Acknowledge your mistakes. Some can hurt and be costly. I know all too well. Just make sure you remember the doors that smashed your fingers the first time and be more careful the next trip through.
Col. Edwin Drake birthed the first oil boom and the world’s commercial oil industry in 1859 with a well near Oil Creek in Titusville, Pennsylvania. I know, I was there.
Seriously, I’ve been in the oil business for 60 years. I know a lot about it; CNBC has even dubbed me the Oracle of Oil. But I’m not perfect. In this business, no one can be.
In The First Billion is the Hardest, published in 2008, I dedicated a whole chapter to what I considered an all-important truth: that the world was running out of cheap oil. Turns out I was jumping the gun on the whole Peak Oil theory by not anticipating that technology was opening up reserves we previously thought could not be retrieved. Of course, I wasn’t alone.
Further back in my career, I didn’t think that the economics could make extracting Canada’s Oil Sands feasible. That’s the same Canada Oil Sands that, some decades later, Time magazine described as that country’s “greatest buried treasure.”
Canada has the third-largest oil reserves in the world, behind Saudi Arabia and Venezuela. Of its 173 billion barrels of oil reserves, 170 billion are located in Alberta, about 168 billion of which are today recoverable from bitumen. Oil sands are a mixture of sand, water, clay and bitumen. Bitumen is oil that is too heavy or thick to flow or be pumped without being diluted or heated.
I’ve done quite a bit of business in Canada, particularly early in my career. I was living in Alberta in 1967 (at age 39) when Suncor (then called the Great Canadian Oil Sands) launched the first project to produce synthetic crude oil from the sands in Fort Murray, Alberta.
At the end of the day, I’d occasionally stop by the Petroleum Club, where four or five of my fellow geologists would be ensconced talking shop. On this particular day, we were there scoffing at the idea of this government project, mostly because we couldn’t see any way it could make any money.
One of our crew, my good friend Harley Hotchkiss, leaned over to me and said, “You know, Boone, for this thing to work, you’d have to have $5 oil.” We both laughed at the idea, as the price of oil was $2.20 a barrel at that time.
I had first met Harley in Calgary in 1957 when I was just starting out as an independent. He was in the oil department of the Canadian Bank of Commerce at the time. We were both about the same age and geologists; he was schooled at Michigan State University. We hit it off right away.
We ended up setting up shop across the hall from each other a couple years later when we both were hunting projects in Calgary. We even shared information, well cards, production cards, and electricity logs — pretty unheard of in what was a competitive, distrustful industry.
We would go on to do deals together as we became fast friends. We made a lot of money together. We in turn each gave a lot to philanthropic causes, sometimes hitting each other up for a cause either of us was working. He would later serve on our Mesa Petroleum Board of Directors for about six years in the early ‘80s, when we were involved in some complicated activities.
But back on that day in 1967, we were right for the day but not for the near future. Our imaginations couldn’t visualize $40 a barrel oil. But it would arrive, and transform Fort McMurray into a boomtown. (For example, total Canadian oil sands production reached about 2.3 million barrels per day in 2014, according to the Alberta Energy Regulator.)
I learned early on in my career to analyze well, assess risks and prospective rewards, and keep things simple. I’ve also learned you can be smart and make the wrong analysis based on the facts you have on hand at any one time. BP Capital did invest big in the Canadian Oil Sands, beginning in 2001.
I’m regularly amazed by the oil and gas industry’s continual advances in technology, research, and innovation. It’s what has made America great, and the industry will continue to prove its greatness under President Donald Trump.
Volkswagen, the storied German automaker, pleaded guilty today to three felony counts as part of a $4.3 billion settlement reached with the Justice Department in January over the automaker’s massive diesel emissions scandal.
There’s a great deal of irony in this, and a great opportunity for America’s energy security. Here’s why.
Back when President Obama rolled into the White House for the first time, I was in the midst of an aggressive campaign to address the stranglehold placed on our national security and our economy by addiction to OPEC oil.
The crux of that plan was to expand renewables (wind and solar) in power generation, and replace dirtier-burning and more expensive OPEC oil with our abundant supplies of cleaner-burning domestic natural gas in the transportation sector. The overarching goal was to break the stranglehold OPEC had on our economic and national security.
