The Picken’s Plan: Where Are We One Year Later?
by David Fessler, Advisory Panelist
Friday, July 10, 2009: Issue #1037
Earlier this week, T. Boone Pickens, the 81-year-old Chairman of BP Capital, appeared on CNBC’s Squawk Box to discuss the progress of the “Picken’s Plan.”
Readers might remember it was during the heat of the Presidential campaign last summer, on July 8, that Pickens began his own campaign to wean the nation off of foreign oil.
Spending his own money, he bought time on the major networks and mobilized an “army” of believers in order to get the word out about the dangers of continued dependence on foreign oil.
Essentially, the Picken’s Plan seeks to reduce the nation’s dependence on foreign oil with a combination of wind-generated power and natural gas powered vehicles. In the process, the need for foreign oil is drastically reduced or eliminated in as little as 10 years.
His timing – with oil prices hovering around $150 a barrel – got him a lot of attention. He spent time last August meeting with both McCain and Obama in hopes that – regardless of the election’s outcome – the victor would understand the magnitude of the problem and get behind an energy plan for the United States.
In the last 12 months, to his credit no other plan has been articulated as clearly and succinctly as Pickens’ has.
Now it’s one year later: Obama is President, oil prices are less than half of what they were a year ago, and the country is sliding deeper into recession. Is shutting off foreign oil still a concern? Have we made any progress in doing so? Are we any closer to a national energy plan?
The short answers are definitely yes, yes and almost. Let me explain:
Still at the Mercy and Whims of Whackos…
While the price of oil has come down dramatically in the last year, our dependency on foreign oil is as great as it ever was. We still get over 70% of our oil from other countries, and it’s a huge security issue.
While the transfer of wealth – dollars out for oil in – is less, it’s still a huge net outflow of nearly $400 billion annually.
There’s no question that keeping that money here will not only have a positive effect on our trade balance, it’ll make a huge difference in the U.S. economy… a “free” $400 billion annual stimulus package, if you will.
Alternatively, according to Boone, “If we go 10 more years with no plan, we’ll be importing 75% of our oil and it will cost us $300 a barrel.”
Even if he’s wrong by 50% – which is unlikely given increasing world demand – it’s still a big problem. So how do we get rid of the rogues?
Closing the Door on OPEC: Light at the End of the Tunnel
In terms of our progress in displacing foreign oil, there’s only one quick way to do it: replace it with natural gas. Just a few weeks ago, the Potential Gas Committee – the nation’s authority on natural gas supplies – issued a report that shows a substantial increase in natural gas reserves here in the United States.
The report indicated that the nation’s gas reserves increased 25% to 2,074 trillion cubic feet (tcf) from 1,532 tcf in 2006 – the last time the report was issued.
This was the largest increase in the 44-year history of the committee, and its language was reflective of that fact: “[The report] shows an exceptionally strong and optimistic gas supply picture for the nation.”
That’s an understatement: At 2030 projected U.S. consumption rates of about 25 tcf, that’s nearly a 100-year supply, and it pegs the U.S. reserves as the largest in the world.
John B. Curtis, a geology professor at the Colorado School of Mines and the report’s principal author, said, “New and advanced exploration, well drilling and completion technologies are allowing us increasingly better access to domestic gas resources – especially unconventional gas – which, not that long ago, were considered impractical or uneconomical to pursue.”
The findings have shifted the focus onto natural gas as a possible transition fuel as we move from coal and oil to solar, wind, geothermal and other non-carbon sources of power. It couldn’t have come at a more opportune time.
Moving Towards a National Energy Plan: Slowly
As I’ve often said in previous articles, the best thing the government can do to move us away from fossil fuels is to provide funding and tax incentives to develop and use something else (and then get the hell out of the way). It appears as though Congress is trying to do just that with natural gas.
H.R. 1835, known as the “New Alternative Transportation to Give Americans Solutions Act of 2009,” amends the Internal Revenue Code of 1986 to create jobs and encourage alternative energy investments.
