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T. Boone Pickens

posted on January 24, 2014

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Energy visionary, political philanthropist.  Entrepreneur T. Boone Pickens using business expertise and political insight in a conservative agenda.  A conversation with T. Boone Pickens on this edition of Iowa Press.

Borg: Certain people seem to have a knack for getting things done, born achievers seemingly defying age, pursuing new agendas.  That description fits T. Boone Pickens.  As the story goes, at age 12 Mr. Pickens took over a 28 customer newspaper route and quickly expanded it to 156.  A geology degree fromOklahomaStateUniversityset him on a career in the petroleum industry and acquiring major companies.  He's now leveraging his wealth in a conservative political agenda and, somewhat surprisingly, trying to wean the nation away from foreign energy by promoting alternative sources, particularly wind and solar energy.  Mr. Pickens, welcome toIowaand welcome to Iowa Press.

Pickens: Thank you.

Borg: It's a pleasure to have you here. Across the table, James Lynch who writes for the Gazette published inCedar Rapidsand Radio Iowa News Director Kay Henderson.

Henderson: As an oil man who is now an advocate of alternative fuels, what is your view of corn-based ethanol?

Pickens: I say I'd rather have ethanol than OPEC oil.  Ethanol, I know how it all happened and I was there when Bob Dole explained to me there's 21 farm states that have 42 senators.  They want ethanol we're going to have ethanol. Okay, fine.  It's American.  Anything American is fine with me.  But OPEC oil, when we buy oil from OPEC, which is about 4.5 million barrels a day, some of that money gets into the hands of the Taliban and Al Qaeda.  Jim Woolsey, former CIA director, he and I are in agreement on this and I would like to cut out all OPEC oil.  Some part of that can go to ethanol.  That's fine with me.

Henderson: Right now the ethanol industry is engaged in what it characterizes as a fight against big oil over an EPA decision to cut back the amount of ethanol that is required to be blended into gasoline this year.  What is your view of the EPA's role in this whole decision making process?  And as a former oil man, what is your view of this concept of big oil?

Pickens: Concept of what?

Henderson: Of the bad old big oil.

Pickens: Bad old big oil?  I don't know.

Henderson: Trying to push away other sources of energy.

Pickens: Well, bad old big oil, I had some encounters with them.  One, first, was Cities Service, second Gulf, third Phillips and fourth Unocal.  So I have some real experience with big oil.  I don't, to me I don't pay that much attention to them because, one, when you look at Exxon 81% of their revenues come from off shore.  So what is Exxon?  Exxon is an international company.  And to pay any attention to them on domestic oil issues, if you want to listen to them fine.  I think their agenda is international.

Borg: But they seem to be leveraging a lot of political support in trying to suppress the use of ethanol.  Do you feel that same way?

Pickens: No because I'm not focused on that.  I understand the ethanol issue and all and I'm not against the ethanol issue.

Borg: But it's not a big priority with you?

Pickens: No, it is not.  I'm not in the business of ethanol and I don't feel like it's competition to me.  So I don't --

Borg: But to follow that line of thinking, you are in the business though of trying to wean the nation away from foreign oil and ethanol is being proposed as a way of helping to do that.

Pickens: Well ethanol, I said three minutes ago anything American I'm for.  And so that's it, it's that simple.  I want American.  But the missing link that we have is we have no energy plan.  Let me just take you down a trail for a second.  One, we're now talking about exporting oil from theUnited Statesand we're importing about 8 million barrels a day.  Now, half of it fromCanadaandMexicoI'm quite comfortable with.  I'm not comfortable with 4 million that we're getting from OPEC.  So here the Commerce Department now has the question, are we going to export oil?  Then you look at the Keystone Pipeline, guess who has a question on their desk?  The State Department.  What?  The State Department, Commerce Department, there's nobody that makes decisions on energy inAmerica.  Well, the Energy Department.  Nah, they absolutely have no, as I see, input to the question. You're going to have to deal with the issue of the SPR at some point, the Strategic Petroleum Reserve.  You have 700 million barrels of oil in storage that you don't need.  Energy has changed inAmerica.

Henderson: So what will be the catalyst to bring about a national energy policy in a country that has been talking, people like you and others have been talking about this as a national security issue.  Nothing has happened for decades.

Pickens: It hasn't, no exactly.

Henderson: So what is going to change the calculation?

Pickens: You have no plan. 

Henderson: What will change -- what will change the calculation and cause there to be a plan?

