10/12 Industry Report [Q2 2019] by Baton Rouge Business Report

Q2 2019

PLUS: The pipe boom Offshore: Not everyone can play Focus on maintenance & turnarounds

THE Ship traffic is on the rise in every navigable Louisiana waterway. And from workforce to infrastructure, ports are playing catch-up to meet demand.

THE

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10/12 INDUSTRY REPORT • SECOND QUARTER 2019 3

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CONTENTS

Publisher: Rolfe McCollister, Jr. EDITORIAL Editorial Director: Penny Font Editor: Sam Barnes Contributing Writers: Erin Z. Bass, David Jacobs, Meredith Whitten Contributing Photographers: Lee Celano, Terri Fensel, Cheryl Gerber, Don Kadair ADVERTISING Account Executives: Lori Christiansen, Judith LaDousa, Angie LaPorte Advertising Coordinator: Brittany Nieto CORPORATE MEDIA Editor: Lisa Tramontana Content Strategist: Allyson Guay

THE

CUSTOM PUBLISHING Sales Director: Erin Palmintier-Pou

MARITIME SCRAMBLE

PRODUCTION/DESIGN Production Manager: Melanie Samaha Art Director: Hoa Vu Graphic Designers: Gracie Fletcher, Melinda Gonzalez, Emily Witt

Ship traffic is on the rise in every navigable Louisiana waterway. And from workforce to infrastructure, ports are playing catch-up to meet demand.

BARNES MEDIA LLC

MARKETING Chief Marketing Officer: Elizabeth McCollister Hebert Marketing & Events Coordinator: Katelyn Oglesby Events: Abby Hamilton Community Liaison: Jeanne McCollister McNeil

AUDIENCE DEVELOPMENT Audience Development Director: Benjamin Gallagher Audience Development Coordinator: Ivana Oubre

50 Leaving nothing

CONTENTS

7 IN THIS ISSUE

to chance Tiring of unplanned downtime, industry moves to a predictive maintenance model.

LAUNCH

8 ICYMI

INSIGHT

Industry briefs

13 Executive profile

Meet Elizabeth Ellison-Frost, who heads up community relations for Chalmette Refining - PBF Energy.

14 Honoring excellence

Driving solutions

A PUBLICATION OF LOUISIANA BUSINESS INC. Chairman: Rolfe H. McCollister, Jr. President and CEO: Julio A. Melara Executive Assistant: Millie Coon

for Greater Baton Rouge industry

52 Guest columnists weigh in on the

dangers of trade protectionism, the industrial value chain and engaging employees across generations.

Safety Advocacy

CLOSING NOTES

56 Company news 58 The boom at a glance

NEWS

26 Supply: Meet demand

Pipe manufacturers and fabricators ramp up for a growing market.

Our maps of the projects driving the industrial boom

62 My toughest challenge

James ‘Pepper’ Rutland of MMR

FOCUS

The Greater Baton Rouge Industry Alliance: Driving solutions for industry. Page 29

Far-flung turnaround, maintenance contractors tackle culture shock and new environs.

Send your ideas and company news to editor@1012industryreport.com.

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Workforce

Recent industry awards

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© Copyright 2019 by Louisiana Business Incorporated. All rights reserved by LBI. 10/12 Industry Report is published quarterly by Louisiana Business Inc. Reproduction without permission is prohibited. Business address: 9029 Jefferson Hwy., Ste. 300, Baton Rouge, LA 70809. Telephone (225) 928-1700. POSTMASTER: Send address changes to 1012 Industry Report, 9029 Jefferson Hwy., Ste. 300, Baton Rouge, LA 70809. 10/12 Industry Report cannot be responsible for the return of unsolicited material—manuscripts or photographs, with or without the inclusion of a stamped, self-addressed return envelope. Information in this publication is gathered from sources considered to be reliable, but the accuracy and completeness of the information cannot be guaranteed. No information expressed here constitutes a solicitation for the purchase or sale of any securities.

10/12 INDUSTRY REPORT • SECOND QUARTER 2019 5

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IN THIS ISSUE

More traffic means bigger, better boats

SAM BARNES

1012industryreport.com

raffic along Louisiana’s waterways ans, says a grossly inadequate supply of pipelines is on the rise, a trend that will likely in the U.S. is the primary reason for the probcontinue in the wake of $1 billem, along with sharp increases in petrochemical, lion-plus industrial investments, the crude oil and natural gas production. growing exportation of oil and gas That all points to a promising future for pipe (and soon to be LNG), and severe trucker and suppliers. (See “Supply: Meet Demand,” page 26) pipeline shortages. Adding fuel to the fire, so to speak, will be the Consequently, the waterborne shipping indusnext wave of petrochemical and LNG projects, try is feeling the strain of an overloaded supply as owners look for ways to shuttle oil and natural chain, and ports are preparing for the eventuality gas from the shale plays. of heightened demand and larger Panamex-style Baton Rouge pipe suppliers Stupp Corp. ships by funneling increasing amounts of money and Epic Piping are tapping into that demand into their infrastructures. (See “The Maritime growth by opening their pocketbooks and Scramble,” page 18). funding facility improvements and expansions. A The Port of New Orleans is eyeing a second stabilizing market has given them the confidence container terminal downriver, free from the to make the investment, as they prepare for the confines of its existing facilities, impending surge. and recently paid $23.4 million In the deepwater for the construction and deHIGH STAKES Gulf of Mexico, STILL livery of new container gantry Meanwhile, in the deepwater technology is Gulf of Mexico, technology is cranes at its Napoleon Avenue Container Terminal. Greenfield the breakeven point lowering the lowering sites are also getting attenfor the industry’s big “portfolio breakeven tion, as the Plaquemines Port players,” a fact reflected in recent Harbor & Terminal District is increases in rig counts in the point for the expanding its footprint with the latest lease sale in March. The industry’s big most recent one generated some development of a liquid bulk export facility, to be operational ‘portfolio players.’ $244 million in high bids and by 2020. represents a gradual upward It’s true that the maritime industry is often trend since 2017. overlooked by most Louisiana residents, despite In other big news, BP announced a $1.3 the fact that more than 30% of all waterborne billion expansion earlier this year following the commerce in the U.S. passes through the lower discovery of an additional 400 million barrels Mississippi River. Bringing the point home, a of oil in the Atlantis field. The company expects recent study by the Offshore Marine Service Asthe platform to be operational by 2020, adding sociation and the Louisiana Association of Waanother 38,000 barrels to the company’s daily terway Operators and Shipyards found that the production capacity. state’s water transportation and support services Despite offshore’s stabilizing trajectory, the sector contributes to some 83,300 jobs in the number of players continues to thin, as it will state, with total payroll income of $5.5 billion likely remain an expensive proposition. It seems and annual economic output of $20.9 billion. current market dynamics aren’t enticing enough to pull most producers away from the shale PIPING HOT plays. The cards are also stacked heavily in favor Part of the strain on shippers arises from a of the mega producers that can find innovative lack of oil and gas pipelines, prompting some ways to get more out of their existing Gulf owners to barge their crude oil and petroleum structures. products downriver. Eric Smith, associate direcThe story begins on page 8; check out our full tor of the Tulane Energy Institute in New Orleanalysis at 1012industryreport.com.

10/12 INDUSTRY REPORT • SECOND QUARTER 2019 7

LAUNCH ICYMI

ALL SIGNS POINT to greater stability in the deepwater Gulf of Mexico. In the last four years, the rig count has increased by some 30 rigs, and the most recent lease sale on March 21 generated $244 million in high bids, representing a gradual upward trend since 2017. Shell was the biggest overall spender in the latest sale, with Equinor submitting the highest single bid at $24.5 million. “(The) lease sale shows strong bidding by established companies, which indicates that the Gulf of Mexico will continue to be a leading energy source for our nation long into the future,” says Joe Balash, assistant secretary for land and minerals management, U.S. Department of the Interior, in a press release. There are other positive signs in the Gulf: BP announced a $1.3 billion expansion in January following the discovery of an additional 400 million barrels of oil in the Atlantis field. The investment will fund a subsea production system running from eight new wells to its current platform some 150 miles south of New Orleans. BP expects the

DON KADAIR

Not everyone can play offshore

Louisiana Oil & Gas Association President Gifford Briggs

platform to be operational by 2020, adding another 38,000 barrels to the company’s daily production capacity. But not all the news is good. The number of players in the annual lease sales continues to thin, with the notable recent absence of ExxonMobil. And given the high barrier to entry in the offshore market, most mid-sized players are excluded from the game. “The (BP announcement) exemplifies the long-term viability of the

Gulf, but it doesn’t change the fact that offshore oil is a high-stakes poker game,” says David Dismukes, executive director of LSU’s Center for Energy Studies. “And not a lot of people play at the high-stakes table.” Offshore likely will remain an expensive proposition, as current market dynamics aren’t enticing enough to pull producers away from the shale plays. As such, the cards are stacked heavily in favor of the mega-producers who can find

DRIFTWOOD: A TIMELINE

MAY 2016

AUG. 2016

FEBRUARY 2016: Driftwood LNG, a subsidiary of Tellurian LNG, is formed by former Cheniere Energy CEO Charif Souki and former BG Group COO Martin Houston.

8 10/12 INDUSTRY REPORT • SECOND QUARTER 2019

—Sam Barnes

OCTOBER 2016: FERC indicates it will

IT’S BEEN MORE three years since former CEO of Cheniere Energy Charif Souki and former COO and executive director of BG Group Martin Houston joined forces in forming a new midscale natural gas liquefaction and export company called Driftwood LNG. Their vision: an LNG production and export terminal on 800 acres along the west bank of the Calcasieu River, south of Lake Charles. At the time, the partners noted that the gas industry is “not about the short-term; we are thinking about the energy needs of the world from 2020 to 2040.” Here’s how far the project has come since then. FEB. 2016

innovative ways to get more out of their existing Gulf structures. BP uses its own proprietary algorithm that allows seismic imaging data to be processed in a matter of weeks instead of a year. “That technology isn’t widely available to a lot of players in that industry,” Dismukes says. “They can’t take advantage of it. They don’t have the balance sheets. It takes a BP or Shell or Chevron to do that. Your average cost is the cost divided by output, and the more you can increase that denominator the more you can drive down that number.” Gifford Briggs, president of the Louisiana Oil & Gas Association, says shifting public opinion and a variety of governmental hurdles following the Deepwater Horizon disaster have further hindered offshore development and prompted companies to shift their strategies to the Permian Basin and other shale plays. This has, in turn, significantly impacted those companies that service the industry. Read the full story at 1012industryreport.com.

prepare an environmental impact statement for the project. Meanwhile, Driftwood LNG asks the U.S. Department of Energy for authorization to export LNG to free trade agreement countries for a period of 30 years and to countries with which the U.S. does not have a free-trade agreement for 20 years.

NOV. 2016

FEB. 2017

MAY 2017

MAY 2016: Driftwood asks the U.S. Federal Energy Regulatory Commission to initiate the pre-filing environmental review process for the LNG export facility and associated pipeline. The following month, the request is approved and draft resource reports are filed in July. 1012industryreport.com

VIRTUAL TRAINING

LEGAL BRIEFS TEST CASE: LOUISIANA SEVERANCE TAXES

EXXONMOBIL, in partnership with Louisiana Economic Development, is launching an initiative to bolster the Baton Rouge area tech sector by investing in virtual reality training for the company’s recently announced polyolefins plant expansion project. The virtual reality initiative, along with ExxonMobil’s proposed small business resource center in north Baton Rouge, are two community investments tied to the company’s major plant expansion project, worth more than $500 million, announced in March. ExxonMobil has partnered with LED FastStart and local IT vendors—including Baton Rouge-based Pixel Dash and King Crow Studios and Thibodaux-based 3D Media—to create virtual realitybased training modules to support the new expansion project. The company is also working with Baton Rouge Community College to create a virtual reality training lab, where students will be trained in process technology and industry-related scenarios. “Our virtual reality training partnership with LED will strengthen collaboration between the petrochemical industry and the local IT sector,” ExxonMobil plant manager Steve Hamilton said at a recent event celebrating the expansion project as well as the company’s 110th anniversary in Baton Rouge. The virtual reality training will allow ExxonMobil and other companies to simulate emergency situations and other scenarios to train employees, such as operators, without putting them at risk, said LED Deputy Secretary Brad Lambert. Another major benefit, he adds, is that manufacturers won’t have to shut down any units for training.

regulations—severance taxes must be based on the actual “gross receipts” received by the producer in an arm’s length sale at the lease in the absence of any “posted field price.”

