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TED2012

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

March 1, 2012

The US consumes 25% of the world's oil -- but as energy tycoon T. Boone Pickens points out onstage, the country has no energy policy to prepare for the inevitable. Is alternative energy our bridge to an oil-free future? After losing $150 million investing in wind energy, Pickens suggests it isn't, not yet. What might get us there? Natural gas. After the talk, watch for a lively Q&A with TED Curator Chris Anderson.

T. Boone Pickens - Entrepreneur and energy theorist
A legendary oil and gas entrepreneur, T. Boone Pickens is now on a mission to enhance U.S. energy policies to lessen the nation’s dependence on OPEC oil. Full bio

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Double-click the English subtitles below to play the video.
I'm a believer.
00:15
I'm a believer in global warming,
00:17
and my record is good
00:19
on the subject.
00:21
But my subject
00:23
is national security.
00:25
We have to get off of oil purchased
00:27
from the enemy.
00:30
I'm talking about OPEC oil.
00:32
And let me take you back
00:34
100 years
00:36
to 1912.
00:38
You're probably thinking that was my birth year.
00:41
(Laughter)
00:44
It wasn't. It was 1928.
00:46
But go back to 1912,
00:49
100 years ago,
00:51
and look at that point
00:53
what we, our country, was faced with.
00:55
It's the same energy question
00:58
that you're looking at today,
01:00
but it's different sources of fuel.
01:02
A hundred years ago
01:05
we were looking at coal, of course,
01:07
and we were looking at whale oil
01:09
and we were looking at crude oil.
01:11
At that point,
01:14
we were looking for a fuel
01:16
that was cleaner,
01:18
it was cheaper,
01:20
and it wasn't ours though,
01:22
it was theirs.
01:25
So at that point, 1912,
01:27
we selected crude oil over whale oil
01:30
and some more coal.
01:33
But as we moved on
01:36
to the period now, 100 years later,
01:38
we're back really
01:41
at another decision point.
01:43
What is the decision point?
01:45
It's what we're going to use
01:47
in the future.
01:49
So from here,
01:51
it's pretty clear to me,
01:53
we would prefer to have
01:55
cleaner, cheaper,
01:57
domestic, ours --
01:59
and we have that, we have that --
02:02
which is natural gas.
02:05
So here you are,
02:07
that the cost of all this to the world
02:09
is 89 million barrels of oil,
02:13
give or take a few barrels, every day.
02:16
And the cost annually
02:18
is three trillion dollars.
02:20
And one trillion of that
02:23
goes to OPEC.
02:25
That has got to be stopped.
02:27
Now if you look at the cost of OPEC,
02:30
it cost seven trillion dollars --
02:33
on the Milken Institute study last year --
02:36
seven trillion dollars
02:38
since 1976,
02:40
is what we paid for oil from OPEC.
02:42
Now that includes the cost of military
02:45
and the cost of the fuel both.
02:47
But it's the greatest transfer of wealth,
02:50
from one group to another
02:55
in the history of mankind.
02:57
And it continues.
02:59
Now when you look
03:01
at where is the transfer of wealth,
03:03
you can see here
03:05
that we have the arrows
03:07
going into the Mid-East
03:10
and away from us.
03:12
And with that,
03:14
we have found ourselves
03:16
to be the world's policemen.
03:18
We are policing the world,
03:20
and how are we doing that?
03:22
I know the response to this.
03:25
I would bet there aren't 10 percent of you in the room
03:29
that know how many aircraft carriers there are in the world.
03:33
Raise your hand if you think you know.
03:38
There are 12.
03:41
One is under construction by the Chinese
03:43
and the other 11 belong to us.
03:45
Why do we have 11 aircraft carriers?
03:48
Do we have a corner on the market?
03:52
Are we smarter than anybody else? I'm not sure.
03:55
If you look at where they're located --
03:58
