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T. BOONE PICKENS: MAKEOVER OF A ROBBER BARON?

UPDATE: (11-13-08) PICKENS MAY SCALE BACK PROJECT...

"The capital markets are problematic for everyone, and we are keeping an eye on them. We are committed to wind development projects and believe it’s a viable business for us. The capital markets may lead us to scale back a bit but we are still going forward with our wind business."

If nothing else, T. Boone Pickens is a financial man -- his Mesa Petroleum is said to have been built more on financial engineering than oil exploration and processing. Now that oil prices are falling and the ability to sell bonds -- even with government guarantees -- is somewhat dodgy, Pickens needs to either postpone or scale back his project.

But, according to the Wall Street Journal, Pickens may have bigger problems...

"About half of the investors in T. Boone Pickens's energy-oriented equity hedge fund have asked to withdraw their money on the heels of losses of about 60% this year, according to people close to the matter. Mr. Pickens and his investment firm have lost $2 billion since peaking in late June, Mr. Pickens said Sunday on the CBS program '60 Minutes.'"

"His fund, BP Capital, will have about between $400 million and $500 million after expected withdrawals. It started the year with about $2 billion. A few weeks ago, Mr. Pickens moved the fund almost entirely into cash to help ride out the volatility in the energy patch, according to people close to the matter."

"Mr. Pickens is expected to personally hold about 20% of the fund after the withdrawals, or about $100 million, after he does some selling along with his investors. He has lost an estimated $400 million or so in his funds this year."

UPDATE: (07-22-08) PICKENS PUBLICITY/PROMOTION TOUR ...

During a Senate Hearing, T. Boone Pickens continued his promotion of his project by continuing to generate media attention with headline grabbing assertions.

According to Reuters ...

"Oil prices will hit $300 a barrel in 10 years if the United States fails to reduce its dependence on foreign imports, billionaire oil investor T. Boone Pickens said on Tuesday."

"Pickens who heads the hedge fund BP Capital, is building a 4,000 megawatt, $10 billion wind farm in Northern Texas that should start generating power in 2011."

"He has been touring the country with a plan to cut oil imports by switching the use of domestic natural gas from firing power plants to powering cars. He hopes the federal government and private investors will build a massive wind farm system in the middle of the country from Mexico to Canada to replace the natural gas that would be used for transport."

Original Blog Entry:

Like all Texas billionaires who have built their fortune by sharp dealing in financial markets, we need to take a much closer look at their proposals before lionizing them or their projects -- just because they mirror the prevailing political opinions on climate, energy and the economy.

Corporate raider and greenmailer or shareholder activist?

T. Boone Pickens was widely known as a takeover operator in the 1980s when he was regarded as a “greenmailer” and worse since many of his takeover efforts failed. However, many failures provided significant financial returns for Pickens and his investment group as he was paid a premium over the actual share price in order to secure a halt to his activities. In essence being paid a premium to “go away” so that management could continue to run the company. It should be noted that these premiums were usually not available to the ordinary shareholder and that stock prices usually tumbled as the price pressure of continual buying eased.

Real deal oilman and energy expert …

There is no doubt in my mind that Pickens is a true oilman and energy expert. Although many of his successes come more from acquisitions and financial manipulations than oil exploration. His philanthropic and political activities on behalf of the Republican party are well known.

He currently heads a relatively unregulated hedge fund, BP Capital Management, which can move substantial amounts of capital in and out of positions with great rapidity.

Milking the political snake …

As with all billionaires who wield enormous corporate power and can direct campaign contributions to politicians, Picken’s ability to milk the political snake is legendary. As he moves into wind-powered energy projects, I would expect that he will also be seeking government grants, subsidies and tax breaks to improve his return on an investment which is normally an uneconomical method to generate power when compared to other generation methods. In addition, I would also expect his operations to generate a significant amount of emissions credits for use as playing chips to sweeten his yields. Thus making him a natural self-interested proponent in monetizing the global weather change phenomenon.

While Pickens is known to be an increasing proponent of natural gas as a replacement for oil energy, I believe he is most excited by his belief that water is the new oil. To this end, Pickens has allegedly purchased the rights to more underground natural water than any other individual in the nation.

While Pickens is the ultimate horse trader, willing to deal in anything that can be traded or arbitraged for a significant profit, and a shining example of American Capitalism, I am somewhat worried about one particular phase of his water acquisition plan.

Why we need to watch Pickens carefully …

In a number of previous blog entries, I have indicated my opinion that the Supreme Court made a grievous error when it put forth the “Kelo” decision which has great impact on the subject of eminent domain. Basically, the Kelo decision allowed municipalities as well as other political entities such as redevelopment agencies and water districts to condemn the land of a private individual and to convey that land to another private individual for profit-making activities so long as the transaction served a “public purpose” which can be substantially different from the old standard of “public use.”   

