The 77-year-old iconic Dallas bidnessman on oil and water, making tons of money late in life, and sticking up for the little guy.
Evan Smith: You bought 65,000 surface acres of water rights in Roberts County in 2003, adding to the 25,000 acres you already own, and you recently tried to make a deal with ranchers there to buy 94,000 for what would have been the region’s highest average price ever: $455 per acre. Frankly, a lot of people in the Panhandle are wondering what you’re up to. After all, you’re Boone Pickens—you must be working an angle.
Boone Pickens: I cut two ways up there. There’s no question that they see me as philanthropic. I’ve given a lot to the area, and I haven’t made any money off water rights—zero. On that attempted purchase, I would have been up to a $100 million investment, and I haven’t made a dime. At the same time, I think there’s a little resentment because I moved from Amarillo to Dallas. I mean, I’ve heard the remarks: See how it is to have the big fish make it to the big pond. The point is, I don’t have any resentment. I lived there over forty years. I went to high school there. But there were too many distractions.
ES: Too much focus on you and your business.
BP: I employed a lot of people there, paid taxes, was generous to charities. And now the first thing they say is “He sold gas to the distribution company.”
I think back on the deal we made to merge with Pioneer [a large independent oil-and-gas company], in 1985. [Corporate raider] Irwin Jacobs was going to take it over—he was already the largest shareholder—and they had a weekend before he was going to drop it on them. He said he was going to close it down in Amarillo and move it to Minneapolis, into a warehouse where he had a lot of space. And it was gonna cost Amarillo two hundred or three hundred jobs. So they came to me. We talked about it over the weekend and looked at everything as quickly as we could, but it wasn’t completely analyzed. We paid too much. It was a mistake on our part. Worst deal we ever made.
ES: But, as you say, you did it for the benefit of Amarillo.
BP: Not exactly. I don’t ever want to say that. I make deals to make money. In that case, it cost us to have to look at it quickly. We just made a bad call.
And the thing is, we weren’t jumping up and down to make it. The deal was actually called off, and everybody was leaving Amarillo the next morning. But the lawyers and investment bankers were in the same hotel, and they had a fire alarm. They all ended up in the parking lot at two in the morning. As they’re waiting to see if the building is gonna burn down, it becomes clear that the Pioneer people didn’t fully understand our offer. So they rethought it, talked calmly about it, and called me at four in the morning to tell me that the deal was back on. That’s how we got tagged with a preferred dividend: From 1986 to 1990, we distributed $1.2 billion to our shareholders, and that was really equity in the company. It was a horrible mistake. If we’d never made that deal, we’d have never gotten our dress over our head by 1996, because we owed $1.2 billion.
ES: Hard to put all the genie back in the bottle.
BP: You can’t do it. It’s like unscramblin’ eggs.
ES: Let me try again on the question I asked you earlier. If people misunderstand your motivation, explain it in your words.
BP: To maximize the value of the land owned by ranchers in Roberts County.
ES: Can you really be that selfless?
BP: Well, I’m a rancher up there too, and I also have water rights. I can’t say I’m doing this just for these other people, but it’s almost like the mission’s been assigned to me.
ES: What do you mean?
BP: There’s not anybody else with the resources I have or the knowledge I have. It’s not that they aren’t as smart as I am; it’s just that I happen to have the things necessary to make the deal. I’m in a position to change the true value of the land. Those people have been in that area for a long time. They’ve moved around that country, but they haven’t made any money. They’ve stayed alive. It would be a real shame for them to be sitting there with an asset worth millions of dollars and not take advantage of it.
I was telling those guys up there, “You know, if I change the value of the land from $200 an acre to $700 an acre, you’re talking about $1 billion in a county of about nine hundred people.” I said, “You guys have to give me some recognition.” One of ’em said, “What do you have in mind?” I said, “Maybe a statue, and my name on the county square.” And he said, “Well, it’s not going to be very big.” And another guy said, “Don’t count on bronze.”
ES: It’s fair to say you’re conscious of the good you’re doing.
BP: I thought about it going in. You see, I’ve owned land in Roberts County since 1971. I bought 2,940 acres, all debt, and I’ve added to it since then. My ranch today has 30,000 acres. So I’ve really tried to help the area. Wherever I go, I help. There isn’t any place anybody’s ever found me where I did anything bad to the community.
