Let's transform energy -- with natural gas - T. Boone Pickens

[Music] [Applause]

I'm a believer. I'm a believer in global warming, and my record is good on the subject. But my subject is national security. We have to get off of oil purchased from the enemy. I'm talking about OPEC oil.

Let me take you back 100 years to 1912. You're probably thinking that was my birth year. It wasn't; it was 1928. But go back to 1912, 100 years ago, and look at that point. What was our country faced with? It's the same energy question that you're looking at today, but it's different sources of fuel.

100 years ago, we were looking at coal, of course, and we were looking at whale oil, and we were looking at crude oil. At that point, we were looking for a fuel that was cleaner, it was cheaper, and it wasn't ours, though it was theirs. So at that point, in 1912, we selected crude oil over whale oil and some more coal.

As we moved on to the period now, 100 years later, we're back really at another decision point. What is the decision point? It's what we're going to use in the future. So from here, it's pretty clear to me: if we would prefer to have cleaner, cheaper domestic hours—and we have that—we have that, which is natural gas.

So here you are. The cost of all this to the world is 89 million barrels of oil—give or take a few barrels—every day, and the cost annually is $3 trillion. And one trillion of that goes to OPEC. That has got to be stopped.

Now, if you look at the cost of OPEC, it cost $7 trillion on the Milken Institute study last year. $7 trillion since 1976 is what we've paid for oil from OPEC. Now that includes the cost of military and the cost of the fuel both, but it's the greatest transfer of wealth—the greatest transfer of wealth from one group to another in the history of mankind—and it continues.

When you look at where is the transfer of wealth, you can see here that we have the arrows going into the Middle East and away from us. With that, we have found ourselves to be the world's policemen. We are policing the world. And how are we doing that? There, I know the response to this. I would bet there aren't 10% of you in the room that know how many aircraft carriers there are in the world. Raise your hand if you think you know.

There are 12. One is under construction by the Chinese, and the other 11 belong to us. Why do we have 11 aircraft carriers? Do we have a corner on the market? Are we smarter than anybody else? I'm not sure. If you look at where they're located—and on this slide, it's the red blobs on there—there are five that are operating in the Middle East, and the rest of them are in the United States. They just move back to the Middle East and those come back.

So it's actually the most of the 11 we have are tied up in the Middle East. Why? Why are they in the Middle East? They're there to control, keep the shipping lanes open, and make oil available. The United States uses about 20 million barrels a day, which is about 25% of all the oil used every day in the world, and we're doing it with 4% of the population. Somehow that doesn't seem right; that's not sustainable.

So where do we go from here? Does that continue? Yes, it's going to continue. The slide you're looking at here is from 1990 to 2040. Over that period, you are going to double your demand. And when you look at what we're using the oil for, 70% of it is used for transportation fuel.

So when somebody says, "Let's go more nuclear; let's go wind; let's go solar," fine, I'm for anything American—anything American. But if you're going to do anything about the dependency on foreign oil, you have to address transportation.

So here we are using 20 million barrels a day, producing 8, importing 12, and from the 12, 5 comes from OPEC. When you look at the biggest user, the second largest user, we use 20 million barrels, and the Chinese use 10. The Chinese have a little bit better plan, or they have a plan; we have no plan.

In the history of America, we've never had an energy plan. We don't even realize the resources that we have available to us. If you take the last 10 years and bring forward, you've transferred to OPEC a trillion dollars. If you go forward the next 10 years and cap the price of oil at $100 a barrel, you will pay $2.2 trillion. That's not sustainable either.

But the days of cheap oil are over. They make it very clear to you, the Saudis do. They have to have $94 a barrel to make their social commitments. Now, I have people in Washington last week who told me—the Saudis can produce the oil for $5 a barrel. That has nothing to do with it; it's what they have to pay for is what we are going to pay for oil. There is no free market for oil; the oil is priced off the margin, and the OPEC nations are the ones that price the oil.

