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Thursday, July 24, 2008

T. Boone Pickens: Tilting at Windmills?

The Pope converting to Islam would not have whipped up the media frenzy as the absolutely astounding announcement that T. Boone Pickens had renounced oil and gone "Green".

I don't understand why all the earth-shattering surprise Picken's new energy plan is generating. T. Boone Pickens has always been "Green". After all, it's the color of money.

I'm not going to rehash his so-called Plan here. It's been done ad nausea by every main-stream media outlet and environmental group you can think of. And I'm not going to discuss the natural gas component of his plan beyond saying it's regressive, will require an absolutely enormous (and enormously expensive) infrastructure, and is still a fossil fuel related solution. It's pure and simple a tack-on for PR purposes to reinforce Mr. Pickens' "Green Conversion". It also doesn't hurt that Pickens owns huge holdings in natural gas and would obscenely profit as his plan is laid out.

I also completely agree with Mr Pickens that the United States is FAR too dependent on foreign oil. You can see it at every level of our economy. And with oil never to see $100 a barrel again, the foreign policy implications going forward are much too large and dangerous to be ignored anymore.

Further, I believe fossil fuels in general are a danger to humanity and have outlived their usefulness. And I'm enough of a conspiracy theorist and admirer of science to question why practical clean replacements haven't been developed and mass-marketed before now.

What I resent, though, is the near-universal blind acceptance and outright adulation at Pickens' "conversion" from greedy oil tycoon to saintly environmental activist.

His contention is there is not enough oil in the world to meet demand. I wish that was true, since it would force accelerated development (or Big Oil releasing the patents they've been buying and hiding - Mr. Conspiracy Theory speaking again) But lack of supply is not actually factual.
Combine known but unexploited oil deposits, suspected massive oil deposits, technology improvements allowing oil companies (at a higher cost, of course) to tap previously unreachable or unusable oil, and his argument doesn't hold up. And notice he focuses (and again, I agree with him on this) on our dependence on Foreign Oil.

When asked what about more US off-shore drilling or Alaskan drilling, he attempts to brush the question off with an off-hand "Sure, go right ahead BUT there's not enough oil to meet demand."

How does THAT fit into his plan? If there's not enough oil to meet demand, why should anyone invest the money to expand off-shore and Alaskan drilling? Why doesn't he say "Don't waste the money drilling: put it into alternative energy!" Why? Because domestic oil is still in his financial interests.

So lets look at his Wind Farms. Pickens' Mesa Power LLP announced back in May that it was committing $2 Billion to harness this enormous source of wind-generated energy.

Two Billion Dollars? Wow, he really HAS gone Green! What commitment! He's really putting his money where his mouth is! Pickens really HAS seen the (environmentally friendly) LIGHT!
There's a slight problem though. His Wind Farms are in the Texas Pan Handle: basically the middle of nowhere. He can generate all the wind-driven power he likes but it's too far away from major population centers and the Texas Energy Grid to do anyone any good.

But his Public Relations campaign was in full gear and like lemming jumping off a cliff, the State of Texas is kicking in almost FIVE Billion Dollars to build the transmission lines to connect Mesa Power to the Texas Energy Grid. And who pays for that? Not Pickens or Mesa: the Texas taxpayer.

Not a bad deal, Mr. Pickens. A Two Billion Dollar investment in a Wind Farm which won't make you a dime based on it's location suddenly is gifted Five Billion Dollars to make a worthless Wind Farm into an enormous profit center....... courtesy of the Texas tax payers. But that's not the end of it. Texas isn't big enough for T. Boone Pickens financial ambitions.

Texas is unique in the United States in that it has it's own stand-alone, Texas-only power grid. While California runs through its typical rolling brown-outs and black-outs in the summer, Texas is self-sufficient and free from federal regulation. Or at least it has been.

The more electricity Pickens can sell, the more money he will make. Hence his recent "suggestion" that America "probably needs" a National Energy Grid which would distribute the power generated from areas like, oh, West Texas, to the rest of the nation.

Daniel Weiss, Director of Climate Strategy for the very liberal think-tank Center for American Progress was quoted as saying "If Pickens can show it's very profitable, that's a very important point." He continues "What Pickens wants to do is go beyond (Texas) and make sure the grid not only goes from the Panhandle to Dallas or Houston, but to Albuquerque or Los Angeles."