and on this slide it's the red blobs on there --
04:00
there are five that are operating in the Mid-East,
04:03
and the rest of them are in the United States.
04:07
They just move back to the Mid-East and those come back.
04:10
So actually most of the 11 we have
04:13
are tied up in the Mid-East.
04:16
Why? Why are they in the Mid-East?
04:19
They're there to control,
04:22
keep the shipping lanes open
04:24
and make oil available.
04:26
And the United States uses about 20 million barrels a day,
04:28
which is about 25 percent of all the oil used
04:32
everyday in the world.
04:36
And we're doing it with four percent of the population.
04:39
Somehow that doesn't seem right.
04:42
That's not sustainable.
04:45
So where do we go from here?
04:47
Does that continue?
04:49
Yes, it's going to continue.
04:51
The slide you're looking at here
04:53
is 1990 to 2040.
04:55
Over that period
04:57
you are going to double your demand.
04:59
And when you look at what we're using the oil for,
05:02
70 percent of it
05:05
is used for transportation fuel.
05:07
So when somebody says,
05:09
"Let's go more nuclear,
05:11
let's go wind, let's go solar,"
05:13
fine; I'm for anything American,
05:16
anything American.
05:19
But if you're going to do anything
05:21
about the dependency on foreign oil,
05:23
you have to address transportation.
05:26
So here we are
05:28
using 20 million barrels a day --
05:30
producing eight, importing 12,
05:33
and from the 12,
05:36
five comes from OPEC.
05:38
When you look at the biggest user and the second largest user,
05:43
we use 20 million barrels
05:46
and the Chinese use 10.
05:48
The Chinese have a little bit better plan --
05:50
or they have a plan;
05:54
we have no plan.
05:56
In the history of America,
05:58
we've never had an energy plan.
06:00
We don't even realize the resources
06:02
that we have available to us.
06:04
If you take the last 10 years
06:06
and bring forward,
06:08
you've transferred to OPEC a trillion dollars.
06:10
If you go forward the next 10 years
06:14
and cap the price of oil at 100 dollars a barrel,
06:17
you will pay 2.2 trillion.
06:20
That's not sustainable either.
06:23
But the days of cheap oil are over.
06:25
They're over.
06:28
They make it very clear to you,
06:30
the Saudis do,
06:33
they have to have 94 dollars a barrel
06:36
to make their social commitments.
06:39
Now I had people in Washington last week told me,
06:41
he said, "The Saudis can produce the oil
06:45
for five dollars a barrel.
06:48
That has nothing to do with it.
06:50
It's what they have to pay for
06:52
is what we are going to pay for oil."
06:54
There is no free market for oil.
06:56
The oil is priced off the margin.
06:58
And the OPEC nations
07:00
are the ones that price the oil.
07:03
So where are we headed from here?
07:05
We're headed to natural gas.
07:08
Natural gas will do everything
07:11
we want it to do.
07:13
It's 130 octane fuel.
07:15
It's 25 percent cleaner than oil.
07:18
It's ours, we have an abundance of it.
07:21
And it does not require a refinery.
07:24
It comes out of the ground at 130 octane.
07:27
Run it through the separator and you're ready to use it.
07:29
It's going to be very simple for us to use.
07:32
It's going to be simple to accomplish this.
07:35
You're going to find, and I'll tell you in just a minute,
07:37
what you're looking for to make it happen.
07:39
But here you can look at the list.
07:42
Natural gas will fit all of those.
07:45
It will replace or be able to be used for that.
07:48
It's for power generation, transportation,
07:52
it's peaking fuel, it's all those.
07:54
Do we have enough natural gas?
07:57
Look at the bar on the left. It's 24 trillion.
08:00
It's what we use a year.
08:03
Go forward
08:05
and the estimates that you have
08:07
from the EIA and onto the industry estimates --
08:09
the industry knows what they're talking about --
08:13
