Of Crony Capitalism and Natural Gas

posted at 5:40 pm on December 9, 2011 by Jazz Shaw

At the Weekly Standard today, Daniel Halper has what should be a must read essay regarding T. Boone Pickens and the NATGAS Act currently being considered in congress. This is one of those subjects where I frequently find myself dealing with conflicting feelings. I am, without question, a huge supporter of the domestic energy potential of natural gas and the jobs it can bring, along with improved positions on national security, well into the next century. Halper notes, however, that Pickens tries to steer the conversation into an area where the government should not stray.

Crony capitalist extraordinaire T. Boone Pickens has an op-ed in Politico today pressing the case, once again, for the NATGAS Act, which is now pending before Congress. The bill itself would offer a slew of subsidies for those companies producing natural gas, converting trucks and cars to natural gas, and developing natural gas fueling stations throughout the country. And it just so happens that Pickens happens to own companies engaged in those very businesses, and passage of the NATGAS Act would bring a windfall of at least $100 million and likely much, much more.

One striking thing about Pickens’s piece in Politico though is the Obama-like shamelessness of his attacks on “special interests.” Of course President Obama is fond of attacking special interests, but it often seems like the only distinction between a legitimate, regular interest and a “special” interest is how much money that interest is putting behind the Obama reelection campaign. Unions, for example, give to Democrats, so they are not a special interest. Clean energy companies, like Solyndra, that rely entirely on federal loans and subsidies for their survival? Not a special interest—they support the president and they love the environment. General Electric, which pays no income taxes? Just ask Jeffrey Immelt, GE CEO and chairman of President Obama’s Council on Jobs and Competitiveness…not a special interest.

To be clear, Pickens is a businessman who has been dealing with energy questions since before many of us were born. He is not unintelligent on the subject. But, as a businessman, he also has to keep an eye on his bottom line. This is where we part ways.

Natural gas, particularly in its compressed form, is already in wide use and current technology holds the promise of expanding that use into many other areas. We may well be the “Saudi Arabia” of natural gas, and this could be a major piece of the puzzle in terms of leading us on a path toward energy independence. But natural gas must – and in most cases already does – prove itself to be fiscally sustainable without being propped up on the taxpayer dime. That’s precisely how we got into so much trouble with ethanol, solar and other adventures too numerous to list.

If Pickens honestly believes in the potential of natural gas – as he clearly does given all the investments he’s made in it – then he should also believe that it is promising enough to stand on its own two legs in the open market. I believe that it will. T. Boone needs to pack his bags, leave Washington, and let the industry prove that it can deliver the goods.


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How many times do you get to hit the lottery?

Speakup on December 9, 2011 at 5:43 PM

Right on Jazz!

B-Ri on December 9, 2011 at 5:54 PM

Op-ed’s have bad ROIs.

He’ll get a much bigger bang for his dollar with a few payments to congressional mistresses, real estate swaps for Senate committee chairmen, exchange of insider stock trading information, or a few bottles of $300 wine for House members.

Good Lord what a state this nation is in.

Cloture on December 9, 2011 at 5:56 PM

If there would be money to be made in a natural gas fueling stations, venture capitalists would have financed them already. Our government has to stop wasting our tax dollars in picking winners & losers!

playsalieri on December 9, 2011 at 5:57 PM

Isn’t this T. Boone Pickens the same guy that’s trying to buy/hog up all the water rights he can around OK and TX? If it’s the same guy, he’s a jerk of the first order. He may not be, I might have him confused with somebody else, but I’m pretty sure that’s him.

sage0925 on December 9, 2011 at 5:57 PM

T. Boone needs to pack his bags, leave Washington, and let the industry prove that it can deliver the goods.

Hear, hear! I work in an industry that powers it’s vehicles with gas, diesel, CNG, LPG, and dual-fuel gas/LPG, as well as battery power. Can you guess what that industry is? We so often follow the auto industry’s lead on many technological advances, but why they don’t follow us on fueling boggles the mind…

stick on December 9, 2011 at 5:58 PM

Boone Pickens is 80+ years old. I doubt if he has any need or desire to profit at the government’s expense at this point in his life. How about maybe he is a patriot that has a plan to get us off ME oil and on to natural gas, but as part of his plan he believes there needs to be short term government involvement to get trucks converted to nat gas?

I’m against the government spending tax dollars to favor one business or industry over another, but that doesn’t negate Boone’s entire plan.

