T. Boone Pickens has never been one to mince words, and that was obvious as he discussed the state of the US oil and gas industry at Hart Energy’s DUG East conference in Pittsburgh recently.
Regarding the move by the US State Department to revisit its decision on the Keystone XL pipeline, he said, “That line should be built, and we should capture the oil from Canada, but the [government] says this will not be acted on until the second quarter of 2013. I promise that if they wait that long, Enbridge will build a pipeline out of Fort McMurray and go west to Kitimat, where the oil will go to the Chinese. If that happens, we are complete fools in this country because we should capture everything in North America that we can to cut off the purchases from OPEC and use our own resources.”
Pickens has long been a proponent of increasing the development and use of North American resources to curtail the use of foreign oil and gas. Indeed, his ultimate goal for the country is for energy independence, which he believes is possible thanks to the shale plays.
“Our energy outlook is vastly different than it was five years ago. Shale gas showed up at a time when we can use our own resources and save ourselves,” he said. He also noted the shale plays elsewhere in the world haven’t shown the same promise as in North America and stated that it was quite possible that the US has more unconventional oil and gas than any other place in the world.
Pickens said that if the US is able to recover more than half of the 8,000 Tcf of natural gas reserves that JP Morgan Chase estimated is in US basins, it would equal roughly 700 MMboe, or approximately three times the oil in Saudi Arabia.
T. Boone Pickens discussed the importance of domestic resources in the US at the recent DUG East conference in Pittsburgh, Pa. (Photo by Tom Fox, courtesy of Hart Energy)
“We’re in a position now where we can pull up to the big table for world energy, and we haven’t had a chair at that table in a long, long time, but Washington doesn’t understand it yet. They don’t realize what we have in this country and how it could be deployed or how many jobs we could get from it,” he said.
In addition, these reserves would provide the US with greater international negotiating power. According to Pickens, former US Secretary of State Condoleezza Rice told him that energy was always part of the State Department’s negotiations with other countries. If the US were energy-independent, this obstacle would be removed and make the department’s job easier while also helping to improve the US economy.
“Since 1976, according to the Milken Institute, we have spent (US) $7 trillion on oil from the Middle East. We have $15 trillion in debt, and by next year’s elections it will be $16 trillion. In the past 10 years, we’ve spent $1 trillion for OPEC oil. If you go forward 10 years at $100 per barrel, it will be $2.5 trillion,” Pickens said.
Using more of the country’s own resources would not only help reduce spending but create jobs, he stated, both within and outside of the industry. “I was in Williamsport (Pa.), and a reporter told me they had a lot of problems with the drilling. I asked what they were, and he said there aren’t enough houses. I said, ‘That’s a problem?’ and told him to classify that as a high-class problem. He then complained about the industry tearing up the roads. I said, ‘Fix them – that’s new jobs. You don’t have problems – you have an economy turning around.’”
Much of the initial focus of the ballyhooed “Pickens Plan” to encourage the increased use of natural gas was focused on the passage of legislation to provide government support for natural gas. However, even as it appears likely that Congress will pass legislation to encourage heavy-duty trucks converting from diesel to natural gas, Pickens said that the trucking industry is moving in that direction without that help.
“These trucks are switching over anyway because of the difference in the cost of fuel. Passing this legislation would make it happen faster – maybe the switch would take four years instead of eight, but it will happen,” he said.
According to Pickens, this legislation is not a government subsidy to support natural gas because the users of natural gas will be paying taxes at the pump, so there is no cost to the government. He also claimed that neither the Pickens Plan nor any legislation supported by the plan is designed to force the federal government to pick an energy winner; rather, the legislation is designed to encourage the government to support energy in the US because otherwise they pick the winner – OPEC. Pickens noted that OPEC countries are not engaged in free market practices, so a modicum of government support is necessary to truly compete on this stage.
“If we strictly let the free market dictate energy, then OPEC wins.”
Although leery of the OPEC threat, Pickens remains upbeat on the future of the US and its energy policy. “The first industrial revolution was built on the back of cheap energy, and we’re at that same crossroads again today. We have the cheapest energy in the world, so if we’re willing to work in this country and we have some leadership, you’ll see a lot of industries that have moved away from us move back to us.”