Pickens Becomes the Lee Iacocca of Natural Gas : Energy: The pitching isn’t just because he wants a cleaner environment. Eighty-eight percent of his company’s reserves are in gas.
T. Boone Pickens, the blunt-spoken Texas oilman and corporate raider, is about to lob an unusually solemn pitch for his latest cause--cars that run on natural gas--to a small audience at the National Press Club.
“It says, ‘Now tell a joke,’ ” Pickens drawls, scowling at his notes. “But I’m not going to do it. . . . I feel kind of serious this morning.”
With good reason.
Pickens has been beating the drum for the downtrodden natural gas business--and the environmentally attractive cars, vans and trucks he believes can save it--since just after dawn as the new chairman of the Natural Gas Vehicle Coalition, a trade group.
Earlier on this sunny October day, he gave TV interviews on Capitol Hill; made a promotional spot; buttonholed old friend Rep. Newt Gingrich (R-Ga.), the House Republican whip, to schedule a private word with him later that afternoon.
Pickens also delivered a kickoff speech for a parade of cars and vans, an ambulance and his own dark blue Cadillac Sedan de Ville--all converted to run on natural gas--before the caravan threaded into Washington’s traffic for a promotional trip to West Virginia.
One of America’s most controversial business figures has not just mounted the soapbox for the good of the environment. Rather, what could be good for the environment would also be particularly good for Pickens.
Pickens is general partner and founder of Mesa Limited Partnership, one of the nation’s largest independent natural gas producers, with more than 2 trillion cubic feet of reserves. Indeed, 88% of Mesa’s energy reserves are natural gas. And with gas prices so depressed that half the nation’s independent producers have gone belly up in recent years, Mesa--and Pickens--have a monumental problem. Not enough people want to buy his product.
So Pickens has become an indefatigable salesman for natural gas.
Many will recall former Pickens’ incarnations--as corporate raider, Japan critic and shareholder rights advocate.
Several of Pickens’ corporate raids--on smaller oil companies, then on majors including Phillips Petroleum Co. and Unocal Corp.--were financed with junk bonds from Drexel Burnham Lambert Inc. He’s never taken over a company. But in retreat, Pickens has made an estimated $1 billion for Mesa over the years by selling stock driven sky-high by the raids themselves.”
In 1989, Pickens began investing in Koito Manufacturing Co., a Japanese auto parts maker, this time with financing from Japanese speculator and alleged greenmailer Kitaro Watanabe. Pickens raised the shareholder populist flag again, demanding a seat on Koito’s board of directors, before conceding defeat last April--apparently without losing any money on the deal.
Critics saw the Koito adventure as an appeal to anti-Japanese sentiment in Texas--as a warm-up to Pickens’ long-expected run for the Texas governorship in 1994. Pickens admits that he’s still intrigued by the job, though he says he might be “too age-y,” at 66, by then.
As founder of the 64,000-member United Shareholders Assn., he has regularly taken corporate executives to task for their “toys” and “perks”--bought, says Pickens, at the expense of stockholders. Pickens once charged that many U.S. chief executives show no more concern for their shareholders “than they do for baboons in Africa.”
In all these battles, Pickens has said he not only made a profit but did a lot of good for ordinary shareholders’ investments. In the Unocal brawl, Pickens claimed that his raid had been a $2-billion boon to Unocal shareholders--though Fred L. Hartley, then Unocal’s chief executive, took a far less rosy view.
Junk bond-financed raids such as Pickens’ “were destroying the central financial system of the country,” said Hartley, who died in October, 1990.
Yet friend and foe alike consider Pickens, for all his folksiness, to be one of the smartest men in the Oil Patch when it comes to finance--an attribute that he will need in the financially sober energy industry of the 1990s.
At the moment, the biggest challenge for Pickens is the severe drop in natural gas prices to about $2 per thousand cubic feet--down 40% over the past six years. A persistent oversupply, the so-called natural gas bubble, has kept prices depressed for the past decade.
