Billionaire oilman T. Boone Pickens says energy is a crisis in the U.S. and should be the No. 1 campaign issue for the presidential candidates. Pickens spoke recently at Oil and Gas Investor’s Energy Capital Forum in Houston.

“Energy is not a debate; it’s a crisis for this country,” Pickens said. “We cannot continue down the path we’re on. It’s that desperate. The sad part is I’m not sure how much the candidates understand the problem.”

Watch video of T. Boone Pickens' press conference

The 80-year-old former owner of Mesa Petroleum, which he sold in the mid-1990s, said the U.S. currently pays out $700 billion annually for imported oil, and that will increase to $10 trillion within 10 years if the pattern continues.

“It’s the biggest transfer of wealth in the history of mankind. If you don’t think that’s not going to bring you to your knees, you’re kidding yourself. It’s going to bring us down if we don’t watch out.”

The energy crisis is a result of decades of lack of leadership that has led to a break down. Now, “somebody has to show up to fix it because we can’t continue on the same path we’re on—it won’t work.”

Pickens chided Democratic candidate Sen. Barack Obama for “throwing around the windfall-profits tax like a piece of balsa wood. I don’t think the senator knows anything about energy. He sounds good for about two minutes.”

Although he has voiced support for Republican candidate Sen. John McCain, Pickens showed frustration with his seemingly lack of knowledge on energy. “I don’t know how much he knows either. He wants to lower the gas tax during the summer. What the hell is he talking about? Will that fix anything?”

Pickens is not impressed by either candidate on energy issues, saying they are not current with the situation facing the country. He plans to elevate the energy issue into this year’s presidential election campaign through a series of television ads and guest appearances to talk about how energy is affecting the country.

“I’m going to force this into this campaign. People will have to believe that I know what I’m talking about and that I have a message worth hearing. We’ll see if I have the credibility to force it into the debate.”

The belief that the Saudi Arabians can twist the spigot on oil production by adding an additional 2 million barrels a day to lower global prices is a false assumption, he said. The U.S. imports 72% of its oil demand, half of which comes from the Middle East.

“I feel sorry for the president going over to Saudi Arabia to ask them to sell us more oil. I don’t think the Saudis have two quarts a day of added capacity. They’re maxed out. They’re selling us all they’ve got.”

He said the U.S. should open up its own resources in the Arctic National Wildlife Refuge (ANWR), the Outer Continental Shelf, and federal lands in the West before asking the Saudis for additional supply. Instead, “we go around with our hat in our hand.”

And while production from ANWR would help meet U.S. demand, takeaway capacity will limit the impact. The Alaskan pipeline already carries 700,000 barrels of oil a day from the region with a maximum capacity of 2 million barrels, and “there won’t be another pipeline from the Arctic coastal plain to the Lower 48. The best you can do out of Alaska is 10% of what we’re using today.”

The price of oil is more likely to reach $150 per barrel before it reaches $120, he said, which he believes is a necessary event to force a change in thinking in the American mindset. “The lower the price (of gas) goes, the more you send a signal to the consumer to use all you want. But when the price goes up, they become more sensitive. It would be better for the country if the price was higher.”

Americans must experience an attitude change and be willing to give all forms of energy a chance. He said there is “no question” that America must embrace alternate energy sources to alleviate the transfer of wealth out of the U.S. to oil-exporting nations.

“People are going to start to come to grips with change. This country is not going to go to its knees and get screwed in a bad deal,” referring to oil imports.

Ethanol is “an ugly baby but it’s ours and it will move cars,” he said, emphasizing that he prefers the less-than-perfect fuel over imported oil. Biofuels, however, will never account for more than 10% of the U.S.’ transportation fuel needs, he predicts.

Pickens foresees natural gas as a short-term solution as a transportation fuel to replace gasoline and diesel in American cars and trucks. The abundance of recent shale and other natural gas discoveries in the U.S. is divine intervention, he says, a domestic resource that can reduce U.S. dependence on imported energy.

“It’s unbelievable for this country to get this (domestic gas-supply) opportunity. It’s almost like divine intervention.”

Pickens himself owns such a natural-gas powered car that he fuels through an attachment in his garage from his home’s gas line.

The Port of Los Angeles is converting thousands of big-rig trucks to natural gas and municipalities nationwide are doing the same with their city vehicles, he cited as an example. Converting one diesel trash truck, he said, equals removing 325 cars from the roads. At today’s prices, the price to fill up with natural gas correlates to about $1.25 per gallon.

The ability to use natural gas as a transportation fuel, though, can only be achieved if the need for it to power utilities is diminished. Wind power, an energy source Pickens is investing heavily in, can provide that buffer by adding the up to 200,000 megawatts of additional forecasted electricity demand to the grid, or approximately 20% more than current U.S. demand.

“If you put 200,000 megawatts on wind, then the natural gas that you pull out of (electricity generation) would be the 38% of the transportation fuel that you need.”

An unlimited amount of wind power is in a corridor extending from Sweetwater, Texas, up through the Great Plains into Canada. To harness that power is “just an incredible opportunity” for the country, he said.

“It’s going to happen because it has to happen. It’s a renewable source we can live with. People don’t like the towers but that’s too bad because we’ve got to have it.”

Unlike in some areas, wind towers “go over pretty well in the central part of the U.S.,” he said, where residents are eager for jobs.

Pickens has set up operations in the Texas Panhandle in Pampa, where he is building a 4,000-megawatt wind farm, equal to the power of two and a half nuclear plants. Ultimately the farm will house 2,500 turbines. He placed an order for the first turbines two weeks ago for $2 billion.

The first turbines that stand 40-stories high will be installed in the summer of 2010 with the first 1,000 megawatts deliverable by the end of 2011. The entire project will be completed in 2016 at a cost of some $10 billion.

Pampa is going to be the wind capital of the U.S. because of this project, he said, benefiting from 2,000-plus wind-related jobs to the area. Small communities throughout middle America will be reborn with the rise of the wind industry, he portends.

“It will be an unbelievable revitalization of rural America.”

In addition to jobs, rural landowners through the Great Plains will benefit from royalties from the turbine production much the same as from an oil well. One section of land can hold five turbines generating $20,000 in royalties per turbine per year. “A person with 640 acres would get $100,000 a year from royalties,” he said.

For people in the central U.S., “it’s huge to them.”

There is no question the U.S. must embrace alternative forms of energy, he said, and up to this point Americans have not been forced to consider everything. “We are going to have changes,” he said, “and they’ll come very fast.”

--Steve Toon