From the October 01, 2010 issue of Futures Magazine • Subscribe!

Boone: The man with a big plan

ImageFM: What is your long-term outlook for the energy sector: Crude oil? Natural gas?

Boone: From a security standpoint, we have to get on our own resources in the United States. If you didn’t have resources, that would be a real problem but we have resources. You’ve got 4,000 trillion cubic feet of natural gas, it is 30% cleaner than gasoline and diesel, it is cheaper and it is an unbelievable opportunity for us to move to our own resources again. If we don’t use natural gas for serious transportation fuel, we are going to go down as the dumbest crowd that ever came to town. Why wouldn’t you replace dirty-foreign-expensive with cheaper-cleaner-domestic?

FM: This is probably contingent on whether your plan is adopted, but where do you see the price of crude and natural gas in the near term?

Boone: 2011 is probably going to be a pretty weak year for natural gas, eventually it will move up but we have such an abundance of natural gas. That is the reason for the wide gap (ratio of price of crude oil to natural gas) that we have never seen before. If it is on a BTU basis, it is 6-1, but we have never been there, natural has always been sold at a discount to oil. If you look at where it hangs out, it is 10-1, so when you have $75 oil you have $7.50 natural gas. We have not had $7.50 natural gas in a while, so natural gas will move up over time because it is a superior hydrocarbon to oil.

Some one recently asked me what if we imported a great amount of natural gas and we found a huge oil field near the States that was low gravity high sulfur crude. Would you continue to import clean natural gas or produce dirty oil? I would say dirty oil because it is a security issue with me.

Natural will become the predominant hydrocarbon.

FM: The ratio of cost of crude oil to natural gas has never been so wide. Why is this?

Boone: It is because you have too much natural gas. You are oversupplied with natural gas. Natural gas is cheaper than coal now.

FM: Your plan makes sense, why hasn’t it happened yet?

Boone: It has happened. You have an energy bill working. You have a 16-day window – eight days in September, eight in October to pass something. If you miss it then you have a lame duck [Congress]. The energy bill that I want is in place, everybody puts it in their plan – it is HR 1835 in the House. If they don’t put stuff on the bill [and] it sits there ready to be voted on, it will pass on the first vote. That is the one that you have a $65,000 tax credit for 18-wheelers. That also is over in the Senate, Senate bill 1408. They know it will pass [there] too if it comes up, but they won’t do stand alone so they try and put everything on there that they can. That will have a hard time passing like cap and trade. Kerry-Lieberman tried that for three months [and] that is now off of it. Now they have the fracing (pronounced fracking) issue on there and the liability in the Gulf so they are struggling with those right now. But they can pass what I want on the first vote.

FM: Are some of those other issues a deal killer for you?

Boone: I have to go along with what [ends up in it]. The fracing issue, I know that business. I have been in it for over 50 years and I have never had a problem with a frac job messing up some ground water. As long as it is in there, it is an issue. Lets see how they work through it. No one has shown evidence of that [fracing contaminates ground water]. That is just a statement that people make that it messes up the water. There is no record of that happening.

FM: And you are not a neophyte on the water issue. You are also in the water business so you don’t want to harm that business.

Boone: That's right.

FM: Where do you see the price of energy: if you plan is carried out and if it isn’t?

Boone: If you do nothing, you are going to be faced with $300 per barrel oil in 10 years, you will be importing 75% of your oil and you will be more dependent on OPEC than you are today. Of course 70% of oil is used for transportation. A battery won’t move an 18-wheeler. You have one resource that will replace imports and that is natural gas. I am talking heavy duty, you can use a battery [for automobiles], but we need to understand energy in this country and we don’t. Say we don’t do anything, you use foreign oil. Venezuela is just waiting, they are sending 400,000 barrels to the Chinese, they want to get all their oil to the Chinese and away from us. That is 1.2 million barrels. Mexico’s biggest fields are in decline. If they don’t do something they will be a net importer in five years and that is 1.3 million barrels that come to us. Take those two countries and there is 2.5 million barrels; we’ve got to go to OPEC for that. People do not look down the road and analyze where this country is going to be and we are going to be in bad shape unless we start to use our own resources.

FM: Some critics point out the you have financial interests in wind farms and other elements that would benefit from your plan and the plan is simply promoting your economic interests. How do you respond to that?

Boone: What I usually say to those guys is, ‘What is your plan? Do you have a plan? Nope. They don’t have a plan so your plan is foreign oil.’ Wind is a marginal money maker because of natural gas. Natural gas at $4 doesn’t do much for wind. I haven’t made any money on wind and I don’t have any legislation that is ready to go about wind. I am working on natural gas for trucks. I can’t apologize for being a geologist and being in the business since 1951, but that also gives me a great deal of experience to use to promote what I am trying to do, which is to get on our own resources and we have more natural gas than any other country in the world. You are sitting here with 4,000 trillion [cubic feet of] natural gas, which is equivalent to 700 billion barrels of oil, which is three times what the Saudis have. You are honestly going to look like a fool if you sit here and ignore what you have available to you and you don’t use it.

FM: Why has the United States not managed to create a comprehensive energy plan despite all the shocks of the last few decades? Can we do it now?

Boone: This is the 15-second answer: lack of leadership. If you go back to Nixon and go through Obama, every guy who has been president or has run for president has said ‘elect me and we will be energy independent,’ and they never have done anything about it. Two, you always had cheap gasoline. It has been cheap enough that everybody has either adjusted to it or conditioned themselves for it, but it has been acceptable and that is it.

FM: Will we first have to experience more pain?

Boone: You may not be just talking about price pain. The people that have the oil, most of it, are not friends of ours; 40% of the oil we import is from countries the State Department recommends we don’t visit, which tells us they’re not friends. Why would you put yourself in a spot where you are dependent on oil from the enemy? I had a Saudi tell me, ‘Every time you try and use alternatives, we just lower the price of oil.’ I said ‘I know. I have seen it.’ They lower it to where it becomes acceptable to the consumer and just go on down the road.

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