- General Electric and Spanish company Acciona SA (ACXIF.PK) reported this week that they were partnering in a 180-megawatt wind farm in the Dakotas. The $381 million project will span over 14,000 acres.
- The United States ranks second with installed wind capacity of 19,600 megawatt [MW] compared to Germany's 23,000 MW. But new figures from The American Wind Energy Association report that we produce more power from our capacity due to better locations and stronger winds - making the United States the world leader in wind power generation.
- Bluewater wind recently received approval to build a wind farm 11 miles off the coast of Delaware. Construction is expected to start in 2010 and be completed by 2012. The project will be the first offshore wind farm in the United States, generating up to 600 MW.
- Texas agreed to spend nearly $5 billion of electrical transmission lines to connect 18,456 MW of wind power from "wind corridor" west to their customers in populated east. Texas is currently reviewing connection line requests for an estimated 54,000 MW of wind power to be built.
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This article has 41 comments:
thefitzman.blogspot.co...
Pickens' plan is a great step in the right direction, but the magnitude of the "oil problem" is so large much more comprehensive steps need to be taken. Meantime, Washington sleeps.....
You are correct, Pickens' plan will only deal with our energy predicament for the next 10-20 years or so.
Making a complete switch to renewables will, in my view, take the entire 21st century, and will be 100 times as difficult as dealing with the first 10-20 years.
Pickens has identified the "low hanging fruit" in the transition from fossil fuels to renewables and proposed that we go forward with those measures that are to anyone who has some understanding of the energy situation the obvious measures to be taking at this time.
In the longer-term, we are going to have to deal with:
1). How to match the energy demand profile as a function of time with the production profile of intermittent renewable sources.
2). How to get the energy from renewable sources, which are sited where the resource is availalbe, to the places where the energy is needed.
3). How to generate enough biofuels to meet the energy needs of applications that can't run on electricity. (e.g. aircraft)
1 and 2 combined could be termed "how to match renewable energy sources with demand in time and space".
I believe that will be the biggest technical challenge ever undertaken by mankind. It will make the development of renewable energy SOURCES such as wind and solar look like childs play in comparison.
It is time to start preparing for Peak Oil impacts: www.peakoilassociates....
survivingpeakoil.blogs.../
As for matching renewable energy sources with demand in time and space, it's possible now, but it is not cheap. Storage facilities, if you can find places to put them that will not run into fierce public opposition, cost significantly more than wind turbines.
I'm all for reducing our addiction to imported oil and I believe market solutions are the only way to accomplish this goal, but there's no silver bullet and I think the public has to feel a bit more pain before public opposition to some very sensible alternatives finally abates.
The US has a pretty good natural gas supply situation in my view. Look at the large discoveries of unconventional natural gas in the various "shales" around the country by companies like Chesapeake and XTO. Beyond the proven reserves, there are staggering amounts of natural gas that they view as "possible", which in my opinion are likely to largely turn out to be real.
Yes it will run out as well, but we have more than we thought, thus allowing us a little more time to make the transition to renewables.
Right now the industry debate is whether we have a GLUT of domestic natural gas.
I believe peak oil is real, and it is now. I believe peak natural gas is not very far down the road. But I also believe that just because one recognizes the peak fossil fuel problem does not mean that one should always accept uncritically the very most pessimistic forecast for the timeline of the decline of the various fossil fuels.
Take James Kunstler for example. I love his writings, he is extremely witty and much of his dire forecasting is probably right on target. But clearly he always proposes the absolutely most dismal forecast on every detail of the death of the fossil fuel era.
You are absolutely right, that is a flaw in Pickens' plan.
Wind power goes together best with natural gas power, because wind is unreliable and natural gas is the fuel used for "dispatchable" power for times when demand peaks above supply.
Wind and baseload plants like coal and nuclear don't "play together" nearly as well.
Personally, I think because of this we shouldn't tinker with the mix of electric power plants, in fact, it may make sense for new plants to be natural gas rather than coal.
However, we can rely heavily on natural gas power plants and not necessarily use up a whole lot of natural gas.