I say Go T. Boone.

Drill, Baby, Drill!

huckleberryfriend on December 9, 2011 at 6:01 PM

You nailed T-Bone perfectly. He’s trying to get mandates for Natural gas burning vehicles and wants to corner the market on Natural Gas stations by making it as cheap as possible for himself courtesy of the taxpayers. He pulled a lot of shenanigans with his failed windmill venture……the man’s a piece of work.

cartooner on December 9, 2011 at 6:04 PM

Isn’t this T. Boone Pickens the same guy that’s trying to buy/hog up all the water rights he can around OK and TX? If it’s the same guy, he’s a jerk of the first order. He may not be, I might have him confused with somebody else, but I’m pretty sure that’s him.

sage0925 on December 9, 2011 at 5:57 PM

That is the same guy, he stands to make mush more money on the water than the gas…..hot gas maybe?

frogs41 on December 9, 2011 at 6:09 PM

We may well be the “Saudi Arabia” of natural gas, and this could be a major piece of the puzzle in terms of leading us on a path toward energy independence.

Color me unpersuaded.

http://205.254.135.7/naturalgas/importsexport/annual/index.cfm

In 2010, the United States imported 3,741 billion cubic feet (Bcf) of natural gas

Natural gas exports from the United States totaled 1,137 Bcf

3741 – 1137 = 2604 Bcf Net imports.

http://www.naturalgas.org/business/supply.asp

In 2010, the United States used 24.1 Tcf of natural gas

If we’ve got such a surplus of Natural Gas that we can use it to power a whole slew of things that we’re currently not using it for; why are we importing around (2.6/24.1) 10.8% of what we use?

You’d think if we’re the “Saudi Arabia of Natural Gas” we’d be exporting a lot of it not importing it… or does Saudi Arabia not do the whole exporting thing?

I’m not saying this is wrong; but nothing I see in our import/export/pricing/usage charts shows that we really have an easily accessed, usable, and cost effective surplus. If we did, why would we still be importing this much every year?

gekkobear on December 9, 2011 at 6:12 PM

No Sh#@!

Pickens cannot wax on about “special interests” while asking for a handout from the taxpayers to forward production of a commodity he profits from. In that regard, he is no different than the solar industries CEO’s who have been sucking on the teet of the Energy Dept’s loan programs.

Get out of D.C. Pickens!

Opposite Day on December 9, 2011 at 6:16 PM

Pickens is like Buffett and Soros. They can never have enough money. Why spend their money when they can spend yours. Pickens is full of good ideas but is very careful where he spends his money. That’s where the crony gets in the mix.

RickinNH on December 9, 2011 at 6:18 PM

T Boone is the same d-bag pushing wind during the 08 elections?

darwin-t on December 9, 2011 at 6:20 PM

Problem is Hucklberryfriend. Your argument for T. Boone’s success is paradoxical. If he is indeed successful, then we end up with one company that owns the whole natural gas enchilada. Ever heard the term “monopoly”? The gubament just loves monopolies.

B-Ri on December 9, 2011 at 6:25 PM

We import natural gas basically for the same reasonsm that we import so much oil and timber products, even though we have major supplies of all three natural resources. We have regulated ourselves out of development of the same. Regulations have cost us the use of our own resources and jobs.

oldbearak on December 9, 2011 at 6:27 PM

I thought that the Democrats were against big business getting ‘subsidies’.

Guess it all depends on WHO is getting them. “Nuance”, right?

GarandFan on December 9, 2011 at 6:27 PM

Remember “Big Wind” cause we can’t avoid the windmill farm they put up in Texas. I have photos. Who made a profit creating that demented forest in West Texas? Was it T Boone Pickens? Was it Speaker Nancy Pelosi?

Dr Evil on December 9, 2011 at 6:30 PM

. We have regulated ourselves out of development of the same. Regulations have cost us the use of our own resources and jobs.

oldbearak on December 9, 2011 at 6:27 PM

Progressivism at it’s finest.

darwin-t on December 9, 2011 at 6:30 PM

Who made a profit creating that demented forest in West Texas? Was it T Boone Pickens? Was it Speaker Nancy Pelosi?

Dr Evil on December 9, 2011 at 6:30 PM

Why yes, yes it was

darwin-t on December 9, 2011 at 6:31 PM

When will people finally understand that every time the government gives us a tax credit, it is paid for by us?