Pickens: Well, okay, think about that.  Usually it's price.  I mean, if you had gasoline prices go up to $5.00 all the politicians they'd want to have a hearing, an inquiry, what's going on? Who is gauging who?  How is this all happening?  How could that happen to us?  That isn't going to happen to us.  You're not going to have gasoline prices --

 

Borg: Get you into the conversation, Jim.

Lynch: I want to change fuels here for a second.  While temperatures outside have been plunging we've seen propane gas prices spike up to nearly $5.00 a gallon.  Is this just a natural market reaction to the demand for propane at this time of the year?  Or is this being manipulated?  Or is it a result of exporting propane, which I guess you oppose exporting our domestic fuel?

Pickens: I don't, no I'm not opposed to exporting products.  We're exporting now about 3 million barrels a day of products out of theUnited States.  But what has happened is your refineries are set to processMiddle Eastcrude.  Why did that happen?  Because ten years ago, fifteen years ago we thought inAmericayou were going to rely more and more on OPEC crude. So the refineries tried to get ahead of it, they designed and did a good job and they're the best refiners in the world today.  But they would rather see heavy crude come into them instead of light sweet because we thought we were going out of the light sweet business.  That all changed with the Bakken, the Eagle Ford andWest Texas, we got light sweet again.  So what do we do?  I'd leave it up to refiners to figure that out.  But I would start to cut down on the OPEC crude, take the Keystone Pipeline but that will get you a lot of crude that would fit American refining right now.

Borg: Back to Jim's question on propane, Jim you can restate it if you'd like.

Lynch: Well I was wondering, is it a natural reaction to the demand for propane?

Pickens: It is.  What's happened, the year has turned cold and it's real cold and consequently I guess you could sit around if you were in the propane business and say, we're going to have propane to fit any kind of winter that we might have.  Well, they're carrying a lot of inventory at that point and they don't want to do it.  They have designed for a normal winter and they didn't get it.  It's colder than normal.  And consequently demand is strong for propane, price goes up and the only way you can kill demand is with price.  So the price will kill demand at some point.

Lynch: But it's sort of a lifeline for a lot of people who heat their homes with propane. They're subject to these price spikes.  And is there a way to avoid crippling those families that are trying to, in some cases, paying more for their propane than their mortgage?

Pickens: Well, it's a tough question, of course and somebody is struggling because of the price of propane.  But now where can we look to get relief?  Are we going to tell them no, you can't sell the propane for $5.00 a gallon?  I don't know.  They'll have price control.

Henderson: For the past several years you have been an advocate of using natural gas as a fuel to motorize vehicles in the country.  Is that practical?  Has it caught fire?  Because I have no opportunity in my neighborhood of fueling up with natural gas.

Pickens: It isn't available to you?

Henderson: No.

Pickens: Well, it's a fuel if you can get to it.

Borg: Well, she heats her house I'm sure with natural gas but that's not a way for a vehicle --

Henderson: I'm asking about you are advocating for vehicles, for motor vehicles --

Pickens: No, actually what I'm after is heavy duty trucks.

Henderson: Right.

Pickens: Okay.  And there if you take out the heavy duty, what we call Class 5 through 8 heavy duty trucks, that is about 3 million barrels of oil a day.  You could cut 75% off of OPEC with heavy duty trucks inAmericabut you have no plan.  But it is happening anyway and it's happening because when you take natural gas to a diesel gallon it's half the price.  It's $2.00 a gallon cheaper than diesel.  And so that is, you're moving in that direction very fast.  And last night I was here and went to a great dinner and some of the I think supporters of the program today that you have going on and I had two truckers talk to me and they said, you've got to look at it, it's too cheap to pass up.  Now, when you do that you're going to have to buy a different tractor.  How much more is that going to cost you, the tractor over a diesel tractor?

Lynch: I didn't want to interrupt but you have talked about the lack of an energy plan.  Six years ago you introduced your Pickens Plan and one of your goals was to reduce energy imports by 30%, oil imports by 30% over ten years.  We're more than halfway towards that ten year goal.  How are we doing?  And what needs to happen to achieve those goals?

Pickens: We're doing great.  Actually we have cut back on oil.  But, again, in the absence of a plan -- if we're going to have a plan get off of the OPEC oil is a place to start.  And Keystone would be a real advantage for us to take the Canadian oil.  But we're moving in the right direction without a plan.  So if somebody says well just leave it alone, it'll all happen anyway, I think you need an energy plan and we only briefly mentioned SPR, Strategic Petroleum Reserve, 700 million barrels are sitting there.  That was a plan that came into existence in 1974.

Borg: For National Security.