By midday in Washington, over club sandwiches and potato chips in his hotel room, Pickens is explaining how this has brought him to push for natural gas cars and trucks.
“I started to look around,” Pickens says. “‘Where can I increase demand? I got to thinking that I’ve got to work on another angle here.”
One option, already being pursued by other natural gas advocates, would be to press for increased use of gas to heat the boilers in electricity-generating power plants. Pickens plans to join that campaign.
But he has also taken note of the fact that two-thirds of the nation’s crude oil now goes into transportation.
“Just being an old, hard-headed businessman,” Pickens allows, “you say, ‘Well gosh, that’s obviously the biggest market that’s available. Now how the hell do I get in it?’ ”
So Pickens joined the board of the Natural Gas Vehicle Coalition late in 1990.
Then, in July, coalition Chairman C. Ronald Tilley, president of Columbia Distribution Cos., abruptly resigned as his firm’s parent company Columbia Gas System Inc. went into Chapter 11 bankruptcy proceedings, another victim of the natural gas industry crisis.
Pickens accepted the chairman’s job. “I hate to use the word ‘volunteer,’ ” he snorts.
For the past three months, he has been filling up his Cadillac at home, from a hose attached to his residential gas line. And he has gone on a crusade, setting forth a far broader vision of natural gas use than anyone has done before.
He’s badgered--so far without success--President Bush’s lawyer, C. Boyden Gray, who drives an old Chevrolet Citation powered by methanol, a rival alternative fuel. Pickens wants Gray to switch to natural gas and support conversion of the entire White House fleet.
Pickens recently flew to Detroit to lambaste the Big Three auto companies for not committing themselves to build more natural gas vehicles.
And on this day, he is taking on his old antagonists, the major oil companies. While 60,000 of New Zealand’s cars--and 300,000 of Italy’s--already run on the fuel, the United States has only 30,000 natural gas vehicles on the road.
“Are we stupid?” he asks. “Or did someone not get ahold of this thing and show us the direction we should have gone? I think the thing was that the major oil companies have had a lot to do with domestic energy policy, and they were protecting their infrastructure.”
Chevron--the largest U.S. producer of natural gas--Unocal and four other oil companies have recently announced pilot programs to install natural gas fueling equipment at some gasoline service stations. But Pickens dismisses this as a “token” effort. He wants chain-wide installations, and soon.
He also disdains current calls to emphasize fleet use first. He wants everyone with a car to at least consider the $2,500 cost of converting to natural gas. They would save, he says, by paying half what they now pay for the equivalent energy from gasoline, and much less in maintenance.
And until there are natural gas fill-up stations coast to coast, he wants utilities to rent home units to their customers.
“I think that in five years,” Pickens says, “especially in Southern California, it’s not going to be acceptable to the neighbors not to convert to natural gas.”
The natural gas industry and its allies profess to be ecstatic at snagging Pickens’ energetic, high-profile services as--in some executives’ term--their “poster boy.”
Environmentalists are more cautious. For one thing, many consider natural gas--a fossil, non-renewable energy source--a promising “bridge” fuel, but one that should eventually be replaced by such renewable fuels as solar-powered electricity.
Pickens scoffs at all rivals to gas.
He calls reformulated gasoline a “dirty fuel” promoted by the oil companies to keep their infrastructure--service stations, refineries, pipelines and the like--intact. Methanol is “most likely a foreign fuel,” Pickens says, because those same multinational oil firms would import gas just as they do oil. Ethanol, Pickens says, is too expensive.
And electricity, he chuckles, is best suited to golf carts.
Meanwhile, though Mesa lost $200 million last year, a debt restructuring in August will keep the wolf from the door for a few years, Pickens says. He now has until 1996--when the first of his new notes come due--to improve the market for natural gas. Pickens also has plans to take the company public again if the current limited partners approve.
From the refinancing, he also picked up a little spending money.
“We’re not flush with cash,” Pickens says. “We’ve got $300 million lying around now, but we’re being careful where we put it.”
True to his faith, Pickens already has made plans to sink some of that money into more natural gas reserves.