The key is to build LOTS of renewable plants as Pickens proposes. Then, MOST of the time we should be able to get power from those. Solar in the day, wind at night. We still need the natural gas plants to to "fill in the gaps", but the point is if we have a lot of renewable plants then the natural gas plants can be shut off a lot more of the time, and thus even though we still need those power plants, we can cut down on the amount of natural gas we are burning in them.
I have read the Pickens Plan. It is not perfect, but it is viable and, more importantly, it is the only thoughtful framework that is on the table right now. We would be foolish to nit-pick it into oblivion just because it isn't "the" solution for all time. To paraphrase, let not perfection be the fatal enemy of the possible. For purposes of discussion, let me state from the outset that I hold positions in CLNE, GE, and PWR.
First, the obvious: Having hamstrung ourselves by limiting severely our production of fossil fuels domestically, we are vulnerable to the political and often fanatical whims of those who are not our very best friends. Worse, we are obliged to fund their "whims" at levels that are obscene. We should start today - this morning - to develop every viable alternative imaginable. This includes drilling for crude oil and natural gas. It also should include hydrogen fuel cells, compressed LNG, bio-fuels, nuclear, solar, geothermal and probably a half dozen that I haven't even heard of. Make no mistake about it....this is a matter of our survival as a free nation, and the environmentalists who have established themselves as the self-appointed "guardians of our planet" will have to just step aside and let the realists work to ensure that they will have enough power tomorrow to light and heat their own
"Save the Planet" offices.
We can and must do anything and everything to maintain our independence. And we must face the fact that we have become our own worst enemies. The petty partisan political theater in Washington has gone beyond acceptability! No matter which side of the political aisle each of us identifies with, we can no longer afford to be red or blue; we must insist, loudly and clearly, that our ensconced representatives in DC stop playing the roles of good Republicans and Democrats and start behaving like good Americans! The only thing hanging in the balance is our nation!!!
the man has a plan with some real possibilities. there are a number of municipal governments that have bought into what both CLNE and Westport (the firm that provides the truck engine technology) have to offer. this is called capitalism in the service of civic good.
no, it's not perfect but it has a chance of doing some real good and making some money as well.
what do you have to offer?
Well said and not all overstated. It took $4.00 gas for people to start asking questions.We can find all kinds of reasons to do nothing, but if we don't take care of our business, we'll be out of business. At the end of the day, it really is everyman for himself and no one out there will really care whether we sit in the warm light or the cold dark. Many would just as soon see us fall (after they have all of our money). It has not dawned on a lot of people, that a free nation cannot remain a world power, if it depends on the good will of theocracies, monarchies, and socialists for it's energy. Affordable energy made the USA great and gave us the ability to project our economic and military power anywhere in the world. We will need to use all the resources available to us. A comprehensive national energy plan is a must so that we don't make the mistake of using food for fuel again. I hope the Pickens Plan starts that discussion.
If Russian filling stations were delivering 10,000psi NG to the general public - you would see occassional "light ups" at the stations....
A few notes:
(1) Pickens has said his plan is a 10-20 year stop gap until additional new energy technolgies are developed.
(2) One of the individual wind plays not mentioned in the article is Vestas Wind Systems AS (VWDRY.PK) which I own.
(3) A key element for electricity generation by variable sources such as wind and solar is electrical energy storage. Batteries and capacitors are an area that need a lot of R&D work. This area is also critical for the eventual ubiquitousness of plug-in electric cars.
(4) As mentioned in the article and by several comments, energy is the largest economic challenge facing the U.S., larger than the size of the credit crisis, national debt and unfunded liabilities for Social Security/Medicare/Medi... combined.
(5) New energy is also the great economic opportunity of the 21st century. It can have an impact equal to (or greater than) the railroad/industrial revolution of the 19th century and the internal combustion engine/petroleum driver of the 20th century.
What history WILL write about the man is he got us off of our a--es and into understanding our energy dilemma. Much like Bill Gates, he will be known as a man who CHANGED America.
So can decry him, talk bad about him or climb on board. As for me, I've always liked Texans with BIG ideas. If we follow along, there's something in this for all of us, perhaps as investments, and certainly saving ourselves money on energy.
If I have to trust someone to help get us through this mess, choosing Pickens over Washington is a NO BRAINER for me!