What's shocking about that statement is not that Pickens wants to make an enormous profit, but that the liberal Weiss thinks that is a good thing. Heaven forbid Big Oil make a profit: THAT's Evil.
Removing "Texas Only" from the State power grid also opens the door to other unintended consequences.
Many in the financial and energy communities have been scratching their heads over the recent investment house purchase of TXU, Texas's primary electricity supplier. After all, they had to borrow almost $30BB dollars for the purchase which translates into somewhere in the neighborhood of $4BB in annual interest payments alone. How are they expecting to make a profit?
Texas is an energy-choice state where residents can contract for their electricity from independent energy companies. These independents can undercut TXU's retail arm and that's how they get new subscribers.
It was intended to create a competitive market and give Texas consumers the opportunity to shop and save on their electric bills. The independent energy companies purchase their electricity from TXU at a discounted rate. Their profit comes in the spread between what they pay TXU and what they charge the consumer.
There's a fly in the ointment, though. The enabling legislation has a little clause concerning "Price Spikes". It's intent was a trade-off to TXU when they lost their monopoly. If energy production costs soared for any reason including increased consumer demand during peak usage periods, TXU complained they could be forced to sell to the independents at a price under their cost to produce the electricity.
To mollify TXU and, on the face of it; their argument was logical, TXU is allowed to charge a much higher peak rate if costs spike even if they have contracted to supply the independents at the lower wholesale price.
Even without Pickens in the mix, this has occurred and bankrupted five independent energy suppliers since the law went into effect. Some contend that TXU can artificially cause these Price Spikes any time they want, but with the enormous growth in the Texas population over recent years and unusually hot summers, they probably occurred naturally.
Now imagine that the Texas Grid is no longer Texas-exclusive. Even with Pickens' contributing his wind-powered energy, the situation is no longer guaranteed to improve rates for Texas residents as Pickens could sell his power to other States, most likely at a higher price.
And what if TXU with it's new-found geographic freedom negotiated a reciprocal power arrangement tied into the Mexican Power Grid? They could "create" Prices Spikes at will by blaming Mexican energy costs, thus deflecting the blame from them and keep a lid on the growing movement to eliminate energy deregulation in Texas and put TXU rates back under State control.

So to summarize, Texas taxpayers give T. Boone Pickens $5BB so that he can make an enormous profit selling the energy to Nevada and California (who are paying nothing towards the construction of the grid). Texas becomes part of a National Energy Grid, falls under federal control, and pays higher electric bills.

I live in Texas. TXU has a Wind Farm a few miles north of where I live. It's great.....except when the wind doesn't blow. Then the alarm bells go off, idled coal-powered plants are rushed back on-line, and we all wait for the wind to come back. Price Spikes.

I haven't been sold on "clean coal". It just seems to arrive at too convenient a time and the rush to adopt it without a lengthy and scientifically serious enough due diligence makes me skeptical. But what about other, abeit unpopular but for the wrong reasons, alternatives that are proven. Look at France, for example: 80% of their electricity is generated by nuclear power.

Three Mile Island was more than 30 years ago and we still haven't gotten over it. America hasn't built a new nuclear power plant since.

Meanwhile the Japanese, the Germans, and others have continued aggressively refining the technology to where nuclear power plants are practically cookie-cutter to construct.
They're much safer now and would take much less than the 10 years it takes to construct one in the United States today by simply eliminating the antiquated red tape that slows construction to a crawl.
That doesn't mean eliminating Department of Energy oversight and regulation. It means updating it to ensure maximum safety while recognizing that many of the existing rules have been made obsolete by the technology improvements.

There is the issue of nuclear waste, but it's really a phony argument. Today, in 2008, nuclear waste has a half-life of thousands of years. Less than 150 years ago, we didn't even have electric lights. Do we have so little faith in the scientific community to say it's impossible that within 200 years, science won't develop a way to render today's radioactive waste harmless?

A hundred years ago we were still 30-40 years away from building the first very primitive computer. Forty years ago, computers ran on punch-cards. Thirty years ago, we put a man on the moon in a spacecraft with a computer less sophisticated than a sub-$100 Texas Instruments calculator of today.

This is not a zero-sum game. Sometime soon, perhaps within our lifetimes, but certainly within our grand-children's lifetime, completely clean Fusion Reactors will be a reality (if they're not already and hidden in Big Oil's basement, said the conspiracy theorist).

Unlike today's Fission Reactors, nuclear fusion is completely clean and runs on water. There is absolutely no radioactive waste and no danger in the event of a malfunction: the reactor would simply shut down. It's the Holy Grail of Green Energy. And for all practical purposes, it will end the energy crisis.
We are at a cross-roads globally. The entire planet is preparing to transition from a fossil fuel infrastructure to a Nuclear Fusion infrastructure. On a GLOBAL INFRASTRUCTURE level, everything in between including wind, solar and other clean solutions are elements to get us through the transition. I am not minimizing their value which will only increase as the technology improves. There will always be a place for them.
But the cost of changing the global energy infrastructure by necessity mandates a single one-time change. Since I contend that Nuclear Fusion (unless something even better comes along in the next 100 years or so) IS the solution, Pickens' idea of building a massive network of natural gas refueling stations, for example, is a massive waste of money for a short-term transitional solution. Pickens is just trying to maximize profits on his vast holdings in natural gas before they become obsolete and worthless. Again, at the taxpayers expense.

Pickens so-called miracle conversion to clean wind energy is nothing more than an attempt to get ahead of the curve as fossil fuels become more and more politically incorrect and costly. It's a temporary solution but will make him untold Billions of profit dollars in HIS lifetime.....all at the expense of Texas and the Texas taxpayer.

Forgive me for not swooning and fawning all over Mr. Pickens. Green? That's what is motivating him: Green-backs. Dollars. Obscene Profits. All subsidized by the very people he will overcharge for his environmentally clean energy. Quite frankly, I don't know what disgusts me more: T. Boone Pickens or the lemmings that are buying his P.T. Barnum routine.

Most certainly and immediately Texas, but ultimately America, will be the worse for it. And Pickens? He'll probably get a statue in Washington, a Presidential Citation, the Nobel prize and the historic legacy he so craves. Unlikely? Al Gore received the Nobel prize and he didn't generate a kilowatt of electricity....


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Mrs. Unloadingzone

Mrs. Unloadingzone
"The Girl of my Dreams"