Washington lawmakers refused to foot the bill for America to go down that path. Now, in an ironic twist of fate, with the VW transgression, we have the Germans poised to finance it for us. And we’re fools if we don’t take advantage of this opportunity.
In 2015, the German automaker, Volkswagen, was found to have installed software on its diesel-powered vehicles that provided false emissions data — data that understated the emissions their vehicles were actually producing.
I’ve always been skeptical that diesel can ever burn as clean as alternatives such as electric cars or heavy-duty trucks fueled by natural gas. The lifecycle costs to produce diesel — from production to refining and out of the tailpipe — are just too great. Going to such lengths to falsify emission data just reinforces my skepticism, and my anger.
Since getting caught, the company has agreed to pay fines of $16 billion to settle claims for cheating. These fines will be paid to the U.S. government and shared among the states. In addition, owners of VW vehicles and the dealers who sold them will share in the proceeds.
We’re not talking chump change here. Texas alone, where I live, is set to get $191 million.
This flap once again underscores the need to get diesel vehicles off the road when and where we can, both for air quality purposes and to reduce our dependence on OPEC oil. One of the most toxic emissions produced by diesel engines is Nitrogen Oxide (NOx). It is generated by all internal combustion engines, but a new natural gas engine developed by Cummins-Westport produced 90 percent less NOx emissions than new diesel-powered trucks. That engine is available today.
State regulators ultimately tasked with spending the VW settlement should have some guidance from those with history, experience and knowledge — including industry, independent experts and environmental authorities.
First, a majority of the funds should be used for vehicles which already perform below current federal NOx limits, such as the Cummins Wesport engine mentioned above.
Second, all vehicles performing below federal NOx limits should be treated equally. States should look to decrease the number of diesel-powered vehicles on the road — especially heavy-duty trucks — and replace them with trucks powered by natural gas.
Why not go right to batteries? Because batteries will not move an 18-wheeler, and they cost at least five times more than comparable diesel-powered trucks. So, while electric cars are all the rage, batteries are not a substitute fuel source for over-the-road trucks.
Finally, while there will be justifiable efforts to use these funds on state fleets, it is even more important to find ways to allow private-sector fleets access to these funds. In fact, that’s where the bulk of the money should go.
Keeping in mind this settlement money is coming from a corporation and not the taxpayers, there will be no shortage of ideas from state regulators on how to spend these funds. States should show leadership by not using it solely to upgrade state fleet vehicles.
The reason is simple. If states use this money to replace aging fleets, this will be a “one-and-done” deal. On the other hand, if the money is used to provide incentives for the public and private sectors to purchase new, natural gas-powered vehicles, the positive effects on reducing NOx emissions will be magnified many times over the years.
Listening to President Trump last night deliver his first joint address to Congress – and his commitment to expanding America’s energy renaissance – reminded me of a story.
I’ve been a member at Augusta National Golf Club since August 1982. At Augusta, the club assigns you a caddy, and that guy will be your caddy as long as you live.
I’ve got a great one, Larry, who is highly skilled and always respectful.
One day as I was playing, I asked Larry, “We’ve got the best golf club in the world. Why do we close it in May for the summer?”
Out of character, Larry looked at me, and I could see in his expression that the man he thought was so smart was not so sharp after all.
“Mr. Pickens, that’s the way we’ve always done it.”
I’ve never stomached that kind of answer from any of my employees, but I didn’t say anything more to Larry on the subject.
I thought about this exchange last night, and the stark contrast in President Trump’s address and the comments just the week before by U.S. Rep. Maxine Waters when she threw out some harsh views for the president’s cabinet, calling them “a bunch of scumbags.”
She referred to the president’s supporters as a “Kremlin clan, all of them connected to the oil and gas industry.” The California Democrat was particularly pointed in her criticism of Secretary of State Rex Tillerson and his Russian oil ties.
Prior to his confirmation, I wrote that Rex Tillerson would make a great Secretary of State. And I think he will.
When is operating successfully in foreign countries, as Secretary Tillerson did when he was CEO of Exxon, a negative? It ought to be a positive.
I’ve been in the oil industry for 60 years as it helped America find great success by producing abundant, cheap oil.
Bringing Tillerson’s global expertise to the Washington mindset is a win for America.
I admire that President Trump is making us try something different. I have always believed that it’s important to show a new look periodically. Predictability can lead to failure. I think we’ve seen that in Washington.
Let’s see where some new approaches take us.