Pickens: Exactly, because we had that Arab embargo and so we said, get some oil in storage in the event this happens to us again.

Borg: But now you seem to say it's a waste to have that plan, that reserve?

Pickens: You don't need the -- the most we have taken out of the SPR, we have removed 4 or 5 times, but the largest amount we have taken out, one was in Katrina and I can't remember the other, is 28 million barrels.  You don't need 700 million barrels in there.  And, again, we have no energy plan.

Borg: But what you seem to imply is that the need for a strategic oil petroleum reserve has passed now, National Security is not any more threatened.  That's what you seem to be saying.

Pickens: I am saying that, exactly.  If you want to make the uncomfortable ones comfortable take out half of it, okay.  But to remove half of it out of there and not disrupt the market is going to take you ten years.

Borg: And we don't have a National Security problem anymore because we have alternative sources other than theMiddle East?  Is that why?

Pickens: Yes.  And we have oil.  I mean, we're the only country in the world that has increased oil reserves and production.  But see in 1970 we hit 10 million barrels a day and '73 we had the Arab embargo.  In '70 you started to decline in theUnited States, the 10 million barrels a day started down.  It went all the way down to 4.5.  We're back up to 8.  We are back up to 8.  And so we have done an unbelievably good job in this country and we have resources that are running out our ears. And we should have an energy plan.  Somebody should sit down and say, okay, let's see what the resources are.

Lynch: Sounds like we don't need a plan.

Pickens: Okay, well and people say that and they say we're working our way out of it.  But you still have the 700 million barrels sitting over here in storage that you don't need.  So that should be addressed and you're going to have to come to the decision whether you want to export or not.  You're going to have to address Keystone.  We don't have a plan and there are things on the table that need to be decided.

Henderson: You are also an advocate of wind energy.  There has been a wind production tax credit which has expired.  Critics of wind energy say it's not profitable unless there's that government prop-up of the tax credit.  What is your view of wind energy and its profitability?

Pickens: I am an expert on wind.  You know how you get to be an expert?  Lose $200 million.  That's what I lost in the wind business.  And so --

Borg: Why was that?

Pickens: Why?

Borg: Yes.

Pickens: You can't -- wind economically cannot compete unless natural gas is $6.00 and natural gas went all the way to $2.00.  I got in it, natural gas was $9.00.  I should have hedged my position.  I'm going to tell it all brother, that I should have hedged my position at that point, did not because I believed natural gas prices would go up higher.  If they did I would make more money in the wind business.

Borg: That seems to argue we're building wind towers all acrossIowafor wind energy and people listening to you here must be saying, isIowamaking a big mistake?  Are energy companies making a big mistake in establishing wind towers inIowa?

Pickens: I mean, the PTC, they're wind deals, people in Iowa are smart people and if they're building turbines they know what they're going to sell their power for and if they have a PTC, which we did have --

Henderson: That income tax credit.

Pickens: I think it still exists.

Borg: The tax credit.

Pickens: The tax credit.

Henderson: For construction that commenced but it's going to end.

Pickens: It will, they may renew it.  They get a chance to this year, to renew it.  And the PTC that we didn't think would be renewed the last time was what, it was -- I took a big loss on that.  I absolutely went the wrong direction twice and you can't do that in big deals.  And so consequently I'm out of the wind business now.  But $6.00, if you follow through on this, $6.00 an MCF for gas will make wind work and wind is about I think the second cheapest per power generation now.  You don't use oil for power generation in theUnited States, it's way too expensive to do that.  And solar is too expensive still.  There's some things to be worked out there.  But wind is, it's close at $6.00, gas today is $4.95.  I look at it very early in the morning and I look at it all day and then I put it to bed at night. 

Borg: We're moving along here and a really interesting conversation on energy but we have some other questions too.  Kay or Jim?

Lynch: Well, earlier you mentionedIowa's role in the presidential caucuses and winnowing the field and you said you hope that Iowans would do their job in the coming cycle.  A couple of Texans are in that field right now, Senator Ted Cruz and Governor Rick Perry are potential 2016 presidential candidates.  Wondering if you can giveIowacaucus goers any advice on the leadership qualities and presidential potential of these characters?

Pickens: Of these two, Cruz and Perry?

Lynch: Yes.

Pickens: I don't think either one of them will make it to the finish line, I don't think they'll be the candidate for the Republican Party.  We got a look at Perry in the last election and didn't stay in the race very long.  Cruz is a little bit early.  You'd pick him green if you took him now.  And so I just don't see either one of them being serious players.

Lynch: Do you have a favorite looking at 2016?