A NEW LOUISIANA Third Circuit Court of Appeal decision bars the Louisiana Department of Revenue from imposing severance taxes on crude oil production based on index pricing. The ruling pertained to a petition Avanti Exploration filed with the Board of Tax Appeals. It reaffirmed that severance taxes should be based on the “gross proceeds” obtained in an arm’s length sale at the lease. The Department of Revenue sought additional severance taxes from numerous Louisiana producers that sold crude oil in such arm’s length sales. The contracts provided that the sales price of the crude oil was based on index pricing, less the amount producer incurs transportation costs in getting his product to market. The department argued that this deduction must be disallowed when computing severance taxes, effectively imposing severance taxes on the index pricing. The Board of Tax Appeals held that the department’s theories were invalid, and severance tax properly was based on the actual “gross receipts” received by the producer in an arm’s length sale. The 15-page appellate court ruling affirms that decision, holding that according to the severance tax statutes—and the department’s own

CONTRACTOR BARRED FROM SUING VALERO FOR CHEMICAL BURN INJURIES A CONTRACTOR INJURED when chemicals spilled on him at a Louisiana Valero Energy Corp. oil refinery in May 2018 can’t sue the company or one of its employees, a New Orleans federal judge has ruled. Judge Jane Triche Milazzo found Larry O’Steen, an employee of contractor Zachry Industrial Inc., was a statutory employee of Valero and therefore can’t sue that company for damages, but wasn’t an employee of the oil company under state whistleblower protection law, also barring litigation. O’Steen sued Valero RefiningMeraux, alleging he was rinsing and draining an old vessel or dome that was part of a crude unit in the refinery when an unidentified solution sprayed onto his protective equipment, melting it and directly contacting his skin. He allegedly sustained burns, scarring and infection. He also claimed that a nurse employed by Valero failed to properly treat his injury and advised him not to seek outside treatment.

—Annie Ourso

DECEMBER 2016: Total of France announces it has acquired a 23% stake in Tellurian Investments for $207 million, with plans to develop an integrated gas project to deliver LNG to international markets from the Driftwood LNG terminal.

AUG. 2017

NOV. 2017

FEB. 2018

MARCH 2017: Driftwood receives a permit to export LNG to free trade agreement nations. Tellurian signs an agreement with Credit Suisse Securities to list company shares on the Nasdaq capital market for up to $200 million. 1012industryreport.com

DECEMBER 2017: Tellurian

AUGUST 2017: Bechtel

offers 10 million shares to fund detailed engineering, raising $94.8 million. In January, the company announces it has raised an additional $14.5 million via an over-allotment option.

completes a front-end engineering and design study for the project.

MAY 2018

APRIL 2017: Tellurian files a formal FERC application.

AUG. 2018

NOV. 2018

FEB. 2019

MARCH 2018: Tellurian starts a nonbinding open season to secure shippers for its Permian Global Access pipeline connecting the Permian Basin in Texas to southwest Louisiana for Driftwood LNG. This same month, Bechtel also makes a $50 million equity investment in the company.

APRIL 2019: FERC grants authorization to build the Driftwood LNG project. A final investment decision is expected this year, with project completion in 2026.

MAY. 2019

JANUARY 2019: FERC issues a favorable environmental impact statement for Driftwood.

10/12 INDUSTRY REPORT • SECOND QUARTER 2019 9

LAUNCH: ICYMI

IN SO MANY WORDS

EVENTS

“We applaud the administration for their commitment to building America’s pipelines, enabling safe, efficient delivery of energy and creating the jobs that Louisiana’s families and businesses rely on every day.” DON

Now in NOLA: LAGCOE 2019 REGISTRATION FOR LAGCOE 2019—taking place for the first time in New Orleans—is now open. The Louisiana Gulf Coast Oil Exposition is set for Oct. 9-11 at the Ernest N. Morial Convention Center. The three-day gathering provides a platform for innovators in the oil and gas industry to showcase technology, equipment and services to local businesses. LAGCOE announced the move of the 65-year-old event—the second-largest oil and gas industry trade show in the country—from its hometown of Lafayette to New Orleans late last summer. Along with traditional exhibits, LAGCOE technical sessions feature industry leaders addressing current technologies, issues and trends from around the globe. Register at lagcoe.com. Early-bird rates are available through June 30.

Louisiana Mid-Continent Oil and Gas Association President and General Counsel TYLER GRAY on executive orders President Donald Trump signed in April to speed up the construction of pipelines and other projects for the production and transport of oil and gas

NUMBERS

$7.5 MILLION Amount Arcosa Marine is investing to reopen the idle barge manufacturing operations in Madisonville, off La. 21 along the Tchefuncte River. The facility has been largely idle since Trinity Marine Products closed the site in December 2015. Arcosa plans to begin customer deliveries later this year.

$87 MILLION Cost of the second phase of BASF’s production expansion for methylene diphenyl diisocyanate, or MDI, at its chemical complex in Geismar

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In 2016, container-on-barge services returned to the Port. Today, operator SEACOR moves up to 400 containers per voyage downriver to the Port of New Orleans for export, loaded with a variety of products from nearby industries. Growing local industry acceptance is ensuring confidence in the service. SEACOR has increased the number of runs to New Orleans per week, and volume has more than quadrupled. Equipment to improve efficiencies on the container dock is currently being manufactured and will be purchased with the assistance of a $1.75 million Maritime Administration grant. A $5 million expansion of the container storage yards is being partially funded through Louisiana’s Port Priority Program. Port Executive Director Jay Hardman said, “We are excited about acquiring new equipment and adding infrastructure. Every container that goes down to New Orleans for export is one less 18-wheel truck on our roads and bridges.” For more information, contact Greg Johnson: 225-342-1660.

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10/12 INDUSTRY REPORT • SECOND QUARTER 2019 11

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Baton Rouge, Louisiana 1012industryreport.com

LAUNCH: PEOPLE

Executive Profile: Elizabeth Ellison-Frost

How did you first get into the oil and energy industry?

I guess you could say I was born into the oil and gas industry. My father was a geologist, and my two brothers own a small oil exploration company in Lafayette. Before coming to New Orleans, I was a landman myself in southwest Louisiana. So, basically it runs in my blood. 1012industryreport.com

NAME

Elizabeth Ellison-Frost POSITION

Community Relations, Chalmette Refining - PBF Energy HOMETOWN

Lafayette EDUCATION

LSU, bachelor’s degree in Political Science; UL Lafayette, master’s in English

You were with ExxonMobil Public & Government Affairs for eight years. What did you take away from that job?

ExxonMobil offered me the opportunity to switch fields to become a public and government affairs advisor. I honed my skills by being hands on in the Baton Rouge and Greater New Orleans areas. I also got to travel extensively while part of the ExxonMobil Regional Response Team, training and participating in drills and learning all aspects of responding to emergencies in Canada, South America, the Caribbean and, of course, the U.S. What has been the toughest challenge in your career?

One of the toughest times in my career was right after the sale of the refinery was announced in the summer of 2015. At that time, I was planning the 100th anniversary celebration of the refinery. I also began planning for the sale and transition with the new company. It was a lot of work, while being unsure of what was going to happen with my job. I believe we employees all had the fear of the unknown. We celebrated the 100th anniversary with employees and retirees one week before the sale.

CHERYL GERBER

lthough Elizabeth Ellison-Frost has a master’s degree in English and creative writing from UL Lafayette, she insists oil runs in her blood. She got her start as an independent landman before joining the law department at Exxon Mobil’s Chalmette Refining. That led to a transition to the company’s Public & Government Affairs division, where Ellison-Frost really got the chance to hone her communication skills. When Exxon sold Chalmette Refining to PBF Energy in 2015, she wasn’t sure if she’d still have a job, but the 10-year-old independent petroleum refiner and supplier offered every single employee a position. Ellison-Frost has been happy to stay on in community relations with PBF and to continue the community outreach that the refinery has become known for in its 100-year history. “PBF is a great company to work for, where leaders emphasize integrity and refining fundamentals such as maintaining safe, reliable and environmentally responsible operations that benefit our workforce, community and environment,” says Ellison-Frost, who was named one of New Orleans City Business’s Women of the Year in 2018. “I believe we have an even stronger community outreach program now than in 2015.”

The next week, I planned a huge celebration as we became part of the PBF Energy family. How would you characterize the refining industry in today’s economy?

The refining industry is thriving, yet extremely competitive. Louisiana has 18 refineries and ranks No. 2 behind Texas in crude oil distillation capacity, which was 3,343,206 barrels per day in 2017. And Chalmette Refining’s future looks bright. Chalmette Refining and our four sister refineries are committed to being a positive influence in the communities where we are located. We also recognize that we must earn the

right to operate in each of our host communities, which requires that we maintain safe, secure, reliable and environmentally responsible operations. What are your passions outside of work?

I’m a history geek, so New Orleans is a perfect city to live in. Plus, I am very proud that the refinery maintains the historic De La Ronde Oaks and has helped with the restoration of the remains of the building that was used by the British as a hospital during the Battle of New Orleans. I also love to read and am trying to get back at writing fiction. — Erin Z. Bass

10/12 INDUSTRY REPORT • SECOND QUARTER 2019 13

LAUNCH: RECOGNITION

ABC Pelican Chapter racks up 14 awards

14 10/12 INDUSTRY REPORT • SECOND QUARTER 2019

• Cajun Industries, LLC, HE-201D Replacement Project (Plaquemine) • ISC Constructors, LLC, Honeywell UOP-DSG Electrical Upgrade and Lab Feeder Replacement (Baton Rouge) • MMR Group, Shell-Olefins Flare Gas Recovery Project (Deer Park, Texas) • Triad Electric and Controls, Inc., Dow Gulfstream Poly B Train 3 Project (Plaquemine) COURTESY ASSOCIATED BUILDERS AND CONTRACTORS PELICAN CHAPTER

he Pelican Chapter of Associated Builders and Contractors Inc. brought home 14 awards from the national ABC Convention in Long Beach, California—including the ABC National Young Professional of the Year Award, ten awards for world-class construction projects and one award for craft work in instrument fitting. ABC Pelican member Lance Arvel of GROUP Industries has been named the ABC National 2019 Young Professional of the Year. The LSU Construction Management team, sponsored by ABC Pelican, took home third place overall and third place in estimating at the 2019 ABC Construction Management Competition. The team was comprised of Brandon Brignac, Briggs Campo, David Morris, Courtney Tilly, John Davis and Annalise Rabito. ABC Pelican member companies received 10 awards for outstanding merit

NATIONAL EXCELLENCE IN CONSTRUCTION EAGLE AWARD WINNERS

shop construction projects at the 29th annual Excellence in Construction Awards. Only 90 projects were honored at the national level, each showcasing industry talent and commitment to building safely, on time and on budget.

• Turner Industries Group, Shell Tiger AO4 Heavy Transport (Geismar)

NATIONAL EXCELLENCE IN CONSTRUCTION PYRAMID AWARD WINNERS • EXCEL Group, Westlake VCM Control Building (Geismar) • GROUP Industries, City Hall Plaza (Baton Rouge) • MMR Group: BASF Geismar Electrical Reliability Project (Geismar) • Performance Contractors, Inc., Dow Poly B&D (Bay City, Texas) • Turner Industries: Olin Plaquemine 2018 Turnaround (Plaquemine)

NATIONAL CRAFT CHAMPIONSHIPS Third Place, Instrument Fitting: Brian Gordon, ABC Pelican craft student sponsored by ISC Constructors Inc.

Check out the Greater Baton Rouge Industry Alliance Safety Excellence Awards and Craft Workforce Development Awards recipients on pages 38 and 39.

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SPONSORED BY:

Energy lives here— exploring the industry that shaped our state

il and gas play a profound role in Louisiana’s economy. Throughout the decades, ExxonMobil has devoted a great deal of energy toward building a brighter future, not only expanding its operations to create jobs, but also investing millions of dollars and thousands of volunteer hours each year in education, job training and more. As ExxonMobil celebrates its 110th anniversary in Baton Rouge, let’s take a look back at the impact that it has made in the region over the years.