Okay, scratch that. When will liberals finally understand that every time the government gives us a tax credit, it is paid for by us?

jfox21 on December 9, 2011 at 6:34 PM

“Boone Pickens is 80+ years old. I doubt if he has any need or desire to profit at the government’s expense at this point in his life.
huckleberryfriend ”

Age has nothing to do with it, some of these people are just down right dishonest and craven. They will be that way for the rest of their lives regardless of how much money they have. I am not saying T Boone is one of those types, just know they are out there.
Soros, Buffett and their ilk are perfect examples.

Some like Buffett seem like nice people, but don’t be fooled simply because they look like your grandpa. His company thrives off taking advantage of inside deals and the death tax. Don’t be fooled, no more subsidies for anyone!

Africanus on December 9, 2011 at 6:45 PM

Hear, hear! I work in an industry that powers it’s vehicles with gas, diesel, CNG, LPG, and dual-fuel gas/LPG, as well as battery power. Can you guess what that industry is?

stick on December 9, 2011 at 5:58 PM

Railroad?

Random Numbers (Brian Epps) on December 9, 2011 at 6:46 PM

“Energy independence” is a delusional concept that (with the geology and economy of this planet, at this point in history) is economically and strategically illiterate. Period.

To brutally summarize. An “externality” is something that is (allegedly) not captured by a system of supply/demand, where prices are set more or less freely by real factors. “Anthropogenic global warming” is the current leader in the category of alleged externalities being cited as reason for gigantic market intervention (“green energy”, etc.).

“Energy independence” is seen as addressing the externality of energy import dependence – which has general national security implications because of the key role of energy in the economy, and specific and acute implications due to the bulk of the best/cheapest hydrocarbon energy being in the f**ked up region of the Middle East.

But – it wouldn’t. It’s fairly easy to see, if people would just think for once. Economic aspect: producing all or almost all of our energy domestically would not change a thing in terms of “dependence” on an increasingly efficient globalized economy – not a bit. Oil is a global commodity. Its price is set globally, by supply/demand. The price of domestic oil will always parallel that of the closest reference global price – unless we were to impose price controls (utter insanity, always, leading to misallocation of resources – see state-level distorted “health insurance” or Medicate cost schedules for examples of how that works out). So no price independence.

And the internationalization of our economy through trade means that a sick or disrupted world economy will hamper ours, tremendously. So any “oil shock” or problem external to the US would, in any case, always greatly affect our economy, regardless of “import dependence”. Strategically, economic “independence” is neither feasibly, nor desirable.

National security: this overlaps with the economic discussion. Obviously the US would be taking huge risks if it chose to sit out international strategic competition – economic risks, but also security risks. 9/11 cost something like $250,000. Our physical security benefits from forward engagement entirely apart from the economic benefit of secure sea lanes, conflicts deterred, etc. Producing all energy domestically would have zero impact on this.

Picture the day we achieve “energy independence”. Next day, all hell happens to break lose in the Gulf, and the sea lanes of SE Asia, Israel goes to war with Egypt, and Russia decides to annex the Abkhazia region of Georgia. Our response, our interests, the impact on our economy and security of our choices, are altered not one iota by the fact that we are producing our oil domestically.

Should domestic energy production be unleashed? Should ridiculous environmental policies and AGW cult destruction be swept aside? Of course. That would result, without doubt and fairly quickly, in an economic boost from employment, supply of equipment, etc., with a longer term benefit in average price of energy of all kinds, and a diversity of supply that helps in the case of supply disruptions (foreign, domestic, natural disasters, wars, whatever).

But the reasons to maximize domestic energy production are entirely the normal ones that apply to all sectors (least cost, proximity to market, abundance of exploitable reserves, state of technology, etc.). Nothing to do with the entirely illusory benefits of the non-existent state of “energy independence”.

This is not just an academic exercise, or pedantic pickiness about terminology – the widespread illusion of “energy independence” shows that economic and strategic illiteracy are dangerously widespread, even among the more thoughtful citizens of the US. With an administration pushing disastrously idiotic economic policies on every front, and a huge swath of the populace known to be clueless about these things, that’s pretty discouraging.

IceCold on December 9, 2011 at 6:49 PM

The bill itself would offer a slew of subsidies

Subsidies needs to be defined. Tax breaks? Ok then; if you go out and produce something we need (food) we won’t tax it. If you go out and produce something we used to need (Angora) we’ll pay you to produce it (cotton, wheat, corn).