ES: And yet that’s not what you hear.
BP: I’ve had friends tell people, “What’s he ever done to damage anybody, cost anybody any money? Who’s he ever stiffed?” They can’t come up with anything. The record’s clean. Now, I’m sure that I haven’t done everything that everyone would like me to do. But I’ve never hurt anybody.
I was in a meeting the other day with an oil company that did some work on ranch land that I own and other ranchers own. They have a right to come in, but I told ’em, “You go around in your big trucks and damage the place. I have the resources to analyze the damage, and it’s huge. The contract clearly says that you’ll restore the land to the same level it was before you came in to work on it. You guys like to roll in and roll out and give somebody $5 an acre and say everything’ll come back to what it was, and that isn’t true. I may have your tracks on my land for twenty-five years. That is not restored to the original condition.” So we got to talking with these guys, and they said, “Well, you’ve been where we are,” and I said, “Of course I have. But I’m not operating from that side of the table right now. I’m operating from the landowner’s side of the table, and you guys are not going to be allowed to do this.” And they said, “What are you thinking?” I said, “Well, the company wants to pay $150,000. I think the damages are worth $4 million.” And the guys kind of smiled. “Uh, this is kind of like shareholder’s rights, isn’t it?” I said, “It is.” I get in these things and they start to take on the appearance of a crusade. It isn’t so much the money as it is trying to do something better for the people involved than they’ve had done for them in the past.
ES: You’re right. It does sound like a crusade.
BP: I keep telling ’em we’re gonna have a better county, we’re gonna have better neighbors, we’re gonna work together, we’re gonna help each other. That’s what we need to do. I tell them, “Anytime you have an offer made for an oil or gas lease, communicate it to me. I can tell you the highest price I know of that’s been offered in the county. I know because I paid it.” And so what I do is try to provide some competition for these folks who come in here trying to buy leases for $25 an acre.
ES: Is the problem that ranchers don’t know better?
BP: And they need the money.
ES: What do you do in a case like that?
BP: Stir it up. Stir it up for our side. Let everyone know what’s happening. The scariest thing for any oilman who goes out to buy a lease is finding out that the landowners are in communication and informed about what’s going on. That’s why we put out a Roberts County letter; we get it out at least once a month. We don’t try to influence them one way or another. We just give them the facts.
ES: What about your plans for selling the water?
BP: We have export permits. We can move it anyplace we want to, and we’ve offered it to West Texas. We’ll build a line from Roberts County down—we’ll lay in the right-of-way of the CRMWA [Canadian River Municipal Water Authority] line. See, CRMWA has a line that extends from up here to Lake Meredith to Lamesa, which is 322 miles. It was built in 1968, which people here don’t know or have forgotten about or whatever. So this line we’re going to build is 322 miles long.
ES: Anyone making noise about that?
BP: Well, there are locals who say, “Oh, he’s stealing our water,” or some bullshit like that. There are people who believe that water is like air, that it belongs to everybody. But that’s not so. The groundwater belongs to the surface. Anyway, if you are going to make any money for these landowners, then you have to sell some water.
ES: How do you get the line built?
BP: We’ve come up with a plan. I got up in front of a Senate natural-resources committee meeting in Amarillo recently. The room was crowded. We said, “This is a proposed line—engineered, ready to go.” Could I get somebody to talk to me about it? Could I get somebody to explore the idea with me? I never got one damn call, and the locals just sit there complaining like hell. Why didn’t they just call and say, “Hey, let’s talk about how this can be accomplished”? Nothing. Zero.
ES: And the reason is . . .?
BP: Oh, I don’t know. I think more than anything it’s that they don’t really know for sure what you’re talking about, and they don’t want to dig into it. I think they’re just lethargic. Nothing happens up there.
ES: Does the state’s water policy figure in this at all? Do you think the current laws on the books are fair?
BP: We are in good shape in terms of what the state law says. Unfortunately, there are 89 groundwater districts scattered around the state, and they do not all administer water the same. Some of them have adopted rules that make it impossible to export water as opposed to using it locally. In some other cases, even if they permit the exporting of water, they permit it only for use by farmers or big landowners. So there hasn’t been equal treatment. We’re working the Legislature right now to firm up the statutory underpinnings for all owners of groundwater to be treated equally. Let me tell you, where you will always see us is on the side of everybody getting treated the same. I’m not asking for anything more than what’s already been given to the city of Amarillo or to CRMWA. I want the same thing, and I want to see the rest of the landowners get the same thing.