IT’S REMARKABLE WHAT A LITTLE ENERGY CAN DO • In 1909, after Baton Rouge’s cotton industry was left reeling from a boll weevil devastation, the community was eager for new business. It welcomed the construction of the Standard Oil Company of Louisiana’s (STANOCOLA) refinery on 225 acres of cotton fields just north of the city. Using mule-driven machinery and local labor, the first few units were built in just months and were processing 1,800 barrels of crude per day by November 1909, with 1,000 employees onsite. • By 1929, the Baton Rouge Refinery was the largest of its kind in the world. During World War II, Baton Rouge became the “Cradle of the Synthetic Rubber Industry,” supplying each soldier with the 32 pounds of synthetic rubber gear needed in the war effort. The refinery’s first female chemists, operators, lab techs and mechanical drafters were some of the 1,000 employees who joined the refinery’s evolving workforce. • By the late 1950s, business was booming. Toy manufacturer Wham-O made an arrangement for the Baton Rouge chemical plant to provide the GREX resin as the durable plastics for hula hoop production. At its peak, Wham-O produced 20,000 hoops a day. The Baton Rouge refinery ushered in new technology with the first analog computer in the research labs in the late 1950s and the first in-plant telephone system in 1961. In 1968, engineers integrated cutting-edge IBM computer-controlled gasoline and lube blending operations. • The 1970s and ‘80s saw huge leaps in both technology and safety. In 1972, the Louisiana Legislature created the Louisiana Offshore Oil Port, or LOOP—a floating single-point mooring system tied into a pipeline big enough to drive a small car through. Today, almost 15% of U.S. crude passes through LOOP. ExxonMobil also led the way in controlling emissions by installing the nation’s first wet gas scrubber. 1012industryreport.com

• In 2010, HULA—one of the largest hydrotreaters in the world—began operation, delivering 90,000 barrels per day of diesel with low concentrations of sulfur. The North Baton Rouge Industrial Training Initiative program opened its doors, spearheaded by ExxonMobil in an effort to better connect community members to industry jobs. Since its inception, ExxonMobil has led collaboration among industry, contractor firms and Baton Rouge Community College to assist plant neighbors in acquiring the skills needed to compete for industrial jobs. The program’s fifth cohort began in January 2019 with a record-breaking 800 applicants and a quadrupled class size of 260. • Even after 110 years in the Capital Region, ExxonMobil Baton Rouge continues to grow. In March, ExxonMobil announced plans to invest more than $500 million to construct a new polypropylene unit in Baton Rouge that will increase polypropylene capacity by up to 450,000 tons per year. Polypropylene is a versatile material that can be used for car parts, recyclables, and food packaging. Construction on the unit is slated to start in 2019, and startup is expected in 2021. The investment is projected to create up to 600 jobs during construction and 65 permanent jobs upon completion. 10/12 INDUSTRY REPORT • SECOND QUARTER 2019 15

COVER STORY

THE

BY SAM BARNES

MARITIME SCRAMBLE

BARNES MEDIA LLC

Ship traffic is on the rise in every navigable Louisiana waterway. And from workforce to infrastructure, ports are playing catch-up to meet demand.

The Port of Greater Baton Rouge moved more than 13,600 containers last year, a 66% increase from 2017’s some 8,200 containers. To accommodate the increased activity, the port has ordered two pieces of equipment—a barge loader and a reach stacker—that should be operational by the end of the year.

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look around the Crescent River Port Pilots Association’s control room in Belle Chasse tells the tale. With a complexity that rivals an air traffic control tower, video display monitors show dozens of GPS-enabled ships anchored off the mouth of the Mississippi River, waiting in a queue for their turn to enter. In the river, itself, ships traverse the waterway in an unfathomable, endless procession. Of the 1,200 pilots in the U.S., 25% of them live in Louisiana. That’s a number that will likely rise, as vessels carrying petrochemicals, oil and gas, agricultural products and other goods continue to increase in volume. “There’s a high demand for our services right now and we’re operating at the redline,” says E. Michael Bopp, president of the Crescent

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Pilots. By law, his state pilots, and others like them, must guide international vessels up the river. Recent data shows that ship traffic is on the rise in every navigable Louisiana waterway. “Go out and look at the river and see what’s going on,” says Paul Aucoin, executive director of the Port of South Louisiana, speaking in March at a Louisiana Mid-Continent Oil and Gas Association meeting in New Orleans. “One industry after another with barges and ships, one after the other.” Port of New Orleans President & CEO Brandy Christian says shipping volumes are “obviously on the increase. It’s not just the number of ships—I think the bigger issue is that we’re seeing larger ships.” Port NOLA tracks the number of vessels moving through the lower Mississippi and has recorded a no-

ticeable increase in container shipping. This easily makes up for a drop in steel, aluminum and grain traffic caused by the recent tariffs. In fact, container volumes set an all-time record in 2018 with 591,253 TEUs (twenty-foot equivalent units), up 12.3% in just one year, and doubling in the past 10 years. The uptick is primarily fueled by exports coming out of Louisiana’s plastic resins market, along with coffee exports from far upriver. Add to that more than $80 billion in announced industrial investments in St. James Parish and elsewhere, and the exports of containers are expected to grow. The resulting ripple effects will impact the entire maritime industry, including vessel operators, marine terminals, shipyards and workers engaged in the movement of cargo. Consequently, ports are scrambling to deliver

10/12 INDUSTRY REPORT • SECOND QUARTER 2019 17

DON KADAIR

COVER STORY

an infrastructure that can handle the additional load, whether that be through an expansion in capabilities or improvements to intermodal functionality. At present, Port NOLA is handling 8,500 TEU ships; in the past their sizes averaged only 4,000 TEUs. “When you start to receive those larger ships you’ve got to have the right infrastructure,” Christian says. “That includes having the right equipment, the right sized cranes to handle processing a bigger ship, and investments in your container yard.” That epiphany led to Port NOLA’s $23.4 million purchase of two new 100-foot gauge container gantry cranes for its Napoleon Avenue Wharf earlier this year. They’re also demolishing warehouses to make way for the cranes and provide more yard space. That will enable it to handle 1.2 million TEUs, doubling its capacity over the current 840,000 TEUs. Port NOLA is also looking at

“A year ago, you could probably find a 2,000-horsepower boat for $3,500 a day, plus fuel. Right now, you’d be lucky to find something in the $4,500-a-day range.” DAVID DELOACH, president, Deloach Marine Services in Port Allen

potential sites downriver, all in St. Bernard Parish, for a second $1 billion-plus container terminal. The team is currently studying each site’s potential for water-side and landside functionality, i.e. infrastructure, roadways and rail access. It’s all part of “Port NOLA Forward,” the port’s master plan. “When we think about a second container terminal, we need to obviously feel very confident that the market will be there for us,” Christian says. Terminal operator Ports America has promised to invest at least $300 million at the new site if and when the port selects a location, which

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Christian hopes will happen in 2020. Southeast Louisiana, alone, leads the nation in American maritime workers, with 33,590 jobs and nearly $9 billion in economic impact, according to a recent Transportation Institute study. Fueling the optimism, the current redevelopment of the shuttered Avondale Shipyards site by T. Parker Host will add new manufacturing, fabrication and distribution capabilities. BUST, THEN BOOM It hasn’t always been this good. A relatively recent uptick in the oil and

gas market, and a wave of exports, have only just recently impacted vessel traffic. Just ask Dave Deloach, president of Deloach Marine Services in Port Allen and a board member of the American Waterways Operators. Over the last several decades, he has seen his share of ups and downs. “We’re just now, in the last six months, coming out of one of the worst, depressed times since the 1980s,” Deloach says. “There’s a combination of factors that contributed to that, one being the fact that the price of oil went down so low that they quit moving oil in barges.” Deloach Marine reached bottom in 2017 before beginning to bounce back. The company provides crew and tugboat services for several barge companies along the Gulf Coast. “Once the oil got back up to the $60 range, crude oil started moving again, and then of course refined products started being produced,” he says. “A year ago, you could probably 1012industryreport.com

find a 2,000-horsepower boat for $3,500 a day, plus fuel. Right now, you’d be lucky to find something in the $4,500-a-day range.” Louisiana economists have also seen a rise in ship traffic. Stephen Barnes, director of the LSU Economic & Policy Research Group, has noted an increase in ship numbers in his most recent data. In his role, Barnes studies petrochemical, oil and gas, and water transportation. “While in 2017 it was still pretty flat, as we got into 2018 things started to edge up,” he says. As might be expected, these

economic factors, along with a confluence of new regulations and self-imposed industry requirements, are spurring private investment in the maritime industry. Many petrochemical owners now have maximum age limits on inland tug boats (most of which are decades old) and in 2018 the U.S. Coast Guard began requiring the inspection of all inland vessels as part of its “Subchapter M” regulations. This is prompting vessel owners and operators to refurbish their fleets and fabricate new boats, en masse. Continued on page 22

“There’s a high demand for our services right now and we’re operating at the redline.” E. MICHAEL BOPP, president, Crescent River Port Pilots’ Association

MID DOWN SHREVEPORT

NEW ORLEANS

BATON ROUGE

CHERYL GERBER

AT BRADLEY FIRM

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WE DO IT ALL WWW.BRADLEYFIRM.COM

10/12 INDUSTRY REPORT • SECOND QUARTER 2019 19

COVER STORY

WATER BOUND

By Sam Barnes

Intuitive innovation has made Mandeville’s Florida Marine a major maritime player.

DESIGNING FOR THE FUTURE

“Innovation is nothing new. Over the years, we’ve diversified throughout the company’s history.” BRENT ICE, executive vice president and general manager, Florida Marine

He then moved to the New Orleans area, but kept the name, and by 1998 had begun one of the largest double-hulled tank barge construction projects in the U.S. At the time, most vessels were single-hulled, but he knew it wouldn’t be long before the Coast Guard changed the requirement. Today, FMT owns 250 of the barges, many constructed at the nearby Trinity Industries shipyard (now Arcosa Marine Products) in Madisonville. Not long after, FMT came close to breaking another record, contracting with a shipbuilder in Panama City to build nearly 70 new towboats. At the time, industry wasn’t paying much attention to the age and condition of tugboats in the river. Today, that’s all changed. Industrial owners are implementing maximum age requirements on the boats coming to their dock, as an estimated 75% of the boats are 25 years or older. By the time that happened, FMT was already way ahead of the game.

TACKLING INNOVATION Florida Marine Transporters has become the second largest inland transporter by capacity, utilizing its fleet of 30,000-barrel barges to move gasoline, diesel, crude oil and feedstocks, smaller 10,000-barrel varieties to move chemicals, and hopper barges for dry cargo. The company’s business model is unique to the industry, as it owns some 90% of its boats and barges, and continues to grow its holdings. It also boasts one of the youngest fleets in the industry. “We have 90 boats and 250 liquid barges that move gasoline, diesel, crude oil and feed stocks. We also have 300 dry hopper barges. We’re moving a lot of

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sand, we’re moving petroleum coke, and we’re moving chemical rock for some of the utility plants,” Ice says. About 700 of its 900 employees are on boats, while the remaining 200 are either “shore-side”—employees purposefully positioned throughout the country or in their corporate office. For those on the crews, it’s a uniquely grueling schedule. Employees there work six-hour shifts, four weeks on and two weeks off. “We try to position people, so if we would have an incident where a crew change is needed, which could be for a variety of reasons, we can accommodate them.” Ice credits FMT’s rapid growth to the owner’s intuitive approach to tackling new endeavors. The highly cyclical nature of the work—much of it tied directly to the oil and gas market—practically mandates resilience, so the company must be willing to try new things. The company is currently eyeing the possibility of tackling “blue water” oceangoing work from the Gulf Coast up the East Coast to New York. It’s also researching more environmentally friendly modes of transportation, such as LNG-powered tugboats. That would truly be innovative, as no inland tugboats currently run on LNG. Ice feels the company has the expertise and the opportunity, along with potential partners in the oil and gas industry, to make it work. “Innovation is nothing new. Over the years, we’ve diversified throughout the company’s history,” he adds. “When we first started, it was just liquid products. Then we started moving into chemicals, then asphalt, then the dry cargoes.”