There are some 5 million various types of NG-powered vehicles running the roads around the world right now, so it is hardly a daunting technology. The 150,000 or so NG vehicles in the U.S. store CNG on board at 3,000-3600 psi's.
And if they were dangerous, trust me, we'd know ALL about it. I'll tell you what IS dangerous, though. Sending $700 billion overseas each year to buy oil from Chavez and his friends. Now there's some REAL DANGER for you!
But we'd have to keep oil prices in the US elevated via taxes (like Europe charges) to prevent a creep back in to the oil demand cycle that has brought the US to its knees and will keep it there for decades unless action is taken.
According to Paulk8756 there are 5,000,000 vehicles operating on NG today. I doubt that would be the case if it was not profitable. If I had a profitable gasoline business that I could milk for more profits using 20-40 year old infrastructure, I would not make an effort to try an alternative until some one started to compete for the business. Thus, the U.S. with only 150,000 NG vehicles is not yet offering any competition to gasoline. I see no conspiracy theory, unless you want to call managing your business to maximize profits one quarter and one year at a time a conspiracy.
To answer your Einstein question, maybe Pickens will create enough of a threat to turn the Einsteins loose. Once the use of NG for transportation reaches the critical mass in the U.S. I am sure we will go from the current 3% of NG vehicles in the world to a much larger percentage. When that has happened here I expect the rest of the world will have grown to much more than 5,000,000 NG vehicles.
Once the move starts it will be a tsunami.
Why hasn't NG caught on for 80 years? Try cheap and plentiful oil for a good reason. Now the relative costs have changed and appear to have changed permanently, or at least for up to 20 years after which NG costs may be rising faster due to supply constraints. In 20 years (or sooner) we should have another technology ready to take over, be it plug in electric, hydrogen fuel cell, or something else not on the radar today.
Wind is erratic and unpredictable
Nuclear is continuous and environmentally friendly the companies to run reactors are U.S. and the uranium is in North America.
ALLLLLLLLLLL ELECTRICITY SHOULD BE NUCLEAR. with no gas, coal, or oil being burnt.
What about nuclear? It seem such a good answer. Then even maybe your local commuters would be able to use electric cars. Right now electric cars are not the answer because they still require fossil fuels to be burnt at the generators
Whatever steps are to be take to address the energy problem will take time to develop and will require the elected folks in Washing to quit their bickering and acceptance of largess by the oil companies, to dictate their actions. If they can't help solve the problem, for heaven's sake GET OUT OF THE WAY!
Whatever steps are to be taken to address the energy problem will take time to develop and will require the elected folks in Washington to quit their bickering and acceptance of largess by the oil companies, to dictate their actions. If they can't help solve the problem, for heaven's sake GET OUT OF THE WAY! Disregard the people who say we can't do it. We haven't tried everything yet. The US has the engineers and economists who can work together to formulate the plans and schedules to address our problems.
In my humble opinion, we need to carefully and without prejudice explore the various alternatives. Here is how I see it:
1. Nuclear plants will be the prime base load suppliers.
2. Coal fired plants will still be used for base load electricity.
3. Gas fired plants will be used for partial base load and peaking requirements.
4. Wind and solar power will be developed to supply as much as is economically possible.
5. Further development of geothermal energy should progress at warp speed.
6. Development of more efficient power transmission facilities must continue.
7. Continued work on developing batteries or other electrical storage methods is needed.
8. Power companies and private groups need to emphasize energy audits of business and residential buildings to achieve maximum efficiency of insulation and power requirements.
9. Natural and LP gas conversions for vehicles are available and already proven.
10. Further development of more recently discovered natural gas locations will take time to develop.
11. ALL of us must educate ourselves to conserve resoources and use them wisely.
In most cities is the US, the peak electrical loads occur during the daylight hours, with reduced demand at night. Wind and solar power will make a significant difference.
By implementing the items listed above, we will reduce our reliance on foreigh suppliers and pt more of our euemployed engineering, construction and business people back to work. Let's all work together to make our country better.
$10 mil. for ads is pocket change, compared to the costs he would have to pony up if his company had to come up with connections itself.
I like the concept, I do not like being manipulated to help finance a particular company.