So where are we headed from here? We're headed to natural gas. Natural gas will do everything we want it to do. It's 130 octane fuel; it's 25% cleaner than oil. It's ours; we have an abundance of it, and it does not require a refinery. It comes out of the ground at 130 octane, run it through a separator, and you're ready to use it. It's going to be very simple for us to use; it's going to be simple to accomplish this.

You're going to find—and I'll tell you in just a minute what you're looking for to make it happen—but here you can look at the list. Natural gas will fit all of those; it will replace or be able to be used for that. It's for power generation, transportation; it's peaking fuel; it's all those.

Do we have enough natural gas? Look at the bar on the left: 24 trillion is what we use a year. Go forward, and the estimates that you have from the EIA and on to the industry estimates—the industry knows what they're talking about. We've got 4,000 trillion cubic feet of natural gas that's available to us.

How does that translate to barrels of oil equivalent? It would be three times what the Saudis claim they have, and they claim they have 250 billion barrels of oil, which I do not believe. I think it's probably 175 billion barrels. But anyway, whether they say they're right or whatever, we have plenty of natural gas.

So I have tried to target on where we use the natural gas, and where I've targeted is on the heavy-duty trucks. There are 8 million of them. You take the 8 million trucks—these are 18 wheelers—and take them to natural gas; reduce carbon by 30%. It is cheaper, and it will cut our imports by 3 million barrels. So you will cut 60% off of OPEC with 8 million trucks.

There are 250 million vehicles in America. So what you have is natural gas is the bridge fuel, is the way I see it. I don't have to worry about the bridge to where—that's your concern. But when you look at the natural gas we have, it could very well be the bridge to natural gas because you have plenty of natural gas.

But as I said, I'm for anything American. Now, let me take you—I’ve been a realist; I went from theorist early to realist; I'm back the theorist again. If you look at the world, you have methane hydrates in the ocean around every continent. And here you can see methane. If that's the way you're going to go, that there's plenty of methane. Natural gas is methane; natural gas and methane are interchangeable.

But if you decide that you're going to use the methane—and I'm gone—so it's up to you. But we do have plenty of methane hydrates. So I think I've made my point that we have to get on our own resources in America. If we do, we can cut out. It's costing us a billion dollars a day for oil, and we have no energy plan.

So there's nothing going on that impresses me in Washington on that plan other than I'm trying to focus on that 8 million 18-wheelers. If we could do that, I think we would take our first step to an energy plan. If we did, we could see that our own resources are easier to use than anybody can imagine.

Thank you.

Thanks for that. So from your point of view, you had this great picking plan that was based on wind energy, and you abandoned it basically because the economics changed. What happened?

I lost $150 million. That'll make you abandon something. Know what happened to us? Chris, is that that power is priced off the margin, and so the margin is natural gas. At the time I went into the wind business, natural gas was $9; today, it's $2.40. You cannot do a wind deal under $6 an mcf.

So what happened was that through increased ability to use fracking technology, the calculated reserves of natural gas kind of exploded, and the price plummeted, which made wind uncompetitive. In a nutshell, that's what happened. That's what happened.

We found out that we could go to the source rock, which were the carbon reservoirs in the basins. The first one was Barnett Shale in Texas and then the Marcellus up in the Northeast across New York, Pennsylvania, West Virginia, Haynesville, and Louisiana. This stuff is everywhere; we are overwhelmed with natural gas.

Now, you're a big investor in that. Bringing that to my—well, you say a big investor. It's my life; I'm a geologist; got out of school in '51, and I've been in the industry my entire life. Now, I do own stocks that—I'm not a big natural gas producer. Somebody the other day said I was the second-largest natural gas producer in the United States. Don't I wish! But no, I'm not. I own stocks, but I also am in the fueling business.

But natural gas is a fossil fuel. You burn it, you release CO2. So you believe in the threat of climate change. Why—why doesn't that prospect concern you?

Well, you're going to have to use something. What do you have to replace it?