In 2009, FMT opened its own shipyard in Harvey, where it performs most of its own repairs, and in 2017 achieved a major milestone by launching its first new boat from there. Jeff Brumfield, FMT’s director of vessel construction and engineering, designed the 120-foot vessel. “In-house building is much better because we have made many strides in the process, including quality control and expenditure of the buildout,” he says. Brumfield has guided the design of FMT’s fleet since 2003, coming aboard after working 18 years for ExxonMobil. He has designed some 95 boats since then. “We have several designs,” he says. “We’ll build four, five or 10 or 20 of that design with different sizes and powers. I’m working on about four right now.” Looking ahead, he says the incorporation of emissions friendly engines will be his greatest design challenge. “That changes the design of the boats because of what you have to do to the exhaust system,” he says. “It impacts the entire size of the boat.” Looming large for all inland companies is the implementation of Subchapter M by the U.S. Coast Guard. In a nutshell, as of June 2018 all vessels must now be Coast Guard inspected. For FMT, that means 25% of its fleet will be inspected this year, and the remainder over a fouryear period. A third-party organization performs the inspections. Chad Hidalgo, FMT safety manager, says the new regulation has prompted FMT to move to a new learning management system to keep up with the process. Hidago works closely with compliance to ensure policies and procedures are updated,and is responsible for the training curriculum. Since safety is vitally important to the petrochemical, oil and gas industries, FMT closely mirrors its policies after those of its customers. “We work for the Exxons, Shells, Chevrons, etc.,” he says. “They all have different things that they want. That raises the bar, because we’ve got to go to the highest standard with every one of them.” To that end, FMT operates its own training facility in Mandeville, and regularly updates its training matrix. “We break it up throughout the year, and by position. Our wheelmen have certain things that they’re trained on; our tanker men have certain things; deck hands and engineers, and so on.”

CHERYL GERBER

he route map for the Mandeville-based Florida Marine Transporters resembles a vast, geographic circulatory system that begins at the mouth of the Mississippi River and goes as far north as Minneapolis. There’s hardly a major inland waterway east of the Continental Divide that the maker, manager and operator of towboats and barges doesn’t traverse. Along the way, it touches rivers with names such as the Ohio, Arkansas, Allegheny, Missouri and Cumberland, among others, as its transports a range of petrochemicals, chemicals, liquefied petroleum gas, crude oil, agricultural liquids and dry cargo. FMT Owner Dennis Pasentine is heavily engaged in the day-to-day operations of his business, arriving at the office every morning at 5 a.m. A fisherman at heart, he watches storms closely, and frequently drops in on the operations center within the company’s relatively new digs off Causeway Boulevard. While there, he reviews the positions of boats, how much fuel they’re burning and how many miles they’ve made. He has developed a sixth sense over the years. “If a boat is not performing how he thinks it should, he’ll ask about it,” says Brent Ice, Florida Marine’s executive vice president and general manager. Pasentine makes sure there’s a good mix of new technology and old-fashioned knowhow on hand. While FMT uses the latest in monitoring and tracking equipment, the company also uses “old school” methodology, including wall boards with tracking data written in dry erase marker. “You have to check off that you’ve done your job so everyone in the room can see that the customer has been notified, docks have been notified and the boat knows their orders,” Ice says. The company also makes a point of hiring homegrown people with backgrounds in industry. There are former employees of Shell and ExxonMobil, among others. Ice, in fact, worked in Marathon’s Marine Group for 10 years prior to coming on board. Pasentine encourages a familial atmosphere, and even brings his Dobermans to the office. His oldest son, Dennis Jr., is the current president of the company, while next in line is John, who is the Dry Division general manager. Dennis Sr. handles the liquids side of the business. A Mississippi native, he formed Florida Marine Transporters in 1994 after purchasing a small company, two boats and seven barges in Pensacola, Florida.

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COVER STORY

THE MARITIME WISH LIST In recent years, the maritime industry’s one unifying cry has been for deeper drafts and more consistently maintained channels. The Port of Lake Charles has been one of the squeakiest wheels, as the Calcasieu Ship Channel has played a vital role in attracting more than $100 billion in industrial development. That’s why keeping the channel dredged to a sufficient depth is a top priority, says Channing Hayden, director of navigation at the Port of Lake Charles and a member of the American Association of Port Authorities. In early April, Hayden and a 12-member delegation of Lake Charles-area port, pilot and industry representatives met with the federal

DON KADAIR

Much of it is a reaction to the Deepwater Horizon disaster in 2010. “They looked out there and said, ‘OK, where do we have vulnerabilities?’ They decided that they didn’t want to work with vessels that are over 40 years old,” Deloach says. “That’s deep sea, ‘blue water’ thinking that has developed over the past five or six or seven years. They just drew a line in the sand.” Tapping into these improving market dynamics, Arcosa Marine Products in Madisonville recently announced a $7.5 million capital investment to reopen its idled barge manufacturing operations in Madisonville. Arcosa, a division of Dallas-based Arcosa Inc., will install new equipment and complete facility upgrades to begin producing barges for customers later this year. Louisiana Economic Development estimates the project will result in another 236 new indirect jobs, for a total of more than 380 new jobs in St. Tammany Parish and the Southeast Region of Louisiana. Arcosa Marine is a leading manufacturer of barges for inland waterways and will produce multiple barge types at the Madisonville site. Deloach Marine has been investing as well, most recently in a marine travel lift that will enable it to lift a boat from the water and “walk it” onto land for repairs. The company expects the investment to double its capacity. It currently owns 12 boats and employs 130.

“We’re working with the U.S. Army Corps of Engineers to program (channel dredging) over a five- to seven-year period through our capital outlay process.” TOMMY CLARK, commissioner, Office of Multimodal Commerce

Office of Management and Budget, a host of Congressmen and others in Washington, D.C., to lobby for more federal funding for dredging. “The greatest need right now is convincing the government that they should keep the channel dredged to its authorized dimensions,” Hayden says. Hayden says he’d be happy if they simply provided what it prom-

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ised in the 1960s—a 400-foot-wide channel at a minimum depth of 41 feet. “If they would give us a channel that met those dimensions, or close to those dimensions as possible, year around, we could take care of the rest.” As it stands now, ships must navigate a narrowing channel in single file, which can cause costly delays. Lake Charles is far from alone.

Speaking at the LMOGA meeting, the Port of South Louisiana’s Aucoin says his number one priority is getting the Mississippi River dredged to 50 feet all the way to Baton Rouge, and “keeping it that way every day, all day.” He adds that maintaining the depth should be a national concern, as some 100,000 barges come through the port loaded with grain, coal and aggregates, among other products. In fact, 6 percent of the grain leaving the U.S. goes through his port. “As it is now, a ship can’t leave fully loaded, and that’s at a cost of $1 million a foot. Last year, we had 4,400 ships come to the Port of South Louisiana. Think if half of those were short loaded.” Some progress is being made. If a U.S. Army Corps of Engineers plan to deepen the Mississippi River channel to Baton Rouge moves forward, a variety of industries along the river will undoubtedly benefit. The goal of the $237.7 million project is to increase channel depths to 50 feet, up from 45 feet, enabling owners to load existing ships to capacity while also allowing larger vessels to traverse the waterway. The plan passed a major bureaucratic hurdle in the summer of 2018 when Corps Senior Civil Engineer James Dalton recommended approval. Dredging the channel would make ports along the river the first on the Gulf Coast to reach the same depth as the Panama Canal, paving the way for new Panamax vessels to reach Baton Rouge. The vessels, which require a draft depth of 49.9 feet, would have clear sailing the entire 256-mile stretch from Southwest Pass to Baton Rouge, provided their superstructures fit below the Crescent City Connection bridge in New Orleans. Jay Hardman, executive director at the Port of Greater Baton Rouge, says a consistently maintained 50foot channel is a long time coming. The port has been studying ways to reduce costs, such as through shorter berthing and loading times, and a deeper channel would be a sizeable step toward that goal. Situated at the convergence of the Mississippi River and the Gulf Intracoastal Waterway, the port spends about $173,000 annually on dredging around its facilities. 1012industryreport.com

PREPPING FOR THE BIG BOYS Christian sees the writing on the wall—the big ships are coming and Port NOLA better get ready. The expansion of the Panama Canal has provided the port with access to some 58 global ports with containerized cargo. The larger of those container ships range from 8,000 to 9,500 TEUs and are increasing in frequency. She says the gantry crane purchased earlier this year supports Port NOLA’s plan to invest in current facilities, along with additional terminal facilities, to ensure that the port can meet projected increases in volume. The new cranes will complement two existing 100-foot gauge cranes currently in operation, and will allow the port’s 50-foot gauge cranes to be used for smaller vessels. To accommodate the cranes, Port NOLA also plans to add 100-foot gauge rail tracks at the Napoleon Wharf. Sandy Sanders, executive director of the Plaquemines Port, says his greenfield port’s 50-foot-plus river draft is more than adequate for the larger, Panamex-style vessels. “The draft aperture to match the Panama Canal can only be found here,” Sanders says.

COURTESY CRESCENT RIVER PORT PILOTS’ ASSOCIATION

Tommy Clark, commissioner of the Office of Multimodal Commerce, says channel dredging is a top priority of his office, as the state is responsible for 25% of the cost. “Right now, we’re working with the Corps to program that over a five- to seven-year period through our capital outlay process,” Clark says. Getting money from the state is a difficult proposition right now, says Shawn Wilson, DOTD secretary, speaking at the LMOGA event. “Somewhere in the neighborhood of $300-plus million a year is needed to maintain authorized levels on the waterways of Louisiana. Whether you’re in Shreveport, Calcasieu or on the Mississippi, that dredging is your lifeline. Without the federal government’s support it’s never going to happen. The moment we start doing it, they completely walk away from the responsibility that’s rightfully theirs.” He points out that DOTD has doubled the funding in the Port Construction and Development Program, which is used to build landside infrastructure for moving cargo, minimizing highway congestion, improving safety and reducing maintenance cost on highways.

The port, which is managed by the Plaquemines Port Harbor and Terminal District, has successfully attracted some $19.5 billion in private investment. Most recently, Tallgrass Energy LP announced plans for a $30 million land acquisition to support a new liquids terminal at the port. The Plaquemines Liquids Terminal is expected to be fully operational in 2020, capable of storing as much as 20 million barrels of crude oil and refined products. It will also be able to support post-Panamax vessels and barges. Tallgrass expects to build a separate offshore pipeline that would give PLT the ability to load VLCCs (Very Large Crude Carriers) by late 2021. That’s part of a $2.5 billion capital investment that also includes a 700mile pipeline to transport 800,000 barrels of crude oil a day from Cushing, Oklahoma, to Louisiana. Additionally, Venture Global LNG Inc. has announced that it will build an $8.5 billion LNG plant at the Plaquemines Port, expecting FERC approval in Third Quarter 2019, and American Patriot Holdings LLC plans to design and build vessels there to move containers from Plaquemines to St. Louis and Memphis.

CALLING ALL PILOTS Louisiana’s maritime surge— whether it be in port expansions, new shipbuilding or just the sheer number of vessels on the waterways—brings with it a corresponding need for ship-side and shore-side workers. At the Plaquemines Port site, Sanders says the biggest problem will be staffing the workforce in such a rural area. “You’re looking at a parish that has 20,000 inhabitants,” he adds. “When this transportation hub is finished, you’re going to have 10,000 to 12,000 people working there, and you can probably quadruple that number during construction.” Port NOLA is seeking to establish a centralized process for interested applicants to access jobs, whether they’re directly tied to the port, the maritime industry or one of the industries using the port. The port is also partnering with various area colleges—such as Delgado Community College—in the development of a specialized curriculum that targets specific skillsets. Looking ahead, Christian says crane operation will be one of the skillsets in high demand. “As we grow and we look to build a second container terminal, we’ll have more mechanical needs around cranes and other types of equipment in the yard.” Maritime vessel operators have their own hiring challenges. Brent

A container ship cruises on the Mississippi River south of New Orleans.