Some economists (yes, I know, Obama does it all the time, but I don’t remember where I read it) have said that we would have better results if market forces (consumer choice) drove the demand for Ag/Oil/Gas rather than government subsidies. Of course ‘experts’ differ, and you can select which point of view you would like to use to support your preconceived conclusion. It’s not like we have a history or anything, ya know?

Skandia Recluse on December 9, 2011 at 7:07 PM

That guy is so hilariously, openly crony capitalist and seems to believe it’s this truly endearing, old noble virtue of his. “Come youngin’, sit on my lap and let me tell you ’bout the time I offered stock options to my cronies in exchange for forcing ol’ Smallville into my oil monopoly”. It’s easy to forget that up until very recently a lot of “serious people” really, really believed in crony capitalism as viable politics and economics and never saw a problem in it.

The NATGAS thing reminds me of Pickens’ Prop 10 scam out here in Cali during ’08, which was which supposed to create a $5 bil taxpayer slush fund to promote alternative fuels, or something. Never mind that the biggest beneficiaries would’ve been Pickens’ own businesses, or the old bat Nancy Pelosi who was a major investor in those same business.

smiley on December 9, 2011 at 7:17 PM

I saw an interview with a former GM exec, who off-handedly mentioned that natgas doesn’t have enough energy concentration to do well in automobile engines

maybe that’s why previous attempts at natgas cars have failed

but here’s the leftist (new nationalist) world view…Step one. Assert that we need X because of the children Step two. Assume that ‘industry’ can make it work Step three. Pass a LAW. Step four. Industry struggles for years to get something that comes close to working Step five…when the peasants start complaining, blame industry

This works ever time.

r keller on December 9, 2011 at 7:19 PM

Just get the government out of the way, period.

If you were to eliminate excessive regulation and taxation what you would have is a profitable industry that, like cellular phone companies due with new telephones, would subsidize the conversion of auto’s and of filling stations.

Government is fundamentally incapable of deciding the best options.

What you get are things like the energy savings tax credit that only goes to those who can afford to spend thousands in the first place but when a regular guy wants to buy a new appliance like say, a hot water heater, he finds the price has skyrocketed due to these same government regulations.

Stop it now, let the market decide.

LifeTrek on December 9, 2011 at 7:24 PM

In my opinion, T. Boone Pickens is a classical robber baron. If he can steal money from the government, he will. If he can destroy an oil company for a few bucks, he will. Like all robber barons, he makes a few high profile donations to win over the hearts of the people he is screwing. Think the new Oklahoma State University Foorball stadium. With that transaction, he has purchased indulgences from most of the Cowboys’ football fans. He is right down there with Icahn, Soros, and Madoff.

Old Country Boy on December 9, 2011 at 7:28 PM

r keller on December 9, 2011 at 7:19 PM

Natural gas doesn’t work well in automobile engines? That’s crazy. Here in OKC (headquarters of Chesapeake and Devon) there’s 1 natural gas car to every 3 gasoline car. They’re everywhere and you can pick one up off the dealer lot. A CNG Tahoe was behind me today on the highway at 75 mph. Natural gas works fine in car engines.

Meric1837 on December 9, 2011 at 7:38 PM

gekkobear on December 9, 2011 at 6:12 PM

Exports are mostly from pipelines to areas of Mexico & Canada where it is easier to reach than cross country.

Our LAST approved export terminal was in Alaska and it is about to be torn down.

Much of our natural gas imports are from Western Canada. Those pipelines were built (much to the detriment of now demolished local petrochemical plants) down to the U.S. due to false demand created during the 1990′s, by Clinton’s Energy Policy, to fuel the only allowable new electric power generation plants.

Kermit on December 9, 2011 at 8:28 PM

Yes! Subsidize the cheapest fuel out there making it practically free for you and me. If someone can come along with an even cheaper fuel, then gub’mint should switch its subsidy to that new, less-expensive fuel. in other words, reward efficiency and cost effectiveness.

I have two wind turbines on my farm. ROI is 208 years. (I’m looking forward to the break even point any century, now.) I hate to break the news to ya, but our gub’mint rewarded me for installing those colossal monuments to stupidity.