Pickens: It's kind of interesting on Christie.  TheGeorgeWashingtonBridge-- Christie is going to have to deal with that for a while.  I don't know.  I don't have to pick today and I think Jeb Bush will get in the race somewhere.  And so the republicans haven't done very well.

Borg: You say you made a bad bet on wind energy.  Who would you place your money on?  Who would you contribute to right now?

Pickens: Well, that again, I don't have to contribute now.  I'm not ready to pick.  I want to see everybody that's going to get in this deal.  The republicans should have a great opportunity with very simply the lack of leadership of President Obama today.  I mean, nobody today would classify him a leader.  And if you look at his record when he was elected he had no credentials, none, zero.  And you andIowahave got to start weeding these people out and giving us the best candidates.  But there should be some method to screen presidential candidates.

Henderson: Who would do it?

Pickens: Well, you know, let's go to corporateAmericafirst and go back into the question.  In corporateAmericayou use headhunters.  If you want to find a CEO for a company in America you'd tell a headhunter this is what we want, find these candidates, bring them to us, we want to look at three candidates.  And that is the job those people have.  Now, I don't know -- anyway there has got to be a better method for how people get to be run for president of theUnited States.

Henderson: In 2004 you were involved in Swift Boat Veterans, the group that questioned John Kerry's military record.  Do you have any regrets about that? Or do you think that was an investment of $2 million that was worth it on your part?

Pickens: It was more than that.

Henderson: How much?

Pickens: I think it was -- I think that Harold Simmons and Bob Perry and I had something like $15 or $20 million in it.

Henderson: Do you intend to do that kind of investing in presidential politics in the future?

Pickens: Tough question but I don't know what the circumstances would be.  That brought me in because I believe it was exactly the right thing to do.  The record was not clear and we went to the nine ads that we ran and I made a statement in a speech inNew York, I said, if anybody can show me a factual error in the nine ads that we did I'll give you a million dollars. Well I had all kinds of stuff about books that had been written that had mistakes in them.  That isn't what I said, I said the nine ads that we ran.  I saw all of those in production.  I saw all of them completed.  I sat and talked to the people that had put it all together.  Is this factually correct? I don't want to be embarrassed by any mistake in any ad and never did anybody come up and say, hey look, this is not right.  Newsweek came out and said we used voiceover and I really, I couldn't believe what I heard.  It was in Newsweek magazine and I immediately got in touch, I said fellas, did we use voiceover?  No, that is Kerry's voice all the way through, it is not voiceover, Newsweek will make the correction next week, which they did.  They retracted.

Henderson: The critics of people, such as yourself, invest that much in politics, they're critics of the Citizens United decision.  Do you think there's too much money in politics?

Pickens: Oh probably but I don't know what you're going to do about it.  I mean, there's limits, $2500, you know what I mean, but then there are openings if you want to go in and do some things, super PACs and all this.  Politicians they'll fix it so they can get all the money that is available.

Henderson: You have also donated a lot of money to your alma mater,OklahomaStateUniversity.  You have particularly donated to the sports programs.  I'm wondering if you think athletes at the collegiate level should be paid or have some sort of stipend.  Why is it the coaches are paid handsomely but the athletes aren’t?

Pickens: Well, let me offer something else.  I've given over $500 million toOklahomaStateand it is split about 50/50 with academic and athletics.  So we have a different university I think -- Iowa State being in the Big 12 with us and all, they know what we've done, you have watched us closely, we have made huge changes in the university and we think that we're now on the same level with our biggest rival which is OU.  Not thatIowaStateisn't a rival too, you guys beat us two years ago and knocked us out of the national championship game.  I was here for that.

Borg: We're down to less than a minute and Kay asked, what do you think about paying collegiate athletes?

Pickens: You know, I have been in that discussion many times and I was a scholarship athlete at Texas A&M and I don't know exactly how you do it but I know these athletes come to school, they have nothing, now they have a room, they have room and board, they have tuition paid, they have tutors, they're getting an education if they really want it.

Borg: Sounds to me like you're putting off a decision on whether or not to pay them in the future.  With that I just have to say thanks a lot for spending time with us today.

Pickens: Sure.  Thank you.

Borg: Well, next week Governor Terry Branstad will be here at the Iowa Press table.  We'll talk about his political agenda and the upcoming election.  And you'll see that program at our usual times, 7:30 Friday night and noon on Sunday.  I'm Dean Borg.  Thanks for joining us today.


Tags: energy ethanol government Iowa news oil politics president President Barack Obama T. Boone Pickens wind wind energy