Crescent River Port Pilots’ Association Captain Casey Crawford

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10/12 INDUSTRY REPORT • SECOND QUARTER 2019 23

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COVER STORY

“Go out and look at the river and see what’s going on. One industry after another with barges and ships, one after the other.” SAM BARNES

PAUL AUCOIN, executive director, Port of South Louisiana

Ice, executive vice president and general manager of Florida Marine Transporters in Mandeville, says the company’s boat crews often work 28 days on/14 days off, and when the economy is on the upswing he has difficulty finding workers. Most challenging will be finding qualified pilots, as earning a pilot’s license requires several years of education and on-the-job training, and the hours can be brutal. Bopp expects the Crescent Pilots’ need for new pilots will only grow as ship traffic increases and says finding them probably won’t be easy. The Mississippi River’s three pilot groups—also including the Associated Branch Pilots (Bar Pilots) and New Orleans Baton Rouge Steamship Pilots Association (NOBRA)—each oversee their own ter-

ritories from the mouth of the river to Baton Rouge. In the Calcasieu Ship Channel, that responsibility falls to the Lake Charles Pilots. As such, a ship requires a new pilot each time it passes into a new territory, since each group is intimately familiar with its own segment of the river. Along the way, pilots must handle a variety of challenges, such as dealing with multi-national crews. There are also no set work hours. “It’s way irregular,” Bopp says. “You could have 25 ships inbound for the day, and you could have another 25 ships sailing out of New Orleans. Then, the very next day you could have 15 ships coming in, and 12 ships sailing out. “It’s a high stress job. It’s like a cop. Sleep and work. But that’s what it takes.”

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SAM BARNES

“Whether you’re in Shreveport, Calcasieu or on the Mississippi, dredging is your lifeline.”

10/12 INDUSTRY REPORT • SECOND QUARTER 2019 25

NEWS PIPELINES

Supply: Meet demand

By SAM BARNES Photography by DON KADAIR

Pipe manufacturers and fabricators ramp up for a growing market.

“With the availability of the workforce that we have in this region, it makes sense to expand here versus somewhere else at this time.” REMI BONNECAZE, CEO, Epic Piping

t’s Economics 101. Current and expected increases in the demand for pipe, coupled with a sorely deficient supply, are giving Louisiana’s pipe manufacturers and fabricators the confidence to update and expand their facilities. Much of the current orders for pipe are coming out of the shale plays of Texas and Louisiana, but the impending proliferation of

liquefied natural gas (LNG) plants is expected to soon add fuel to the fire. That means pipe suppliers must prepare now for a ramp-up in production if they want to stay ahead of the curve. It’s a far cry from the dismal days of 2015 and 2016, when the industry suffered from a sharp decline in the oil and gas market. That led to significant and sizeable layoffs for many pipe suppliers. Moreover,

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volatile commodity prices led to wild fluctuations in the price of steel, an essential input to the industry. That all changed in 2017 and 2018, as oil prices stabilized, and optimism rebounded over market forecasts. According to the Industry Market Research Report, published in December 2018 by IBIS World, demand for both seamless and welded pipe increased substantially in 2018, a trend that will likely continue

through 2019 and 2020 due to a significant rise in oil and gas exploration. This presents unprecedented opportunities for the pipe industry. Louisiana firms are already in prep mode, and have felt confident enough to open up their pocket books. In February, Baton Rougebased Epic Piping announced plans to spend up to $40 million to expand its pipe spool fabrication facility in Livingston and invest in a 1012industryreport.com

new 24,000-square-foot administrative office in Baton Rouge. The investment is expected to increase the company’s global production footprint by more than 30% and enable Epic to produce larger and heavier pipe. Its employee count, currently at 900, will increase to more than 2,000. “With the availability of the workforce that we have in this region,” says CEO Remi Bonnecaze, “it makes sense to expand here versus somewhere else at this time.” The expansion will prepare the company for increased demand for pipe spool products, driven largely by several active and planned projects in the petrochemical and LNG markets. Since its formation in 2014, Epic has grown to become one of the largest heavy pipe fabricators in North America, with three major fabrication facilities‚ including the 268,000-square-foot facility in Livingston. Then, in March, Stupp Corp. announced that it would spend $22 million to expand and upgrade its two steel pipe manufacturing plants at its north Baton Rouge headquarters. The company is adding assets that will improve efficiency and

1012industryreport.com

help it achieve tighter specifications, while also preparing the supplier for greater production capacities in the pipeline market. The project will result in 128 new jobs and bring Stupp’s employment level near its peak of five years ago. “(The investment) is designed to optimize the capabilities of the assets,” says Chip McAlpin, Stupp’s vice president of corporate strategy and development. “It will include the installation of some new equipment and allow us to process pipe more efficiently. In years of high market demand, we will be able to hit higher performance numbers.” As an added bonus, the investment will enable the company to prepare for increased pipe demand in the Permian Basin and other shale plays. AN URGENT NEED Eric Smith, associate director of the Tulane Energy Institute in New Orleans, says a grossly inadequate supply of pipelines in the U.S. is the primary catalyst for the demand surge. Sharp increases in petrochemical, crude oil and natural gas production are quickly transforming Louisiana into a net-export state. “We need pipelines to feed these

(LNG) terminals and transport crude,” Smith says. “Without the Keystone XL Pipeline, for example, Texas doesn’t have any crude, and I guarantee you if Texas doesn’t get heavy crude, we don’t get their excess.” One hurdle will be figuring out how to get crude oil from locations outside Texas and Louisiana. As such, momentum is increasing for a route between Cushing, Oklahoma and Corpus Christi, Texas, as well as other points north. In many locations, pipeline routes have never existed. The Corpus Christi and “Golden Triangle” areas in Texas, for example, are destined to become major export hubs. “You’re building brand new infrastructure to get it there,” says John Clark, Stupp’s chief commercial officer. “These are the big pipelines, but there are also smaller gathering lines and short sections that connect existing infrastructure to new wells.” That all points to a promising future for pipe suppliers. While Stupp prides itself on being realistic and grounded—given that its work volumes are tied closely to the unpredictable nature of oil and gas— it’s hard to deny that the market has stabilized in the last year. “While it’s not a perfect world, it’s now sustainable,” Clark says. “Even as the demand goes up and down, you have the ability to remain profitable. Therefore, you can justify a large capital expense that’s going to take a while for a payback because you have a little more stability.” McAlpin predicts periods of high-

er, more consistent utilization than in previous years, driven by market demand projections and a more competitive posture. “We’ve taken a holistic approach. Efficiency projects are helpful in good times, but they’re critical in bad times.” A high percentage of Stupp’s business goes to a short list of customers with tall orders. “Nobody’s calling us for 1,000 feet of pipe. They’re buying 500 miles. When business is good, we get a project and it lasts for months.” DOWNSTREAM NEEDS Further strengthening pipeline demand will be the next wave of petrochemical and LNG projects, as owners look for new ways to shuttle oil and natural gas from the shale plays. Speaking in March at the Louisiana Oil & Gas Association’s Annual Meeting in Lake Charles, Mike Eberhardt, CFO and treasurer of Venture Global LNG Inc., says much of the natural gas needed for the company’s planned Louisiana LNG facilities will come by pipeline from the Haynesville Shale. “We’ll need roughly 2.2 BCF of natural gas for each 10 MTPA facility,” Eberhardt says. The company’s Calcasieu Pass project has received all federal approvals and its other project, in Plaquemines, is expected to receive final FERC authorization in August. As they strive to meet LNG demand, pipeline owners are at varying stages of completion. Oklahoma-based Enable Midstream Partners recently announced plans

10/12 INDUSTRY REPORT • SECOND QUARTER 2019 27

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to build a 165-mile gas pipeline from northwestern to southwestern Louisiana along the Texas state line. The pipeline would take gas from the Haynesville Shale and other regions and ship it to new LNG export terminals in Louisiana and Texas. Elsewhere, Tallgrass Energy announced plans to build a crude oil pipeline—the Seahorse Pipeline—from Cushing, Oklahoma, to its planned Plaquemines Liquids Terminal in Louisiana. Of course, industry’s demand for pipe doesn’t end at the plant gate. Bonnecaze says Epic’s expansion is a reaction to the need by LNG and other plants for larger-diameter, fabricated pipe within their facilities. The expansion will enable the company to handle the bigger pipe, as it buys materials in advance and keeps them in inventory—requiring sufficient space for storage and fabrication. “If you take a 96-inch-diameter pipe and you put two pieces side by side, you’re taking up a large amount of your floor space,” Bonnecaze says. “Having a greater capacity allows us to produce more product. You tend to see larger diameter pipes and heavier wall thicknesses, particularly for the LNG and the gas plant projects. “With the greater capacity, we’ll be able to take on more projects, as well as grow our customer base since we can perform more projects at once.” He expects work volumes to surge in late 2019 and continue into 2020 and beyond. “An LNG plant might take several years to construct because they have individual trains,

so there could be multiple years of work with one plant,” he adds. “It stands to reason that there would be a larger amount of work going forward. I think right now it does look promising.” In addition to its Livingston facility, Epic has a distribution company in Houston, as well as other manufacturing facilities in San Marcos, Texas, and the United Arab Emirates. LOOKING FOR WORKERS As with most manufacturers, pipe suppliers often struggle to find skilled laborers. That can make it tough when you’re ramping up production in a low-unemployment environment, McAlpin says. “When we’re running more volume, it takes more technicians and inspectors to do it. It takes more people to handle the additional pipe that’s coming through the mill. All those things take additional employees.” The problem is particularly acute on the skilled trades front, as Stupp is currently in need of qualified and experienced electricians, mechanics and machinists. “We’ve been working with Baton Rouge Area Chamber, Louisiana Economic Development and the Mayor’s office, and we’ve received great support from them,” he adds. Bonnecaze says Epic currently employs just under 1,000 employees, but that will ramp up significantly in the next six to eight months (including EPIC’s international operations). That includes skilled workers, primarily pipefitters, welders, painters, technicians, safety personnel and others. 1012industryreport.com

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SPE C I A L A D V E RT I S I NG SE CTI O N

Tom Yura

Chief Operating Officer, Cornerstone Chemical Chair, GBRIA Board of Directors

Partnering for a strong industry leads to a stronger community GBRIA’S MISSION IS to “drive solutions to common issues with an emphasis on workforce development and safety performance.” To achieve this mission, we have six strategic objectives: • Achieve injury and incident free workplaces • Ensure access to a competitive and skilled company and contractor workforce • Facilitate operational excellence through networking and exchanges • Build support in the local community for retention and growth of our industries • Maintain a vibrant, successful and involved membership • Provide stewardship to budget and maintain the highest levels of financial integrity As you read on, I hope you will find that our organization made progress in each of these areas over the last year. The first area I would like to address is our goal to achieve injury and incident-free workplaces. In April, 2019, GBRIA celebrated its 23rd Annual Safety Excellence Awards. This event, like others in the past, aims to highlight the excellent achievements made by GBRIA members and contractors over the past year. This partnership has produced work environments that rival any other industry in the region. When comparing various industries, we find that the retail industry’s recordable rate is around 3.3, manufacturing as a whole is around 3.6, and within the GBRIA membership, the recordable rate has been well below a 1.0 for the past 15 years. This is accomplished, in part, through the dedication of members of the Safety, Health, and Security Commit1012industryreport.com

tee, who strive to share best practices with both GBRIA membership and the contractor community to keep our employees safe. Next, I would like to acknowledge the efforts of the Workforce Development Committee to ensure access to a competitive and skilled company and contractor workforce. This committee has focused on encouraging craft training to high school students in the Greater Baton Rouge Area with more outreach, especially through GBRIA’s Annual Craft Workforce Development Awards Program. In addition, GBRIA voices industry needs in post-secondary institutions through cooperation with the Louisiana Community and Technical Colleges System and advisory boards for programs such as Non-Destructive Testing and Process Technology. GBRIA also plays a part in workforce development by working with the ABC Pelican Chapter through a quarterly joint taskforce. GBRIA’s annual Craft Workforce Development Awards banquet continues to grow, recognizing more contractors, post-secondary institutions and high schools for their achievements in workforce development or craft training each year. GBRIA’s Membership and Public Affairs committee continues to build support and engagement in the local community for retention and growth of our industries. GBRIA now uses its social media platforms to educate the public of industry operations. Large events such as the annual Craft Workforce Development Awards, Safety Excellence Awards and Annual Meeting are broadcast through GBRIA’s YouTube channel

and the Louisiana Hometown Network on cable channel 21 for four weeks after each event. Our increasing Public Affairs outreach program will focus on “the value proposition” to our Capital Area community. From the small business owner who supplies our industry and employees to the schools we support with our tax dollars, externship programs, and resources, we have such a great story to tell. It’s time for us to raise our voice and be proud of our industry. Through relationships with traditional media platforms, GBRIA promotes facts and positive news stories. The Advocate and The Baton Rouge Business Report continue to feature articles of GBRIA sharing results of our regular surveys including our Plant Managers’ Economic Outlook quarterly survey and our Bi-Annual Labor Forecast survey. GBRIA also contributes to the 10/12 Industry Report each quarter. For further engagement with membership and community, GBRIA hosts several large events each year. For the first time in 2019, GBRIA hosted a Clay Shoot at Bridgeview Gun Club in Port Allen as a kickoff to the 2019 Safety Excellence Awards. The Safety Excellence Awards Banquet, held on April 4 had more than 600 in attendance. The Annual Meeting and first Annual Gala took place on January 25 with around 200 attendees. The Contractor Workforce Development Awards Banquet is on September 19th and GBRIA will host a Top Golf Social as a kickoff prior to the banquet. The Golf Tournament & Gumbo Cookoff will take place in November. Mark your calendars!