we've got 4,000 trillion cubic feet
08:15
of natural gas that's available to us.
08:18
How does that translate
08:20
to barrels of oil equivalent?
08:22
It would be three times
08:24
what the Saudis claim they have.
08:26
And they claim they have 250 billion barrels of oil,
08:28
which I do not believe.
08:31
I think it's probably 175 billion barrels.
08:33
But anyway, whether they say they're right or whatever,
08:38
we have plenty of natural gas.
08:41
So I have tried to target
08:43
on where we use the natural gas.
08:45
And where I've targeted
08:47
is on the heavy-duty trucks.
08:49
There are eight million of them.
08:51
You take eight million trucks --
08:53
these are 18-wheelers --
08:55
and take them to natural gas,
08:57
reduce carbon by 30 percent,
08:59
it is cheaper
09:02
and it will cut our imports
09:04
three million barrels.
09:07
So you will cut 60 percent off of OPEC
09:09
with eight million trucks.
09:12
There are 250 million vehicles in America.
09:14
So what you have
09:17
is natural gas is the bridge fuel,
09:19
is the way I see it.
09:22
I don't have to worry
09:24
about the bridge to where at my age.
09:26
(Laughter)
09:29
That's your concern.
09:31
But when you look at the natural gas we have
09:34
it could very well be
09:36
the bridge to natural gas,
09:38
because you have plenty of natural gas.
09:40
But as I said, I'm for anything American.
09:43
Now let me take you -- I've been a realist --
09:46
I went from theorist early to realist.
09:49
I'm back to theorist again.
09:51
If you look at the world,
09:53
you have methane hydrates in the ocean
09:56
around every continent.
09:59
And here you can see methane,
10:01
if that's the way you're going to go,
10:04
that there's plenty of methane --
10:06
natural gas is methane,
10:08
methane and natural gas are interchangeable --
10:10
but if you decide
10:12
that you're going to use some methane --
10:14
and I'm gone, so it's up to you --
10:16
but we do have
10:18
plenty of methane hydrates.
10:20
So I think I've made my point
10:23
that we have to get on our own resources in America.
10:26
If we do --
10:31
it's costing us a billion dollars a day for oil.
10:34
And yet, we have no energy plan.
10:37
So there's nothing going on
10:40
that impresses me
10:43
in Washington on that plan,
10:46
other than I'm trying to focus
10:49
on that eight million 18-wheelers.
10:51
If we could do that,
10:54
I think we would take our first step
10:56
to an energy plan.
10:58
If we did, we could see
11:00
that our own resources are easier to use
11:02
than anybody can imagine.
11:05
Thank you.
11:07
(Applause)
11:09
Chris Anderson: Thanks for that.
11:17
So from your point of view,
11:19
you had this great Pickens Plan
11:21
that was based on wind energy,
11:23
and you abandoned it basically
11:26
because the economics changed.
11:28
What happened?
11:30
TBP: I lost 150 million dollars.
11:32
(Laughter)
11:34
That'll make you abandon something.
11:36
No, what happened to us, Chris,
11:39
is that power, it's priced off the margin.
11:42
And so the margin is natural gas.
11:48
And at the time I went into the wind business,
11:51
natural gas was nine dollars.
11:53
Today it's two dollars and forty cents.
11:55
You cannot do a wind deal
11:58
under six dollars an MCF.
12:00
CA: So what happened was
12:02
that, through increased ability
12:04
to use fracking technology,
12:08
the calculated reserves of natural gas kind of exploded
12:10
and the price plummeted,
12:13
which made wind uncompetitive.
12:16
In a nutshell that's what happened?
12:18
TBP: That's what happened.
12:20
We found out that we could go to the source rock,
12:22
which were the carboniferous shales in the basins.
12:24
The first one was Barnett Shale in Texas
12:27
and then the Marcellus up in the Northeast
12:30
across New York, Pennsylvania, West Virginia;
12:33
and Haynesville in Louisiana.
12:36
This stuff is everywhere.
12:38
