By JEFFREY A. TRACHTENBERG
The Wall Street Journal
August 15, 2008
In his upcoming book, "The First Billion is the Hardest," oilman T. Boone Pickens provides a series of chatty vignettes that he believes reflects key turning points in his business career -- defeats as well as triumphs.
Mr. Pickens, who today is the chief executive of BP Capital, a Dallas-based hedge fund, also has a serious message about energy and the U.S.'s increasing reliance on foreign oil. He wants the U.S. to cut back on imports and to aggressively invest in renewable energy resources, particularly wind power. In May, his Mesa Power LLP placed a $2 billion order for wind turbines.
But Mr. Pickens also likes a good story. While explaining to an audience why he once made a bid for a much larger company, Mr. Pickens told the following joke to illustrate his point that money changes everything: A man walks into a bar with a talking dog. The barman is amazed, and eventually gives the pooch a dollar to buy him a newspaper down the block. When he doesn't return, the owner finds his dog canoodling with a poodle. After the owner expresses dismay, the dog replies: "This is the first time I've had money."
It's easy to forget that Mr. Pickens started out as a geologist at Phillips Petroleum. Before he quit in 1954, he was supporting his wife and two kids on $500 a month, which he describes "as a pretty good salary" at the time. At the age of 26, he bought a station wagon and went into business as a consultant. Two years later, he and several investors formed an oil company that evolved into Mesa Petroleum, which eventually became one of the largest independent oil companies in the U.S. Mr. Pickens, 80 years old, was interviewed by the Wall Street Journal's Jeffrey A. Trachtenberg.
The Wall Street Journal: What prompted this book?
T. Boone Pickens: I felt like a lot had happened to me. I left Mesa [Petroleum] in 1996 and the 12 years that followed were the most productive years of my life. Also, I came from a small town in eastern Oklahoma, and I think that I can still reach a young audience who want to know that average intelligence and a good work ethic is all you need.
WSJ: You were in effect fired as CEO of Mesa Petroleum by Richard Rainwater and his wife Darla Moore in 1996. In this book, you settle scores with them, adding the occasional shot to the ribs. What about forgetting and forgiving?
Mr. Pickens: If somebody I don't like gets in the crosshairs, I pull the trigger. But I don't hunt for them. The reason for paying them back is that they couldn't make a professional transition. You want your departure after 40 years to be pleasant, not unpleasant. They did things that were totally unnecessary, so that's why I said what I said.
WSJ: BP Capital has done well in the commodity markets. Do speculators play a constructive role?
Mr. Pickens: When you look at a commodities market you need hedgers and speculators. If you don't have one, you don't have a market. That's how it works. I don't think speculators are destructive. They are an infinitesimal part of the market. Fundamentals make the market. I'm amused when Congress tries to place the blame on somebody but never themselves. I've never heard any of them ever say, "I've made a mistake." I do. I say I called it wrong. But they just try to find somebody to blame. Now they are blaming speculators. Surely they have more to do than that. We don't focus on the problem in Washington.
WSJ: You often stop in your book to remind readers that you came from a modest background, with a grandmother who cut a smart deal with you to mow lawns for only a dime. Was she really that tough?
Mr. Pickens: Oh yes. She said at one point, "I'm going to help you out on a bad deal," and I thought she was going to raise the price. Instead she offered to have the mower sharpened. She taught me lessons I've never forgotten. She said that the next time I made a contract, I would spend more time figuring out the costs. And it was absolutely true.
WSJ: You've become a representative for renewable energy, which seems odd for an oilman. Did you have a conversion?
Mr. Pickens: It's not a conversion. It's a necessity to save the country. The hydrocarbon era is shutting down in the U.S. We peaked at 10 million barrels produced in 1970; today it's 5 million barrels. We are fading. If you are going out of business you don't go down with the ship, you get another ship. For us it's natural gas. We never felt our back was against the wall. We didn't know it because our leadership didn't tell us. And we didn't feel it because we had cheap oil. It was: Send it to us, never mind the price. Then one day it went vertical and people began screaming. Now we're placing blame. But what we should have done is closed the door and said, how do we get out of this trap? Oil is in decline, coal is dirty, and down the list you go. Circle the ones that will reduce what we're paying for foreign oil. Natural gas, do we have enough? Yes. Why not use it? No leadership.
WSJ: What are your views on lifting the federal moratorium on offshore drilling for oil and gas?
Mr. Pickens: I'm for drilling every place. And I'm for nuclear, and I'm for ethanol, because it means another one million barrels we don't have to import. I'm for anything American. I'm opposed to only one thing: foreign oil. Heck yes, drill. There is nothing wrong with drilling. We haven't had an oil spill in 20 years. If you don't like the appearance of rigs don't look.
WSJ: How can the U.S. lower the amount of gasoline, and therefore imported oil, it uses?
Mr. Pickens: Only one way quickly. You have to change the fuel. If you don't have the oil, what can you use to reduce imports? The answer is natural gas. We are so fortunate to have an abundance of natural gas. It's cleaner, cheaper, and it's ours. How could we ever have imported so much oil when we have so much natural gas? The answer is we didn't have leadership. We have 142,000 natural-gas-powered vehicles, mostly trucks. We sit here like dumb-dumbs. We have plenty of natural gas.
WSJ: You argue that coal is the immediate answer to our energy needs. Won't more coal-fired power mean more global-warming gases?
Mr. Pickens: No question about it. But you can clean it up. The coal is ours. That's a resource we have available. We can't keep importing oil. I'd rather use our finite resources than somebody else's. And natural gas will be a bridge to the next generation of transportation fuel. Right now we have nothing.
WSJ: You're promoting the Pickens Plan, a blueprint for a dramatic change in the U.S. energy landscape. Do you see any politicians or companies embracing new energy policies that make sense?
Mr. Pickens: There's no policy. We have 250 million vehicles in America. We have got to make some changes. The government must come out and say all government vehicles in the future will use natural gas. You can revitalize our economy, our transportation system, and create an energy system in 10 years that would be the best in the world. Instead, we're importing oil that will be $300 a barrel in 10 years.