Lastly, GBRIA’s coalition with the Baton Rouge Area Chamber and the Center for Planning Excellence, the Capital Region Industry for Sustainable Infrastructure Solutions, or CRISIS, continues to make a difference in our transportation infrastructure. CRISIS has developed a multiyear strategy to support the region’s needs through the use of smart transportation technology, improvements to the planning process, alternative transportation funding mechanisms, and an expansive outreach program with local, state and Federal officials to implement solutions to traffic and infrastructure. In 2018, Governor Edwards announced a new project to widen I-10 from the bridge to the split. CRISIS continues to work with the legislature to implement sustainable solutions to execute major infrastructure projects in the region. All of these efforts would not be possible without the GBRIA staff led by our executive director, Connie Fabre. The team continues to do an excellent job moving our agenda forward by providing the energy to garner support for these initiatives from our members. I want to acknowledge the leadership provided by the Board of Directors, and last but not least, I want to thank the member companies who support GBRIA. These achievements would not have been possible without the sweat equity our companies provide. We still have many challenges facing our industry. We have a demonstrated record of success when we work together as GBRIA, and I look forward to meeting these challenges head-on. Together, we are the Greater Baton Rouge Industrial Alliance.

10/12 INDUSTRY REPORT • SECOND QUARTER 2019 31

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4/10/19 2:33 PM

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SPE C I A L A D V E RT I S I NG SE CTI O N

Connie Fabre

Executive Director, GBRIA

Making a mark around the globe THE GREATER BATON ROUGE Industry Alliance (GBRIA) was established as a “Local User Council” (LUC) affiliated with The Business Roundtable to better represent the interests of Baton Rouge’s regional industrial sector and bring a voice to its most pressing needs and concerns. Since those early days, The Business Roundtable’s construction efforts became The Construction Users Roundtable, or CURT, and GBRIA continues to be affiliated with this national organization. In the late 1960s, Louisiana was experiencing new investment and construction and the owners of the construction projects—mainly petrochemical plants— were searching for a way to improve industry’s influence through a common voice. GBRIA was formed in 1970 and embarked upon improving relations with union crafts and helping members deal with concerns that stemmed from the formation of the Occupational Safety and Health Administration (OSHA) and the Environmental Protection Agency (EPA). Today, GBRIA’s activities still center on safety and workforce development and include efforts to better community relationships and promote public awareness about the important role industry plays to the economy of both the region and the state of Louisiana. GBRIA’s members look to the association for solutions to common issues in areas where they do not compete, and over the years the association has helped develop several standard solutions that help industry members and their contractors operate more efficiently. 1012industryreport.com

GBRIA hosted its Annual Meeting and 1st Annual Gala at the Country Club of Louisiana on Jan. 25, 2019.

Simply put, GBRIA helps its members remain globally competitive. A few examples of GBRIA’s history of accomplishments include standardized contractor safety awareness training through the Alliance Safety Council. This promotes the standard training curriculum of the National Center for Construction Education and Research (NCCER), which is used in high schools, community colleges, union trade schools and at the Associated Builders and Contractors (ABC). In 2007, GBRIA played an important part in changing the regional craft training model from one that was almost 100% privately funded by membership to a public-private partnership, helping to spread craft training to all state community and technical colleges, as well as into high schools. And when members raised concerns over the Baton Rouge area’s inadequate road infrastructure, GBRIA helped bring community and governmental

stakeholders together to form CRISIS, the Capital Region Industry for Infrastructure Solutions. In the span of four years, the group has helped secure a new Mississippi River ferry and several major new highway construction projects, including the widening of I-10 from the bridge to the I-12 split and widening of I-10 through Ascension parish. In addition, CRISIS supported and helped promote MOVEBR, the nearly $1 billion proposal that passed and will relieve congestion and provide increased regional connectivity. By speaking as one voice, decision makers in government gained understanding and were able to prioritize solutions that will benefit the region. Last year, GBRIA brought stakeholders together to impress upon lawmakers the impact that a change to the economic development incentive used

by the state for 82 years has had. Investment in the state saw a decline and contractor work hours dropped off significantly, despite the fact that business conditions remain favorable for investment, and neighboring states are seeing continued growth. GBRIA will continue to address the Industrial Tax Exemption Program (ITEP) to educate and find common solutions. Attracting more of the local workforce to the high-tech, high-paying jobs in industry is a key focus of GBRIA and in 2019, we will focus on growing skilled craft training at community and technical colleges and high schools in the River Region south of Baton Rouge and New Orleans. More than $130 billion of industrial projects are planned to be built in Louisiana by 2025 and more than $40 billion of that being south of Baton Rouge and south of New Orleans. GBRIA is poised to welcome new members and grow along with the growth that the industry is experiencing. Members include industrial manufacturers or “owners” of construction projects. In addition to membership, GBRIA offers a sponsorship program whereby industrial suppliers and contractors can participate in the activities of the association. Please inquire about membership or sponsorship today if you aren’t already participating and view our website at gbria.org.

10/12 INDUSTRY REPORT • SECOND QUARTER 2019 33

SPE C I A L A D V E RT I S I NG SE CTI O N

Tom Yura

Tim Harris

Meet the Greater Baton Rouge Industry Alliance Leadership

Steve Ledoux

Joe Debiaso

Jennifer Dunphy

Paul LaBonne

Daniel Tate

Officers

Steve Ledoux

Jennifer Dunphy

Tom Yura

Louisiana Operations Site Leader

Baton Rouge Chemical Plant Process Manager

Chief Operations Officer Cornerstone Chemical Chair of GBRIA Board of Directors

Tim Harris

Olin Blue Cube Operations LLC Treasurer and Membership & Public Affairs Committee Co-Chair

Board Members at Large

Plant Manager

Joe Debiaso

Eastman Chemical Vice Chair of GBRIA Board of Directors and Safety, Health and Security Committee Co-Chair

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SPE C I A L A D V E RT I S I NG SE CTI O N

Steve Welch

Jake Valenti

Daniel Tate

Site Manager Eco Services Golf Committee Chair

Steve Welch Plant Manager Occidental Chemical Contractor Workforce Development Committee Chair

Chad Naquin

Connie Fabré

Sub-Committee Chairs

Brandon Smith

Jessica Pranjic

Sue Leger

Staff

Jessica Pranjic

Jake Valenti

Connie Fabré

Safety and Security Manager

Executive Director

Manager of Communications & Workforce Development

Occidental Chemical GBRIA/Safety Council Steering Committee

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Chad Naquin Louisiana Operations Associate Director of Maintenance

Brandon Smith Manger of Safety, Health & Security GBRIA

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Sue Leger Manager of Finances & Administration GBRIA

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10/12 INDUSTRY REPORT • SECOND QUARTER 2019 35

SPE C I A L A D V E RT I S I NG SE CTI O N

30 years of no action. It’s time to fix our roads. BUSINESS LEADERS, CHAMBERS of commerce and trade associations from across Louisiana formed the Louisiana Coalition to Fix Our Roads (LCFOR) in October, 2018 to raise awareness of the state’s poor road and bridge condition and to advocate for a funding solution. Through a statewide social media campaign, LCFOR is encouraging citizens to join them in their efforts to rally lawmakers to pass a comprehensive funding plan to make the state’s roads and bridges safe, improve quality of life and meet the state’s growing transportation needs. “The campaign is about empowering Louisiana citizens to directly connect with their lawmakers and let them know they are fed up with our state’s terrible roads and bridges,” said LCFOR President Erich Ponti. “2019 must be the year to fix our roads.” The last time state lawmakers made a serious effort to fix our roads was in 1984 when the fuel tax was increased to its current base level. In 1989, lawmakers funded the TIMED Program, a plan to increase capacity throughout the state but with no funding to maintain the new capacity or other existing transportation infrastructure.

In the 30-plus years since, no new investment has been made, even as the state’s population has grown by half a million residents. Additionally, inflation has outpaced current funding sources. The state continues to fall further behind on needed improvements to roadways and bridges while the costs to complete the necessary projects continues to rise. A 2017 study from a national transportation research group, TRIP,

36 10/12 INDUSTRY REPORT • SECOND QUARTER 2019

examined the state of Louisiana’s roads and bridges. The data shows the state’s transportation system is in poor shape: • At least 38% of Louisiana’s state roads are in poor or worse condition • 1,821 bridges are structurally deficient or functionally obsolete • 15% of the state’s bridges are “substandard” • At least 15 bridges have closed so far in 2019

• Louisiana was 12th highest in the nation for highway fatalities in 2017 State Representative Steve Carter (R-Baton Rouge) has introduced legislation to address funding the state’s roads and bridges: HB 542. The bill reforms the Louisiana Department of Transportations and Development’s operations by ratcheting down the agency’s current use of the existing 16-cent fuel tax for operating expenses. The bill simultaneously increases new revenue for road and bridge construction through a fuel tax increase, rededication of existing fuel tax and new registration fees on electric and hybrid vehicles. A key component of Rep. Carter’s plan is utilizing the new “Construction Sub-Fund” (lockbox) of the Transportation Trust Fund. This “lockbox” ensures dollars deposited in the “lockbox” go directly toward improvement projects. Voters approved this constitutional amendment in 2017 aimed at protecting highway dollars from being eroded by ever-growing DOTD employee costs. HB 542 increases the state gasoline tax by 6 cents in 2019 and the state diesel tax by 4 cents. Both taxes will 1012industryreport.com

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increase by two cents every two years through 2031, with no increases beyond that time. “Providing safe roads and bridges are a vital function of state government and it’s time for us in the legislature to start making our citizens’ safety a priority,” Carter says. “The fuel tax is the time-tested, fair way to raise money for roads and bridges. We are once again one of the last states in the country to raise revenue for roads. Every state in the deep south has raised revenue within the past six months. This bill is the right solution for our legislature and Louisiana.” Michael J. Olivier, CEO of C100 Louisiana, says the bill has been specifically developed to address every concern that has prevented the legislature from taking action in the past. “This legislation is the product of dozens of businesses in this state coming together to produce a real, long-term solution to Louisiana’s crumbling roads and bridges,” he says. Several signature capacity infrastructure projects are prioritized in the proposed legislation. Projects included are a new Mississippi River bridge at Baton Rouge, a new I-10 bridge across the Calcasieu River at Lake Charles, the completion of I-49 South from Lafayette to New Orleans, the widening of I-12 from Baton Rouge to the Mississippi state line, the widening of I-20 at Shreveport and Bossier City, widening of I-20 at Monroe and access improvements to Port NOLA. “The current traffic situation in and around Baton Rouge is a supply chain and a workforce issue for Dow,” 1012industryreport.com

says Tommy Faucheux, Southeast U.S. state government affairs leader at Dow Chemical. “The unpredictability of travel time on our roads adds costs to shipments in and out of our facility. It also adds hours to our employees’ workdays. LCFOR’s gas tax increase proposal would get us a new bridge south of Baton Rouge. The Coalition recognizes the urgency many of us feel is needed to solve our traffic problems sooner rather than later.” HB 542 also dedicates 60% of revenues to the preservation of existing roadways and the financing of a robust statewide bridge replacement program aimed at constructing hundreds of new bridges in rural Louisiana along many of the state’s noninterstate highways. “Our state’s transportation system is creating major challenges for the agriculture and forestry industries,” says Ronnie Anderson, president of Louisiana Farm Bureau Federation. “With thousands of load-posted, comprised bridges, our farmers and foresters have a very difficult time getting their goods to market. Roads and bridges must be a priority for the legislature—we have to do something about this now.” “The coalition is growing in numbers by the day,” LCFOR’s Ponti says. “It’s common sense. We need quality roads and bridges in our state. It affects us all—our families, our businesses, our state’s economic opportunities. In the 2019 legislative session, Coalition members and the citizens of Louisiana are speaking up and want their legislators to stop ignoring the issue and begin working together and pass HB 542—plan to fix our roads and bridges.”