We are overwhelmed with natural gas.
12:40
CA: And now you're a big investor in that and bringing that to market?
12:42
TBP: Well you say a big investor.
12:46
It's my life.
12:48
I'm a geologist, got out of school in '51,
12:50
and I've been in the industry my entire life.
12:52
Now I do own stocks.
12:54
I'm not a big natural gas producer.
12:57
Somebody the other day said
13:00
I was the second largest natural gas producer in the United States.
13:02
Don't I wish.
13:04
But no, I'm not. I own stocks.
13:06
But I also am in the fueling business.
13:09
CA: But natural gas is a fossil fuel.
13:12
You burn it,
13:15
you release CO2.
13:17
So you believe in the threat of climate change.
13:19
Why doesn't that prospect
13:23
concern you?
13:25
TBP: Well you're going to have to use something.
13:27
What do you have to replace it?
13:30
(Laughter)
13:34
CA: No, no. The argument that it's a bridge fuel makes sense,
13:39
because the amount of CO2 per unit of energy
13:42
is lower than oil and coal, correct?
13:46
And so everyone can be at least happy
13:49
to see a shift from coal or oil to natural gas.
13:52
But if that's it
13:55
and that becomes the reason
13:57
that renewables don't get invested in,
13:59
then, long-term, we're screwed anyway, right?
14:02
TBP: Well I'm not ready to give up,
14:05
but Jim and I talked
14:07
there as he left,
14:09
and I said, "How do you feel about natural gas?"
14:11
And he said, "Well it's a bridge fuel, is what it is."
14:13
And I said, "Bridge to what?
14:16
Where are we headed?"
14:18
See but again, I told you, I don't have to worry with that.
14:20
You all do.
14:22
CA: But I don't think that's right, Boone.
14:24
I think you're a person who believes in your legacy.
14:26
You've made the money you need.
14:29
You're one of the few people in a position
14:31
to really swing the debate.
14:34
Do you support the idea of some kind of price on carbon?
14:37
Does that make sense?
14:40
TBP: I don't like that
14:42
because it ends up the government is going to run the program.
14:44
I can tell you it will be a failure.
14:47
The government is not successful
14:49
on these things.
14:52
They just aren't, it's a bad deal.
14:54
Look at Solyndra, or whatever it was.
14:57
I mean, that was told to be a bad idea 10 times,
15:00
they went ahead and did it anyway.
15:02
But that only blew out 500 million.
15:04
I think it's closer to a billion.
15:07
But Chris, I think where we're headed,
15:10
the long-term,
15:13
I don't mind going back to nuclear.
15:16
And I can tell you what the last page
15:18
of the report that will take them five years to write
15:20
will be.
15:22
One, don't build a reformer on a fault.
15:24
(Laughter)
15:27
And number two,
15:29
do not build a reformer on the ocean.
15:31
And now I think reformers are safe.
15:34
Move them inland
15:37
and on very stable ground
15:39
and build the reformers.
15:43
There isn't anything wrong with nuke.
15:45
You're going to have to have energy. There is no question.
15:47
You can't -- okay.
15:49
CA: One of the questions from the audience
15:51
is, with fracking and the natural gas process,
15:54
what about the problem of methane leaking from that,
15:57
methane being a worse global warming gas
16:00
than CO2?
16:02
Is that a concern?
16:04
TBP: Fracking? What is fracking?
16:06
CA: Fracking.
16:08
TBP: I'm teasing.
16:11
(Laughter)
16:13
CA: We've got a little bit of accent incompatibility here, you know.
16:15
TBP: No, let me tell you,
16:19
I've told you what my age was.
16:21
I got out of school in '51.
16:23
I witnessed my first frack job
16:25
at border Texas in 1953.
16:27
Fracking came out in '47,
16:29
and don't believe for a minute
16:31
when our president gets up there
16:33
and says the Department of Energy 30 years ago
16:35
developed fracking.
16:38
I don't know what in the hell he's talking about.
16:40
I mean seriously, the Department of Energy