Here are the highlights from www.gotrac.us on what this act does:
- An excise tax credit through 2027 for alternative fuels and motor vehicles involving compressed or liquefied natural gas (LNG).
- An income tax credit through 2027 for vehicles powered by compressed or LNG.
- A new tax credit for the production of vehicles fueled by natural gas or LNG.
- A tax credit for alternative fuel vehicle refueling property expenditures for refueling property relating to compressed or LNG and allow an increased credit for such property.
- Requires 50% of all new vehicles purchased or placed in service by the U.S. government by December 31, 2014, to be capable of operating on compressed or LNG.
- Authorizes the Secretary of Energy to make grants to manufacturers of light and heavy-duty natural gas vehicles for the development of engines that reduce emissions, improve performance and efficiency, and lower cost.
Now before I get a dozen e-mails pointing out that natural gas is just a different fossil fuel, let me head them off. There’s no argument there.
However, it’s much cleaner burning, produces less carbon emissions and, most importantly, it’s found here in abundance. It’s a walk in the park to produce new cars and trucks that run on it, and convert older ones as well.
And if it helps free of the grip of rogue nations around the world in 10 years or less, then I’m all for it. We’ll all be better off economically, and we’ll all have greater peace of mind.
How do you play it? Take a look at Clean Energy Fuels Corporation (Nasdaq: CLNE), a provider of natural gas as a vehicle fuel, primarily for fleet use in the United States and Canada. It designs, builds and operates natural gas fueling stations, and provides financing for natural gas vehicles. It and others in the sector will undoubtedly benefit from this legislation when it’s passed.
Next week, I’m going to take a look at the state of the wind power industry, and why it’s currently in stall mode.
Good investing,
David Fessler
Any investment contains risk. Please see our disclaimer.
18 Responses to “The Picken’s Plan: Where Are We One Year Later?”
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David Fessler is the energy and infrastructure expert for Investment U.
I see UPS trucks all over New York City powered by natural gas. It must be doable. Why wait until 2024?
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The problem with Clean Energy (CLNE) is that they have a negative return on equity, negative earnings, negative levered free cash flow and relatively no revenue growth. In addition, they have no dividend. In an economy that is likely to go further south for at least another year or two, it would make more sense to own something that is positive in all those categories.
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David,
A few months ago, I may have agreed with you about natural gas being the most benign fossil fuel based on its one carbon atom. However after studying the Marcellus shale hydrofracturing process for extraction, I have to tell you, this is a tragic way to go. Our most preciouos resource in all the world is fresh water. This process uses and abuses an incredible amount of water and leaves it in an unrecoverable mode.
Please rethink…
ruth young
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Gas conversion on cars is available in the UK,but I have never seen it in the USA. It cost about £2000 to convert a car to run on Gas and petrol.
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What about methanol? Unlike ethanol, it can be produced from coal, natural gas, agricultural waste and many other things and could be used to run our vehicles. The technology already exists to build flex-fuel cars that use 100% methanol or any combination of methanol, ethanol and gasoline. It has many advantages over natural gas and being a liquid, is easily transportable. The book ‘Energy Victory’ by Robert Zubrin makes the case very well.
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Another alternative to synthetic fuels is to manufacture gasoline from natural gas. You might remember Amoco “white” premium gas.
DOE funded a large study 5-8 years ago on new catalysts and devices to accomplish this for “stranded” natural gas not near pipelines.
It was economical and could be done with small installations. Well pressure was sufficient for operations.
Synfuels from coal are huge polluters in South Africa, efficient and cheap, but have a large carbon footprint and sulfur is dealt with by more calcium carbonate, releasing CO2.
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If you want the best green energy supplier in the U.S. check out this website. http://www.nexteraenergyresources.com/
Net output 16,945 mW of renewable energy.
Mr. Pickens is far behind the curve.
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Excellent comments and viewpoint .. but I offer a synical replique … there are TOO many US vested interests in Oil, or we probably would already be doing it. Ex: .. the Bush family and friends.