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SPE C I A L A D V E RT I S I NG SE CTI O N

2019 GBRIA Safety Excellence Award recipients THE GREATER BATON ROUGE Industry Alliance, Inc. established the Safety Excellence Award program in 1996 under the leadership of Hal G. Ginn, plant manager of DSM Copolymer at the time, in an effort to recognize excellent safety performance by contractors working in industrial facilities. GBRIA held its 23rd Annual Safety Excellence Awards banquet on Thursday, April 4, 2019 at L’Auberge Resort in Baton Rouge, Louisiana. GBRIA members that nominated their highest performing contractors in 2019 included Air Liquide, Air Products, Americas Styrenics, BASF, CF Industries, Delek US, Eastman Chemical, Eco Services, ExxonMobil Baton Rouge, ExxonMobil Polyolefins, Formosa Plastics, Honeywell, Honeywell UOP, INEOS Oxide, Methanex, Mexichem, Nova Chemicals, Nucor Steel, Nutrien, Olin Plaquemine, Olin St. Gabriel, Occidental Chemical Convent, Occidental Chemical Geismar, Placid Refining, Renewable Energy Group (REG), Rubicon, Shell Catalyst and Technologies, Shell Chemical, Shell Convent Refinery, Solvay, Syngenta, The Dow Chemical Company, Total Petrochemical, W. R. Grace, Westlake Chemical Plaquemine, Westlake Chemical Geismar and Veolia. The winning contract companies each year demonstrated a level of safety excellence that includes thousands and millions of hours worked without injury, a commitment by management to educate workers, and a fostered zero-incident culture. The 2019 GBRIA Contractor Safety Excellence Awards were presented in four service categories, with companies being further subdivided in each category by either Division I, Division II or Division III based on company size.

General Construction and Maintenance

Specialty Trade (Soft Craft)

Division I: 1st Place: 2nd Place: 3rd Place:

Petrochem Field Services PALA Interstate Industrial Specialist LLC

Division I: 1st Place: 2nd Place:

Coating Services Inc. Petrin

Division II: 1st Place: 2nd Place: 3rd Place:

Cajun Industries LLC Specialty Welding and Turnarounds LLC (SWAT) Repcon Inc.

Division II: 1st Place: 2nd Place:

BrandSafway Excel Modular Scaffolding & Leasing Corp.

Division III: 1st Place: 2nd Place: 3rd Place:

Division III: 1st Place: 2nd Place:

Apache Industrial Services Brock Services

Performance Contractors Inc. Brown & Root Industrial Services LLC Turner Industries Group LLC

Specialty Trade (Hard Craft)

Technical Support Division I: 1st Place: 2nd Place: 3rd Place:

Austin Fire Systems Jacobs Alliance Group Acuren Inspection Inc.

Division I: 1st Place: 2nd Place: 3rd Place:

Westgate LLC Midwest Cooling Towers LLC Cooling Tower Technologies LLC

Division II: 1st Place: 2nd Place: 3rd Place:

Axion Logistics Ford, Bacon & Davis UP Professional Solutions

ISC Constructors LLC Turner Specialty Services, LLC Universal Plant Services

Division III: 1st Place: 2nd Place:

MMR Constructors Inc. JVIC (A Zachry Group Company)

Division III: 1st Place: 2nd Place: 3rd Place:

Total Safety U.S. Inc. Petroleum Service Corporation, an SGS Company TEAM Industrial Services

Community Service Award: EXCEL Innovative Practice Award: Zachry Group 2019 Hal G. Ginn Safety Excellence Award: Cajun Industries LLC

Cajun Industries was honored with the 2019 Hal G. Ginn Safety Excellence Award at the GBRIA Safety Excellence Awards.

38 10/12 INDUSTRY REPORT • SECOND QUARTER 2019

John Jackson, host of the Discovery Channel’s TV show “Out Da Bayou,” addresses the crowd.

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River Parishes Community College received a 2018 Post-Secondary Achievement Award.

2018 GBRIA Craft Workforce Development Award recipients GBRIA BEGAN RECOGNIZING contractor companies that invested time and money into workforce development in 2007 through the Craft Workforce Development Awards program. Nominees present their workforce development programs to GBRIA’s Contractor Workforce Development Committee. Based on the committee’s evaluation, a nominee can receive an Award of Excellence, Merit or Recognition. Nominees are categorized by the type of work performed and then grouped into division sizes based on the total number of hours worked, grouping similarly-sized companies together. The highest-scoring company in each division also receives the “Best of Division” Award. GBRIA began recognizing high schools that incorporated craft training programs into their curricula in 2015. High schools are grouped in division sizes based on student-body size with similarly-sized schools grouped together. A craft training instructor from each division is also selected as a “High School Craft Educator Champion.” 2018

was the first year that post-secondary institutions also received awards. Individuals who receive nominations based on their dedication to workforce development are also recognized as Craft Workforce Development Champions. Nominating plants are eligible to receive the Most Valuable Plant Award based on its workforce development efforts and one member of GBRIA’s Contractor Workforce Development Committee is recognized as the Most Valuable Player for his or her efforts on the committee. GBRIA held its 11th Annual Craft Workforce Development Awards banquet on Thursday, Sept. 14, 2018 at Renaissance Hotel in Baton Rouge, Louisiana. GBRIA members that nominated contractors or schools for their workforce development or craft training programs include: BASF, Dow Chemical Company, Eastman Chemical, ExxonMobil Baton Rouge, Nucor, Olin Blue Cube Operations, Occidental Chemical Convent, Occidental Chemical Geismar, REG, Shell Convent, Shell Geismar and W.R. Grace & Co.

GBRIA Craft Workforce Development High School Awards Division I: Doyle High School – Award of Excellence West Feliciana High School – Award of Excellence Albany High School – Award of Merit Brusly High School – Award of Merit Donaldsonville High School – Award of Merit French Settlement High School – Award of Merit Louisiana School for Agricultural Sciences – Award of Merit Livonia High School – Award of Merit Maurepas High School – Award of Recognition Division II: Central High School – Award of Excellence Live Oak High School – Award of Excellence St. James Parish Schools Career Center – Award of Excellence Plaquemine High School – Award of Merit Walker High School – Award of Merit 1012industryreport.com

Continued on page 13

10/12 INDUSTRY REPORT • SECOND QUARTER 2019 39

Issue Date: 2Q Ad proof #3

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Division III: East Ascension High School – Award of Excellence St. Amant High School – Award of Excellence Dutchtown High School – Award of Merit

GBRIA High School Craft Educator Champions Dr. Paul Theriot, West Feliciana High School – High School Craft Educator Champion for Division I Billy Doiron, Live Oak High School – High School Craft Educator Champion for Division II Kiesha Nall, East Ascension High School – High School Craft Educator Champion for Division III

Craft Workforce Development Post-Secondary Achievement Award Recipients Associated Builders and Contractors, Pelican Chapter Baton Rouge Community College River Parishes Community College

Craft Workforce Development Awards General Construction & Maintenance Category Division I: Action Industries, Inc. – Award of Recognition Volks Constructors – Award of Recognition

Turner Specialty Services received the Division II Best of Division Award.

Division II: Excel Modular Scaffold and Leasing – Award of Merit

Specialty Trades (Hard Craft) Category Division I: Bevel Tech Group – Award of Recognition Westgate, LLC – Award of Merit Division II: MMR Constructors – Award of Excellence ISC Constructors – Award of Excellence Pala Interstate – Award of Merit

Technical Support Category Division I: ControlWorx, a John H Carter Company – Award of Merit Division II: Turner Specialty Services – Award of Excellence Premium Inspection and Testing – Capitol Division – Award of Merit HydrochemPSC – Award of Recognition Thermon, Inc. – Award of Recognition Total Safety, US – Award of Recognition

Best of Division Awards Turner Specialty Services – Best of Division II Jacobs – Best of Division III

EXCEL – Award of Excellence

Craft Workforce Development Champions

Jacobs – Award of Excellence Turner Industries Group LLC – Award of Excellence Brown & Root Industrial Services – Award of Merit Zachry Group – Award of Merit

Civil and Structural Category Division I: Barriere Construction Co., – Award of Merit Hoist & Crane Service Group – Award of Recognition Specialty Trades (Soft Craft) Category 1012industryreport.com

Vehicle Damage

Employee Downtime

Vehicle Downtime Lawsuits

Personal Injuries

Increased Vehicle Insurance Rates

Decreased Productivity

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Westgate LLC - Best of Division I

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FOCUS

MAINTENANCE / RELIABILITY / TURNAROUNDS tor’s portfolio is on the Gulf Coast, much of the rest is in the Midwest and along the East Coast, and about half of that is in maintenance work. “We’ll do about $50 million a year just for DuPont in about 20 or so locations,” McManus says.

“It’s a work in progress. It’s a lot of steps and a lot of rules.” DON KADAIR

JOHNNY HOLIFIELD, CEO, Specialty Welding and Turnarounds (SWAT)

Taking expertise on the road Far-flung turnaround, maintenance contractors tackle culture shock and new environs. By SAM BARNES

here others see a roadblock, Johnny Holifield sees an opportunity. That’s why his troupe of Southernborn turnaround specialists can be found in some unusual places these days, whether it be California, Michigan or even Alaska. Specialty Welding and Turnarounds’ biggest recent move has been to the Golden State, and while California’s Senate Bill 54— passed in 2014—seems to exclude nonunion, “outsider” contractors, SWAT used an existing job there

as leverage and set up a permanent office. SB 54 requires refineries in California to use a “skilled and trained workforce” trained at one of the state’s recognized apprenticeship programs, which are largely union controlled. “We knew we were equipped to handle the challenge of geographic expansion,” says Holifield, SWAT’s CEO in Gonzales. “While many of our larger competitors moved out of California when SB 54 took effect, we formed a partnership with four different state labor unions: Local 342 and Local 549 in Martinez and Local 250 and Local 92 in Carson.”