ES: I’m sitting here wondering how we got to this point—where water is such a commodity. Or maybe I should be asking why it took so long for somebody like you to figure out how to put a price on it.
BP: You know, Texas hasn’t had the problem that California and Colorado and places out west have had; they’ve been dealing with this for the last twenty years. It hasn’t been an issue here until now. Certainly nobody thought about water having any value.
ES: Can we switch over from your current obsession to your previous one? What do you think the price of oil is going to be this time next year?
BP: On April 29, 2003, I said it would be at $30 by the end of the year. It closed at $25.24 that day, and about six weeks later it crossed $30. Then in May of last year, I said it would be $50 before $30—it would get up to $50 before it went back down to $30. That was a piece of cake. Then right at the end of last year, I said $60 before $40. When it dropped down to $40.50, I got a call from the New York Times. And I said, “I may be like the guy who fell off the ten-story building and then, when he went by the fifth floor, said, ‘Well, I’m not dead yet.’” It went down to $40.40, but it came back up. And I got a call this morning at six-thirty from a trader who said that on access trading they finally hit $60.
BP: So you want to know about this time next year? If I get pinned down, I’m gonna say $70 before $50. [Editor’s note: The price of oil fell below $50 on April 29.]
ES: Why do you think oil is going up like this? Is it inevitable, the times we live in, or will it come back down to a normal place? Or maybe this is the new normal.
BP: This is the new normal. You’ll never see oil below $45 unless it’s a very brief spike down.
ES: What about drilling in Alaska? Is that going to solve the problem by reducing our reliance on foreign oil?
BP: I don’t care what you do in Alaska. From Alaska south you have a pipeline that holds 2 million barrels a day. Think about that for a minute. We import more than 11 million barrels a day. You think Alaska’s gonna fix that? All you have is a capacity of 2 million barrels in that line. So when people say, “Why don’t we just open up Alaska and fix all our problems?” I’m like, “What are you talking about?”
ES: Are you saying you’re against drilling in Alaska?
BP: I think the people of Alaska should be allowed to do what they want. As far as destroying the Arctic coastal plains, drilling isn’t about to do that. I’m an environmentalist. I’ve been over ANWR [the Arctic National Wildlife Refuge] in a helicopter; I was there for the caribou migration. You’re not gonna mess up anything up there. The damage will be minimal. But my point is, it isn’t gonna fix anything.
ES: Is there anything we can do, leaving Alaska aside?
BP: Well, what you could do is go ahead and start to take natural gas to a higher use. It can compete with gasoline and diesel. It’s domestic. It’s clean. In California, natural gas will put you in the HOV lane with single occupancy! If we had that here, I’d get a natural-gas-powered car. You could also start to develop the oil shale on the western slope of Colorado. No question, there is a tremendous amount of oil in the shale out there.
ES: Let me ask a few questions about you. The most interesting thing I’ve read about you is that you’ve made more money since you turned seventy than you made in all the years before. And those were some years before.
BP: And that’s making it. It isn’t like I liquidated some big stock position. What my tax man said when I paid my taxes in April 2004 was that I’ve paid 75 percent of all the taxes I’ve ever paid since I turned seventy. And I wasn’t a dog taxpayer before that.
ES: Pretty amazing.
BP: It is amazing. Somebody said, “Do you feel like it’s bragging?” and I said, “At my age? I don’t think so.”
ES: Is it true that you made the Forbes 400 this year for the first time?
BP: For the first time. Not bad.
ES: An overnight success in your mid-seventies.
BP: All the time people tell me, “I’m as smart as you. Why’d you get to make this money?” One thing was, I stayed current.
ES: What do you mean?
BP: Well, they played a lot more golf than I did, and gin rummy in the afternoon. I mean that they slowed down and I didn’t. My God, I’ve been in the business since 1951.
ES: If you can’t do it by now…Right?
BP: Right. There’s a place in there where you peak, but when does that peak occur? Is it when you’re fifty, sixty, seventy, eighty? I don’t know. But I don’t think I’ve reached my peak yet.