Patton531 on December 9, 2011 at 9:04 PM

If Pickens honestly believes in the potential of natural gas – as he clearly does given all the investments he’s made in it – then he should also believe that it is promising enough to stand on its own two legs in the open market.

Good idea, then let’s end all special tax breaks for oil companies, and even consider an oil surtax to cover the cost of our armed forces in the Middle East that remain deployed to protect the oil supply to the US.

bayam on December 9, 2011 at 9:14 PM

T Boone is the same d-bag pushing wind during the 08 elections?

darwin-t on December 9, 2011 at 6:20 PM

Yes. It was a back door plan to claim the water rights in Texas using government money.

LoganSix on December 9, 2011 at 9:40 PM

why are we importing around (2.6/24.1) 10.8% of what we use?

gekkobear on December 9, 2011 at 6:12 PM

Because as an input the average total cost is lower. As domestic demand increases, the pressure on world supply will increase the price. When the price increases there will be profit incentive for domestic producers to come online.

Say you have 8 tons of sheet steel (or whatever staples are made of) is just sitting in your backyard. You could buy the thousands of dollars in machine tools to produce your own staples, but until you’re using tons of staples it makes more sense to buy them at Staples.

WeekendAtBernankes on December 9, 2011 at 10:32 PM

Correction: … sheet [metal] (or … of) [xxx] just …

Am I a nerd? Nope. Chuck Testa.

WeekendAtBernankes on December 9, 2011 at 10:34 PM

While oil prices have gone back up from their 2009 lows, though not coming near their 2008 highs, natural gas prices are pretty close to their 2003 levels, and talking with another Texas oilman last month, Clayton Williams, he said he doubted you’d see much upward movement in natural gas prices any time soon, because there is so much shale gas in play right now, not just in Texas, but the huge Marcellus Shale formation west of the Appalachians and stretching up towards the Adirondacks. That doesn’t mean there aren’t gas wells being drilled; just that the profit margins on them aren’t going to be as good as the oil wells being drilled right now.

What that means is if you’re heavily invested in developing natural gas fields, you need something to jack the prices to make the return on your investment increase. So it’s pretty safe to guess that T. Boone’s desire to push the use of natural gas is in part due to T. Boone’s desire to push his own natrual gas investments back up to the $8-$12 mcf range they were in 2006-08, instead of the $4 level they’ve been hovering around for a while now.

jon1979 on December 10, 2011 at 1:34 AM

“Good idea, then let’s end all special tax breaks for oil companies”

bayam on December 9, 2011 at 9:14 PM

Nice to see that you still have the talking points from two summers ago down pat. Consistency is a hallmark of a rare troll.

1) Now please list all the types of “special tax breaks” that oil companies receive that do not also apply to several other industrial sectors (including your man’s favorite, GE).

2) Even if your point were true, name the source of funds oil companies would use to pay any increase in their taxes, and for extra credit how many more people go on federal subsidy when they can’t afford heating oil next winter due to a projected price increase?

But I’m sure cause and effect often does not often enter into your “but it makes me feel good” arguments.

Difficultas_Est_Imperium on December 10, 2011 at 1:51 AM

Your point is well put. The government needs to stay out of the development of natural gas.

SC.Charlie on December 10, 2011 at 8:31 AM

LNG is maybe something to incentivise but “gas stations” isn’t the way to go. Creating plants to provide jobs and exports abroad is a good thing, this is picking T. Boone as a winner. He really doesn’t need much more help in that category.

moniker11 on December 10, 2011 at 10:27 AM

CNG is our best energy solution over the next few hundred years. It is the cleanest burning, it is abundant, and it’s cheap (in comparison). The industry doesn’t need Gov handouts. They can manipulate their profit margins just fine by adding a few cents at the pump. The biggest hold up to getting CNG vehicles on the road en mass is fueling stations. I haven’t seen official research on the subject but I believe the only real downside is a loss of 5 to 10 horses in output.

NoPoliticalAffiliation on December 10, 2011 at 12:02 PM

we’re spending tons of money thru usaid and other world ngo’s to help the economies of other nations. why not help our own ailing economy a bit? Pickens has a good plan as long as 100% of that NG is produced in the US. DD

Darvin Dowdy on December 10, 2011 at 12:04 PM

Same guy who took out TV ads pushing wind turbines down in Texas.
Go away T. Boone. F A R A W A Y from my pocketbook T. Boone.

Amendment X on December 10, 2011 at 7:27 PM