T. Boone Pickpocket... or American Hero?

If you watch any TV at all, you've probably seen "oilman" T. Boone Pickens in his new commercials discussing his plan for America's energy future. It's quite impressive in my opinion to see a guy step up, develop a strategy, and execute a marketing plan to get the public excited about reducing our dependency on foreign oil. But, what are the real details of his plan? Why does he need to spend over $50 million raising public awareness and support? His plan calls for a massive investment in infrastructure for wind power - a bold entrepreneurial move. Can't he just do it without all the buzz, sit back and watch the money roll in?

A review of the plan on his own website is concise and well-marketed. We should reduce our foreign oil dependency by switching to natural gas powered vehicles. Natural gas, he argues, is cheaper, proven, and sourced domestically. The second key component is expanding wind power to generate electricity (partially replacing natural gas generated electricity). Again, wind power would be a domestic energy source and he argues that the U.S. is the "Saudi Arabia of wind power." The plan calls for the development of massive and expansive wind farms across a corridor stretching from Texas to North Dakota. He created enough buzz that he was invited to testify before Congress.

The U.S. Senate Committee on Energy and Natural Resources held a hearing on June 17, featuring Mr. Pickens. In his opening statement, he gives us more information which begins to explain his desire to generate massive support in the court of public opinion. Pickens outlines his concerns and calls on Congress to help address a few issues:

1. Siting Authority - The first point of concern is the ability for Pickens to secure the land rights required to build his wind farms and the necessary transmission of the energy. He calls for the power of eminent domain to be employed to secure this land.

2. Federal Lands - The Pickens Plan would require land which spans across Federal land. He notes there are provisions to secure these rights, but they are cumbersome. He asks that process be streamlined.

3. Federal Permitting - The construction of new transmission lines requires permits from the U.S. Government. Again, he asks that the existing process be streamlined and expedited.

4. Equitable Cost Allocation and Recovery - Pickens is willing to put up the capital for building the infrastructure. But, once it is built, he wants to pass the costs back to those who use the energy. This is more complicated since the energy will be used by residents of many states including states where no investment is made. He calls on the Federal Energy Regulation Commission to modify regulations to meet his needs.

5. Equitable Allocation of Capacity - Existing regulation allows for energy producers to share transmission lines. Pickens argues that if he invests in the development of new transmission lines, that he should receive preferential treatment and priority in the use of those lines.

6. Financial Incentives: Pickens calls for a loan guarantee program and tax incentives to reduce risk in his investments and encourage others to do the same.

I'd say that most of his arguments are fair, or at least they make sense from his perspective. Energy markets, like just about everything else, are highly regulated creating barriers for entry. But, I do have one big problem with this plan which I cannot reconcile immediately. This is his call for the power of eminent domain.

The Fifth Amendment to the Constitution governs the use of eminent domain in the United States. The text states, "... nor shall private property be taken for public use, without just compensation." The key phrase here is "public use" whereas Mr. Pickens is seeking private investment. Eminent domain powers have been used by allowing states to broadly interpret public use. The Supreme Court decision in Kelo v. The City of New London upheld the actions of the city who seized land from Kelo and others for the purpose of economic development, namely a research facility for pharmaceutical giant Pfizer. This was (and still is) a controversial decision as it allows for very broad interpretation of public use. As such, Pickens is more than happy for the government to step in and ensure that he can have any land he wants for his project. (The Court's opinion can be read here.)

Pickens is not new to leveraging government to get what he wants. Should we really blame him if it will help him get what he wants? Not sure I can blame him for that. But, I don't believe that he is being straightforward in his desire to have the government take land from private citizens by force for his own benefit. I suppose that story wouldn't go over as well in his commercials.

Pickens and his wife have given a lot of money this election cycle including the maximum $2300 to Sen. Pete Domenici (R-NM) who is the Ranking Member of the Senate Committee on Energy and Natural Resources.