Well, um, the ISS—no, no. The argument that it's a bridge fuel makes sense because the amount of CO2 per unit of energy is lower than oil and coal, correct? And so everyone can be at least happy to see a shift from coal or oil to natural gas.

But if that—if that's it, and that becomes the reason that renewables don't get invested in, then long term, we're screwed anyway, right?

Well, I'm not ready to give up. But Jim and I talked there as he left, and I said, "How do you feel about natural gas?" And he said, "Well, it's a bridge fuel is what it is." And I said, "Bridge to what? Where are we headed?"

But again, I told you I don't have to worry with that—you are, no. I don't think that's right. Bo, I think you're a person who believes in your legacy. You've made the money you need; you're one of the few people in a position to really swing the debate.

Do you support the idea of some kind of carbon—some kind of price on carbon? Does that make sense?

I don't like that because it ends up—the government is going to run the program, and I can tell you it'll be a failure. The government is not successful on these things; they just aren't. I mean, it's a bad deal. Look at what Solyndra or whatever it was. I mean, that was told to be a bad idea 10 times; they went ahead and did it anyway.

That only blew out $500 million; I think it's closer to a billion. But, Chris, I think where we're headed—I mean the long term—I don't mind going back to nuclear.

And I can tell you what the last page of the report that’ll take them 5 years to write will be: one, don't build a reformer on a fault. And number one: two, do not build a reformer on the ocean.

Now, I think reformers are safe; move them inland and on very stable ground and build the reformers there. Ain't anything wrong with—you’re going to have to have energy; there is no question you can't—

Okay, so one of the questions from the audience is, with fracking in the natural gas process, what about the problem of methane leaking from that? Methane being a worse global warming gas than CO2, does that—is that a concern—fracking?

Yeah, what is fracking? I'm teasing; we got a little bit of accent incompatibility here, you know? No, let me tell you—I’ve told you what my age was. I got out of school in '51. I witnessed my first frack job at Borger, Texas, in 1953.

Fracking came out in '47. And don't believe for a minute when our president gets up there and says the Department of Energy 30 years ago developed fracking. I don't know what the hell he's talking about. I mean seriously, the Department of Energy did not have anything to do with fracking. The first frack job was in '47; I saw my first in '53.

I fracked over 3,000 wells in my life, never had a problem with messing up an aquifer or anything else. Now, the largest aquifer in North America is from Midland, Texas, to the South Dakota border—across eight states, the Ogallala Triassic age. There have been over 800,000 wells fracked in Oklahoma, Texas, Kansas, in that aquifer there—there's no problems.

I don't understand why the media is focused on Eastern Pennsylvania.

So you don't support a carbon tax of any kind or a price on carbon?

Your picture then, I guess, is how the world eventually gets off fossil fuels is through innovation—ultimately, that will someday make solar and nuclear cost competitive. Solar and wind—Jim and I agreed on that in 13 seconds—that is going to be a small part because you can't rely on it.

So how does the world get off fossil fuels?

Well, you're going to use—we have so much natural gas a day; it will not come where you say, "Well, let's don't use that anymore." You'll keep using it; it is the cleanest of all. If you look at California, they use 2,500 buses; LTA have been on natural gas for 25 years. The Fort Worth T has been on for 25 years.

Why? Air quality was the reason they used natural gas and got away from diesel. Why? All the trash trucks today in Southern California on natural gas. It's because of air quality.

I know what you're telling me, and I'm not disagreeing. How in the hell can we get off the natural gas at some point? And I say that is your problem.

All right, so it's the bridge fuel. What is at the other end of that bridge is for this audience to figure out. If someone comes to you with a plan that really looks like it might be part of the solution, are you ready to invest in those technologies even if they aren't maximized for profits? They might be maximized for the future health of the planet.

I lost $150 million on the wind.

Okay, yeah, sure, I'm game for it because, you know, again I'm trying to get energy solved for America, and anything American will work for me.

But I really, really appreciate you coming here, engaging in this conversation. I think there's a lot of people who want to engage with you, and that was a real gift you gave this audience.

Thank you so much.

You bet. Thank you.