16:43
did not have anything to do with fracking.
16:45
The first frack job was in '47.
16:48
I saw my first one in '53.
16:50
I've fracked over 3,000 wells in my life.
16:53
Never had a problem
16:56
with messing up an aquifer or anything else.
16:58
Now the largest aquifer in North America
17:00
is from Midland, Texas to the South Dakota border,
17:03
across eight states --
17:06
big aquifer:
17:08
Ogallala, Triassic age.
17:10
There had to have been 800,000 wells fracked
17:13
in Oklahoma, Texas, Kansas
17:16
in that aquifer.
17:19
There's no problems.
17:21
I don't understand why
17:23
the media is focused on Eastern Pennsylvania.
17:25
CA: All right, so you don't support a carbon tax of any kind
17:29
or a price on carbon.
17:32
Your picture then I guess
17:34
of how the world eventually gets off fossil fuels
17:37
is through innovation ultimately,
17:39
that we'll someday make solar and nuclear cost competitive?
17:42
TBP: Solar and wind, Jim and I agreed on that in 13 seconds.
17:47
That is, it's going to be a small part,
17:51
because you can't rely on it.
17:53
CA: So how does the world get off fossil fuels?
17:55
TBP: How do we get there?
17:57
We have so much natural gas,
17:59
a day will not come
18:01
where you say, "Well let's don't use that anymore."
18:03
You'll keep using it. It is the cleanest of all.
18:05
And if you look at California,
18:08
they use 2,500 buses.
18:10
LAMTA have been on natural gas
18:12
for 25 years.
18:16
The Ft. Worth T
18:18
has been on it for 25 years.
18:20
Why? Air quality was the reason they used natural gas
18:22
and got away from diesel.
18:25
Why are all the trash trucks today in Southern California
18:27
on natural gas?
18:29
It's because of air quality.
18:31
I know what you're telling me, and I'm not disagreeing with you.
18:33
How in the hell can we get off the natural gas at some point?
18:36
And I say, that is your problem.
18:39
(Laughter)
18:42
CA: All right,
18:44
so it's the bridge fuel.
18:46
What is at the other end of that bridge
18:48
is for this audience to figure out.
18:50
If someone comes to you with a plan
18:52
that really looks like it might be part of this solution,
18:54
are you ready to invest in those technologies,
18:56
even if they aren't maximized for profits,
18:59
they might be maximized for the future health of the planet?
19:01
TBP: I lost 150 million on the wind, okay.
19:04
Yeah, sure, I'm game for it.
19:07
Because, again,
19:10
I'm trying to get energy solved for America.
19:13
And anything American
19:17
will work for me.
19:20
CA: Boone, I really, really appreciate you coming here,
19:22
engaging in this conversation.
19:24
I think there's a lot of people who will want to engage with you.
19:26
And that was a real gift you gave this audience.
19:29
Thank you so much. (TBP: You bet, Chris. Thank you.)
19:31
(Applause)
19:34

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T. Boone Pickens - Entrepreneur and energy theorist
A legendary oil and gas entrepreneur, T. Boone Pickens is now on a mission to enhance U.S. energy policies to lessen the nation’s dependence on OPEC oil.

Why you should listen

T. Boone Pickens views America's dependence on OPEC oil as the greatest threat to the country's national security and economic well-being. In developing The Pickens Plan for America’s energy future, he's advocating for domestic alternatives and even greater new technologies. Pickens grew from humble beginnings in Depression-era Holdenville, Oklahoma, to be one of the nation’s most successful oil and gas entrepreneurs, and has been uncannily accurate in predicting oil and gas prices (CNBC coined him the “Oracle of Oil”) -- and he's established a very successful energy-oriented investment fund. Pickens is also an innovative, committed philanthropist who has donated nearly $1 billion to charity.

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