Financial Post | 16 October 2015
Legendary Texas oil tycoon T. Boone Pickens is suing Ontario for $700 million over wind power
T. Boone Pickens made billions drilling for oil and gas and squaring off in bare-knuckled corporate takeover bouts.
Now the 87-year-old tycoon is embroiled in what may be the last big battle of his career. Only this one is aimed thousands of miles north of his Texas home. And it is over wind power.
It is an unusual fight for the former wildcatter. Pickens is using his rights under the North American Free Trade Agreement to bring claims against the Canadian province of Ontario. And a Florida company that has provoked his ire is one that is usually on the same side as Pickens when it comes to regulation and politics — in particular, in helping Jeb Bush get elected president.
Like other investors who have challenged governments, Pickens has taken his dispute to an international court. He is seeking $700 million in damages for future losses related to bids that his wind power company, Mesa Power, lost in wind power auctions in Ontario.
Pickens and Mesa Power contend that the Florida company, NextEra, was granted exclusive access through private meetings with important government officials that ultimately tilted the bidding in its favor.
The province of Ontario granted NextEra $3.8 billion in energy contracts. Mesa Power contends that $18,600 in donations that NextEra made to the ruling Liberal Party in Ontario before elections in 2011 had undue influence on the auction.
NextEra did not respond to a request for comment.
Mesa Power’s notice of arbitration also includes allegations of favoritism toward two Korean companies, Samsung C&T and Korea Electric Power Corp., that entered a separate energy deal with the government.
Pickens says his long-running dispute is a matter of principle.
“It makes no difference whether the amount is $7 billion or $700 million,” he said. “It’s about fighting for fair and equitable treatment.”
But Mesa Power’s loss in Ontario was also personal — the projects would have been the cornerstone of a wind energy business that he extolled back home in the United States and that ultimately failed.
In other circumstances, NextEra, a sprawling energy company based in Juno Beach, Florida, has been aligned with Pickens. Both NextEra and Pickens have close ties to the Bush family and have been generous donors to Bush’s current campaign for president. And both Pickens and NextEra have at times advocated the same regulatory policy changes.
Pickens first pushed into wind power in 2007, creating Mesa Power to develop and finance wind and other renewable energy projects.
When Ontario enacted a Green Energy Act in 2009, both Mesa Power and NextEra saw an opportunity. As part of its policy change, the government created a program to provide incentives for companies to invest in renewable energy projects. Companies that were awarded contracts would be paid premium guaranteed prices set by the government. In one auction, more than 500 applications were submitted, exceeding the government’s expectations, according to statements filed with the court.
“It was a very, very attractive price,” said Cole Robertson, vice president of finance for Mesa Power, noting that the government’s set price in 2011 was double that in Texas at time.
Mesa Power submitted several project proposals through the program. But when the first rankings came out in late 2010, its executives disputed the assessments, arguing that Mesa Power’s projects should have been higher.
Ontario government officials have countered that Mesa Power did not submit its applications properly.
“In my view, many of Mesa Power’s failures were caused by its sloppiness and lack of care in preparing its application, and the consequent failure to satisfy clearly defined criteria,” said Richard Duffy, a manager of procurement at the Ontario Power Authority, the agency charged with evaluating energy project proposals, in a witness statement.
Mesa Power later disputed an auction in the spring of 2011, complaining of a lack of transparency around the process of awarding contracts and insufficient time for public consultation. Mesa Power executives wrote to Shawn Cronkwright, an official with the power authority, seeking clarification and meetings with the agency and the Ministry of Energy. Cronkwright told Mesa Power executives that these meetings would not be possible because the agency had yet to award contracts, according to court documents.
The same month that the government rejected his projects in 2011, Pickens took his case to an international tribunal, a forum where the judges are appointed by both parties in the case and a judgment can’t be appealed.
Ontario says the claims are without merit. The international tribunal is expected to rule as soon as this month.
Pickens’ lawyers argue that NextEra was able to wield influence because of its chief lobbyist, Bob Lopinski at Counsel Public Affairs. A former adviser to the Ontario premier, Dalton McGuinty, Lopinski was hired in 2010. He contacted former colleagues in the premier’s office to set up meetings for senior NextEra executives including Mitch Davidson, the chief executive. He also arranged for meetings at the Ministry of Energy and the power authority.
“Throughout this arbitration process the government of Canada has been working closely with the government of Ontario to vigorously defend this case,” said John Babcock, a spokesman for the Canadian government.
For NextEra, whose operations include electricity plants in Hawaii and wind farms in North Dakota — such political contributions are not unusual. In the United States, the company has spent millions of dollars in political donations to both the Republican and Democratic parties.
“You can’t win an election in Florida without the support of NextEra,” said William Pentland, managing partner at Brookside Strategies, an energy consulting firm. NextEra’s subsidiary, Florida Power and Light, came under criticism in 2009 when former Gov. Jeb Bush argued for rate increases for the company in an opinion piece in The Tallahassee Democrat.
Invoking rolling blackouts in Brazil at the time as a warning sign, he wrote, “It might surprise a lot of Floridians to know that our state may face a similar fate.” He added, “With power, the cash registers open and close.”
Pickens, too, has taken his share of public criticism for his business ventures. In the 1980s he waged relentless campaigns against some of the biggest oil companies like Unocal and Gulf Oil, being called a “corporate raider” and once a “soul-sucking ghoul.”
“It’s just part of the business. I never cried,” Pickens said in the interview.
With that same attitude, he abandoned his wind energy projects when the price of natural gas fell, changing his prospects for making a profit with wind energy.
“I’ve drilled dry holes before and I didn’t quit drilling wells,” Pickens said. “Wind? Sure, if the economics get right, I’ll get back in.”
For now, though, he’s back to oil and natural gas. Speaking to an audience of hedge fund managers in Las Vegas earlier this year, Pickens declared that he was about to “give up on Washington,” because of its failure to approve the construction of the Keystone XL oil pipeline, a contentious cross-border project with Canada that would extract oil from the Canadian oil sands.
He’s setting his sights on Bush to make it possible. But he is keeping his options open, most recently donating $25,000 to Carly Fiorina. Pickens is also considering a donation to another Republican candidate, Ben Carson, according to a representative.
“You’ve already passed the House and the Senate,” Pickens said back in May. “So a new president would fix it.”