Pickens’ water play …

According to published reports, Pickens has turned only eight acres of what has been described as “Texas Scrub Land” into his own water agency with the power to condemn other people’s property using the agency’s power of Kelo-inspired eminent domain. According to Texas State law, only those people who live on the eight acres will be allowed to vote for the approval of the water district.

According to an article in the Austin American-Statesman …

“By law, only the two people who actually live on the eight acres will be allowed to vote: the manager of Pickens' nearby Mesa Vista ranch and his wife. The other three owners, who will sit on the district's board, all work for Pickens.”

“Pickens ‘has pulled a shenanigan,’ said Phillip Smith, a rancher who serves on a local water-conservation board. ‘He's obtained the right of eminent domain like he was a big city. It's supposed to be for the public good, not a private company.’"

“Pickens and his allies say no shenanigans are involved. Once the district is created, the board will be able to issue tax-exempt bonds to finance construction of Pickens' planned 328-mile, $2.2 billion pipeline to transport water from the Panhandle across the prairie to the suburbs of Dallas and San Antonio.”

Two Texas Senators weigh-in …

“[Senators] Duncan and Seliger: Don't cut off the lifeblood of West Texas”

“Many angry landowners have contacted us about a plan that, contrary to good public policy, will affect property rights of rural Texans. The new Roberts County Fresh Water Supply District No. 1, acting as an alter ego of businessman T. Boone Pickens and Mesa Power Pampa LLC, has launched a private venture that may force landowners across 11 counties to submit to the power of eminent domain so that district can pump water from the shrinking Ogallala Aquifer and sell wind-generated electricity.

“This new governmental entity is composed of only five people, all employees or associates of Pickens. Mesa is Pickens' private company; he controls the various corporate shells identified with this project in filings with the Public Utility Commission.”

“Pickens' plan is to sell 200,000 acre-feet of Ogallala water each year to the Dallas-Fort Worth Metroplex, even though the plan has not been embraced by water policy planners as an economically viable solution. Such an extensive extraction of water from the Ogallala Aquifer will affect natural spring flows and on the Panhandle and West Texas communities that depend on that water.”

The “why” behind T. Boone Pickens’ wind project …

Enabling the wind part of the project stems from a last-minute House amendment last year that allows a fresh water supply district to host transmission lines from wind energy projects on its rights-of-way or easements. The amendment lets Pickens' personal fresh water supply district develop right-of-way to build the transmission lines for wind-generated energy he intends to sell. This part of the plan also taps the emotions of those who support development of wind energy resources in the Panhandle (as we do).

“Many believe that if they oppose Pickens' supply district's Ogallala-to-Metroplex water project, they will miss out on wind energy opportunities. That is not true.”

“Pickens isn't the only one seeking to develop wind energy. He's just the only one who personally owns a governmental entity to obtain the right-of-way for him.”

Duncan, R-Lubbock, represents 46 Panhandle and West Texas counties. Seliger, R-Amarillo, represents 26 counties from the Panhandle to the Permian Basin.

It appears that the old saying “appearances can be deceiving” has never been truer. What is being passed along to the citizens of the United States as the “Pickens Plan” for wind energy generation may be, in reality, a water-grabbing scheme to make more money for T. Boone who seems to be going “whole hog” to feed at the public trough.

On the surface, the creation of this special water district, controlled by a single individual,  in order to grab water rights, land, the right-of-way for power lines and issue his own controlled securities, STINKS!

What can YOU do?

Before you endorse any energy or water policies based on the global climatology scam, decide for yourself which of the special interests will benefit from the government’s actions.

Pray that a test case involving Kelo-style eminent domain will, once again, grace the courtroom of the Supreme Court and this time the Justices will repeal the current test of eminent domain “public purpose” and reinstate the “public use” requirement. In my opinion, it is wrong for any government agency to take private property from a private individual and give it to another private individual for the purposes of making a profit for that private individual. To my way of thinking, it is immaterial if the process results in a “public purpose,” it needs to result in a “public use.”

For those in Texas, watch your back. Pickens is a sharp operator and can afford the very best lawyers, lobbyists and legislators to press his advantage. Visit Pickens' site at www.pickensplan.com to see how he is selling his project to the public.

Do not vote for any politician who supports Kelo-style eminent domain.

-- steve

Quote of the day: “My definition of an expert in any field is a person who knows enough about what's really going on to be scared.” -- P. J. Plauger

A reminder from OneCitizenSpeaking.com: a large improvement can result from a small change…

The object in life is not to be on the side of the majority, but to escape finding oneself in the ranks of the insane. -- Marcus Aurelius

Reference Links:

Duncan and Seliger: Don't cut off the lifeblood of West Texas

Kelo decision|Wikipedia

T.Boone Pickens|Wikipedia


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