Everyone seems to agree on the need for both Wind and Solar. The problem is dealing with nature's inconsistencies in respect to both Technologies.
If more research were allocated to electrical storage batteries whereby the electricity produced would be stored and could be discharged in a steady stream.
The problem has been the capacity of the Batteries.
So instead of a big Manhattan Project, I would propose Natural Gas Plants, Wind and Solar to increase the amount of electricity available and all-electric vehicles that wouldn't need the infrastructure of most of the alternatives.
That's my opinion. But let me give all of you Kudos for the most sensible series of Posts I've seen in a long time. Thank you.
Statewide monthly gas well gas production for Chesapeake Operating:
Oct 07 32.9 Nov 07 31.5 Dec 07 31.1 Jan 08 29.9 Feb 08 27.4 Mar 08 27.8 Apr 08 25.7 May 08 25.1
So, production plummeted by 24% within 8 months. Within these 8 months NG prices surged from 6.17 (Q3 2007) to 11.34 (Q2 2008).
Also: According to Texas RRC, output from the Barnett Shale peaked in Dec 07 with 3.07 BCF and declined to 2.61 BCF (May 08) so far.
Shale NG is hot air, just declining too much.
‘Buy America Energy’ should be our focus for the future.
We could have $2.50 gasoline from our own local supplies.
The American oil shortage is political, not geological.
In the U.S., the local, State and Federal governments prohibits drilling offshore, effectively blockading American companies from supplying oil to Americans so that foreigners can make obscene profits from our energy stupidity.
Half the home sales in America are foreclosures because we are sending all our money overseas for foreign oil, when it could be staying here creating millions of safe American oil and local jobs.
The entire economy and our communities are facing collapse because of the irrational ongoing attack on American Energy.
Our entire modern society is build on fossil fuels. The population is so brainwashed by the "Sierra Club Gang" they don't realize that if the much maligned oil companies went on strike, within a month half the population would be dead;
Without hydrocarbons fuel you would soon be walking. You couldn’t be driving cars, and it wouldn’t do any good to call the maintenance or repair people because they wouldn’t be able to get there, as they would be walking too.
The food distribution system would quickly grind to a halt as cold-storage warehouses stockpiling perishables went offline due to lack of electricity.
Most of the things we depend upon would be gone, and we would literally be depending on our own food assets and those we could reach by walking to them.
Without hydrocarbons fuel people in hospitals would be dying faster, because they depend on electrical power and natural gas for warming to stay alive. But then stoppages would soon include water, food, civil authority, emergency services. And we would end up with a country with many, many people not surviving.
ANWR: Could quickly replace 10% of America's oil imports.
OIL SHALE: There's 3 trillion barrels of oil in Shales in Colorado, The technology to remove the oil was developed back in the mid 1980s. This Area could supply 20-30% of America's oil needs within a decade, with modest environmental impacts. It only takes 3 barrels of water to make one barrel of shale-oil. It take 85 barrels of water to make one barrel of ethanol!
CALIFORNIA FACT; There is between 2-3 billion barrels of proven-probable barrels of oil within 20 miles of the Santa Barbara County shores alone.
See; www.strategicnine.com/...
CALIFORNIA FACT; This area alone could produce 300,000 to 500,000 barrels a day for 10-20 years, replacing more than half of California's oil imports, while generating billions in County, State and federal royalties, and make Santa Barbara County the wealthiest in the nation.
NATURAL OIL SEEPS POLLUTION; The Santa Barbara County continues to suffer 6,000 tons per year or airborne pollution from natural oil-gas seeps and does not get a nickel in revenues or health benefits from natural oil seeps and instead continues bankrolling Americas competitors and enemies.
Change is urgently needed, or the American economy will soon disintegrate.
The OPEC-Russia-Chavez oil cartel is not just looting the United States, but the whole world, and will accumulate over $1.5 trillion in net profits this year. At their current rate of take, OPEC-Russia will acquire enough cash to buy majority control of every leading company in the United States within six years. And you are voting into power the very American-energy-traito... who are doing this to you and your country.
Its high time to Put American’s Energy Supplies First.
Vote all the energy-idiots out of local state and federal governments.
www.arcticoag.com/