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Just an alert for next week’s wind power analysis. Be sure to look at Vestas, which has opened three plants in Colorado.
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The problems of transmission line capacity and availability cannot be abated. Boone has had to trim back his plans for wind power electricity production because the wind power is “HERE” in the desert, but the market is “THERE” East Coast, and there’s no pipe to get the power from HERE to THERE. Same problem with natural gas. So unless we get pipelines and power transmission lines built PDQ, in 10 years, yes, we will be looking at $300 oil. And then, no more USA. The smart money is already leaving.
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Please read the book, “Gusher of Lies” by Robert Bryce. Then let us know what you think about “energy independence.”
David Paulson
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G’day We here in Australia have been using natural gas in our cars and trucks for years.I can remember buying a Cherokee Jeep in 1984 with natural gas and I had no problems with car…You blokes over their should have really embraced this technological years ago…..Danny from Melbourne Australia
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For those of us who want a cleaner environment to live in, there is hope with the gradual reduction of the use of fossil fuels. Let me emphasize the term “use” because it is where the solution lies. The less we use the less we spend and the less we pollute. This solution is so simple it looks simplistic. Therefore, a world campaign and particularly, a campaign in the worst polluters in the world such as China and the US to reduce waist and wanton consumption (we have more money, therefore we use more) can go a long ways to reduce the dependence on the oil belonging to the enemies of the US. One more thing, cheaper fossils fuels are a thing of the past no matter how many wars are waged (desert storm comes to mind)so, does it make sense to turn enemies into friends? duh. But this entitles dwelling into politics and that is the sacred cow many don’t dare to touch…
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Great article, keep-em comming
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What no one says about LNG when the tank is hit by another car. BIG BANG!!!!!!
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Natural gas usage for commercial vehicles has commenced and is growing. Next we need gradual expansion of natural gas pumps and more ways of using in P/U trucks, larger cars, and eventually, all cars. Pickens is on the right track and the nation owes him its gratitude for his non-partisan leadership. Whereas he moved to rapidly on wind power, and overlooked transmission costs, this too was in the right direction but the timing probably a bit early.
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It’s a great time to invest in geothermal heating and cooling technology. The American Recovery and Reinvestment Act of 2009 recently lifted the caps on tax credits to qualified geothermal heat pumps, which was previously set at $2000. Homeowners who install a geothermal ground loop or ground water geothermal heat pump qualify for this one time of up to 30% of the total investment, as long as the pump meets or exceeds EnergyStar requirements and installed after December 31, 2009. Business owners will receive a credit of 10% of the total investment. Units installed in 2008 are subject to a $2,000 cap, but those installed between 2009-2016 have no cap.
This substantial tax credit is just one of the many benefits of using geothermal technology to heat and cool your home. Geothermal systems use 25-50% less electricity than conventional systems. According to the EPA, geothermal pumps reduce energy consumption up to 44% compared to air-source heat pumps, and up to 72% compared to standard air-conditioning. In humid areas, like Florida, geothermal heat pumps improve humidity control by maintaining 50% relative indoor humidity.
But it’s not just the tax credit or energy savings that should peek your interest, geothermal heat pumps are also extremely durable and reliable. The underground piping carries warranties of 25-50 years, and the heat pumps are known to last twenty years of longer.
So, if you’re looking for a reliable system that will also give you tremendous savings on your energy bill over the long-run, a geothermal heat pump may just be what you’re looking for!
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I agree with you completely. Energy independence has so many worth while advantages:reducing our balance of trade deficit, eliminating the need to borrow from China, and making us more secure strategically. In addition if we have a short time frame for accomplishing this goal we can also reduce unemployment, possibly even eliminate it.
Not having the infrastructure is not a problem, it is an advantage. New companies will have to be built, more people will be required to do the work. Go for it!
If we could get all of the coal fired plants on natural gas we could meet the 2055 green house gas goals by 2019.
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