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The decision seems to be paying off. With more than 500 welders, pipefitters and boilermakers working in the state, SWAT exceeded 400,000 man-hours in its first year of operation. The company has subsequently recruited seasoned turnaround manager Spencer Moak to oversee the region, and opened a new office in Signal Hill, Calif. It expects to double its business on the West Coast in 2019. SWAT’s story of expansion is becoming commonplace, as Louisiana maintenance and turnaround contractors are journeying in greater numbers to other areas of the U.S., as well as international locales. Most of the time, they’re following their existing client base to other plants. As for the owners, they’re attracted to the contractors’ unique skill sets and stellar productivity rates. Fred McManus, chief operating officer at Brown & Root in Baton Rouge, says much of his company’s East Coast work is for long-time client DuPont USA. While about 40% of the contrac-

TRANSPLANTING THE CULTURE Some states and regions are worlds apart with respect to the labor environment and other workplace dynamics. That’s why farflung turnaround and maintenance contractors must be malleable and adaptable to achieve a sustainable business model. While the move to California was a no-brainer for SWAT, as it already has more than $100 million in revenue booked for 2019, working in a union environment brought with it some unique challenges for a Gulf Coast-based “merit shop” contractor. For one thing, SWAT had to sign an agreement with various unions in the state to abide by their bylaws. “It’s a work in progress,” Holifield says. “It’s a lot of steps and a lot of rules. You can’t even bring fabrication from a shop outside of California unless it’s from a union arm. We have to participate in their apprentice programs and we have to prove that we have qualified labor. We also have to show that our guys are qualified and that they are dues-paying members.” SWAT hired personnel in both Signal Hill and Gonzales to handle the additional administrative functions and paperwork. Perhaps the biggest adjustment has been the requirement that SWAT hire local union members in certain situations. After all, the company prides itself on its rigorous employee vetting process. Back home, “if they don’t come recommended, they don’t get hired,” Holifield says. Therefore, Holifield seeks to maintain SWAT’s culture of safety and productivity by bringing new hires to the company’s various local offices for indoctrination. “ They don’t know our culture and 1012industryreport.com

DON KADAIR

our safety values and how we run a job,” he says. “Some of the guys are great and some of them aren’t so great, so we have to work through it.” As for Brown & Root, it hires almost exclusively from the local area, given the long-term nature of its maintenance projects. That means it must contend with differing levels of “human metrics”: workforce availability, quality and training. The contractor trains its new hires on methodology and metrics during weeks and months of indoctrination into the corporate culture, along with job- and task-specific training. “Cultures exist wherever you go, and either you’re going to allow it to continue or you’re going to influence that culture,” McManus says. “In most cases, we want to influence that culture. Therein lies our real challenge—how do we make sure that we influence the culture in the way we want and need.” At its East Coast sites, Brown & Root has struggled with attracting the younger workers necessary

“We’ll do about $50 million a year just for DuPont in about 20 or so locations.” FRED MCMANUS, COO, Brown & Root

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to replace retiring baby boomers. McManus says the average age of a maintenance employee there is north of 55. “It’s more difficult to get younger folks to plug in and be interested in the work that we do, so our workers are staying longer,” he adds. “I have mechanics that are 70 years old, but love coming to work every day.” Stephen Toups, president of Turner Industries in Baton Rouge, says the workforce problem is widespread. “The biggest thing for industry right now is letting people know the opportunity, getting them trained and providing a path forward,” Toups says. “It’s electrical, it’s carpentry, it’s pipefitting, it’s welding, it’s the sale of anchor bolts. The biggest challenge is letting people know the killer opportunities that are out there.” IN THE END, THE WORK IS THE SAME No matter the local hurdles to be cleared in regard to regulations, hiring and the corporate culture, the

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FOCUS: MAINTENANCE / RELIABILITY / TURNAROUNDS work is much the same once inside a significant challenge in the face communicating, your metrics are the plant gates, Turner’s Toups says. of workforce availability issues and good, and you’re letting them know “You don’t really have to deal with other regional dynamics. what’s happening before it happens, that outsider mentality ... not in the For all of its maintenance conthe owner is happy. You’re being industrial world. If you go to one tracts, Brown & Root follows severproactive in reporting things.” of our maintenance sites in Illinois, al predetermined Key Performance or a maintenance site in most other Indicators (KPIs) that it establishes, FAR FROM HOME places in the U.S., there’s going to be monitors and communicates. Since SWAT’s Gulf Coast-based people from Louisiana and Texas. “Every quarter we sit down with employees are typically working It’s very clear. You can either weld or you can’t. You can either be a carpenter or you can’t. You can either “The biggest challenge is build scaffolding or you can’t.” SWAT’s Holifield agrees. “No letting people know the killer matter where you are, whether opportunities that are out there.” you’re in Louisiana or California, STEPHEN TOUPS, president, Turner Industries the work is the work.” McManus says the National Center for Construction Education and Research (NCCER) plays a our key customers and review these projects for months, they’re fresignificant role in standardizing metrics and say, ‘Hey, we’re doing quently away from home for extendworker quality in the industrial OK here. Here’s an opportunity for ed periods of time. That’s because setting, keeping it comparable across improvement, or here’s what we’re their jobs are spread across the most regions. going to do to continue to improve entire U.S., in locales like Michigan, As such, Brown & Root seeks and make it better.’ Minnesota, Kentucky, New Mexico to maintain a target percentage of “You have this ongoing dialogue and Alaska. NCCER-certified workers at its with your customers to establish or As a result, family-related issues sites. also tracks variety of #1 proreview those metrics, and to make are an ongoing concern. “Those emIssueIt Date: Q2 aAd proof • Please respond by e-mail or fax to withensure your approval or minor revisions. ductivity-based metrics sure that you’re staying in touch,” ployees involved in pre-turnaround • AD WILL RUN AS IS unless approval or final revisions that necessary standards are met, McManus adds. “As long as you’re preparations might be at the site for are received by the close of business today. • Additional revisions must be requested and may be subject to production fees.

three to five months before a turnaround even begins,” Holifield says. “Then the outage comes, and it’s a distinct window of time in which we have to perform. That’s when we man-up and ramp up to the high numbers. “So, if a planner goes out there before the jobsite, he could ultimately be there a year,” he adds. “He plans, establishes manhours and resources and orders the material. It’s hard and you’re trying to do the best you can to take care of them, but it’s a business and when we make a commitment to a customer, we’re asking these guys to be gone for months at a time.” Holifield’s Gulf Coast-based employees also endure a bit of a culture shock when traveling to some regions. In California, for example, the cost of living is significantly higher. “We increased their per diem so they could afford to stay there, but the big incentive for the guys is the base rates,” he says. “They make a lot more money on the West Coast than on the Gulf Coast.”

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An ounce of prevention— or a full overhaul

veryone knows that preventative maintenance is critical in every industry, yet companies often do the bare minimum to keep business moving. The reality is a lack of service and regular maintenance can be expensive and, even worse, can cost lives. Implementing a good maintenance program increases runtime and reduces the chance of unscheduled downtime, often saving companies thousands of dollars annually. From a small company founded in 1947, Danos has grown into a trusted strategic partner for oil and gas operators around the globe. Danos is a third-generation familymanaged oilfield service provider with 15 service offerings: production workforce; materials management; shorebase and logistics; specialized consultants; regulatory auditing and measurement; project management; automation; instrumentation and electrical; construction; fabrication;

coatings; scaffolding; mechanical maintenance; valve and wellhead; and power generation. Danos’ team of mechanical experts provides a host of preventative maintenance— including diesel, natural gas and slow speed— for onshore and offshore customers. Their mechanics perform quarterly maintenance, repairs, inspections and overhauls on all customer-owned equipment. In addition, coatings, instrumentation and electrical, and construction crews provide maintenance for customers as needed. It is imperative that oil and gas companies track, monitor and schedule routine maintenance on their equipment. Danos’ highly trained team has the experience to provide peace of mind with their extensive technical knowledge and industry-leading service. Visit danos.com to get your systems on the right track.

TRUE STORIES FROM THE FIELD Annual inspection averts major failure While performing the annual inspection of a natural gas generator on a customer’s offshore platform, the Danos team noticed a strange noise coming from the gear drive on the front of the generator engine. They determined that the engine was damaged internally – resulting in a complete overhaul. Routine annual inspections are more than an item to check off a list – that inspection averted further engine damage and even potential injuries.

Coatings team provides customer cost savings Using key performance indicators tied to Danos’ Quality Management System, a Danos coatings team saved a customer $2,000 per week with performing regular platform maintenance. Utilizing a daily man hour report, a cost performance index, schedule performance index and contractor efficiency norms, Danos found areas of inefficiencies and actions needed to increase contractor time on tools, while shortening crew work time. They produced a report that provided cost-effective ways to perform and manage these types of projects.

FOCUS: MAINTENANCE/RELIABILITY/TURNAROUNDS

Leaving nothing to chance

By SAM BARNES

Tiring of unplanned downtime, industry moves to a predictive maintenance model.

CHERYL GERBER

ime is money, and that’s entirely too evident in the world of industrial maintenance. Planned turnarounds at Gulf Coast plants account for a mere 25% of maintenance downtime, with the remainder coming from unplanned breakdowns, outages and shutdowns. While planned turnarounds directly impact an owner’s bottom line, the real financial danger comes from unexpected events. That’s why industry has begun to turn its collective eye to a “predictive maintenance” strategy in the last five years, as it seeks to transform maintenance from a time-based process to one based on need. Predictive maintenance incorporates predictive analytics and machine-learning algorithms based on historical and real-time data to identify specific issues. In addition to helping prevent downtime, a predictive maintenance approach can better identify true maintenance needs and can be useful in industries where the uptime of critical assets drives the bottom line. In Luling, Bayer Crop Science hopes to become an industry leader in this regard, as it integrates three key components of predictive maintenance during its current $975 million fertilizer plant expansion, to be completed later this year. Formerly owned by Monsanto, the plant hopes to change the way equipment health data is integrated into its business systems for better decision-making and increased asset availability. Bayer believes it can use the new production facility as a means to develop better systems for reduced downtime across all its plants. In the process, it hopes to increase equipment availability, reduce staff exposure to hazardous locations and reduce the risk of cross-contamination with the existing facility. Derek Taravella, the maintenance and reliability systems technology specialist for Bayer Crop Science, is working to support integration activities on a global scale, developing a new “one company strategy” for maintenance and reliability systems.

Derek Taravella, the maintenance and reliability systems technology specialist for Bayer Crop Science, is working with the organization to support integration activities on a global scale, developing a new “one company strategy” for maintenance and reliability systems.

He categorizes predictive maintenance into three categories: Advanced Instrumentation for acquiring data and information from the assets, Asset Performance Management (APM) for analyzing the data, and Computerized Maintenance Management Systems (CMMS) for managing the execution of the prescribed maintenance. Taravella believes these solutions work best when they’re fully integrated, meaning they’re linked from the shop floor all the way to the technician who actually executes the work. In that regard, he feels Bayer has made significant progress. “We’re in the process of integrating Emerson advanced instrumentation technologies, such as our vibration monitoring and instrumentation diagnostic tools, with our APM tools. Our vision is to integrate these tools with the APM tool, and then the APM tool with the CMMS system.” In Geismar, BASF began enhancing its Predictive Maintenance programs two years ago, driven largely by the availability of new high-tech tools. Scott Waguespack, BASF-Geismar’s site technical expertise manager, says the company rolled out a new corporate strategy in December that focuses heavily on digitalization

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and predictive maintenance, chiefly through new wireless infrastructure. Waguespack is responsible for technical expertise, resources and programs as they pertain to the plant’s fixed and rotating equipment. BASF’s new investment represents a sizeable shift for the company from preventive (or time-based) maintenance to predictive. “If you go back 10 to 20 years, our maintenance programs were still very labor intensive,” he says. “They were route-based, meaning you had personnel that completed a migration route or a sampling route. You had to have people out there obtaining the data and then you came back and analyzed that data, piece by piece.” The biggest advancement has been in the implementation of wireless technology, a significantly more cost-effective method for monitoring equipment. Before, it was an expensive proposition to hard-wire a system and run it back to the control system, then route the information to the technicians, who would then analyze the data. “You can implement wireless infrastructure more cost-effectively and have wireless transmitters going to a hub, that then goes to a database. At that point, you’re only

looking for the outliers (anomalies), so that’s a huge efficiency gain.” BASF implemented its first full site wireless infrastructure network two years ago, and is currently in the middle of its second iteration of the technology. “If you set the network up correctly, you can put virtually anyone’s sensors in the field and have them talk to the network,” Waguespack says. “Then the network gets the data back to you.” A big fan of the methodology, he says predictive maintenance puts the focus squarely on safety, efficiency, reliability and asset effectiveness, with reliability being the primary driver. “You’re more efficient and safer because you eliminate exposures, and you’re more effective with your assets,” he adds. “But to make your equipment more reliable, you need to be able to predict those events and monitor their health much better.” TOOLS OF THE TRADE Will Goetz, vice president for digital transformation at Emerson U.S., a predictive technology provider and consultant, says the time-based method of maintaining equipment is based on outdated principles. Goetz helps companies examine their operations in order to find ways to improve, lower energy costs and lower emissions. “The theory behind preventive (as opposed to predictive) maintenance is based upon the old World War II approach to equipment, where they determined that equipment was going to have a pre-defined breakdown cycle. In that case, you perform maintenance on a periodic basis and thereby catch them just before they break.” That approach, however, has been debunked by a number of studies, as the time-based approach is ultimately more costly since repairs are often performed on assets that don’t need repairing. Alternatively, a host of predictive technologies can provide information about the health of the system, and provide advance warnings when things go awry. Technologies such as oil analysis can yield more than six 1012industryreport.com

DON KADAIR

months of planning time, and vibration analysis can yield three to six months. “You can get significant advanced notice that an asset is having an issue, then plan to work that with the production cycle,” Goetz says. “When it’s done really well, you’re not just determining that an asset has a problem, you can get to the point of prescriptive maintenance.” Emerson has a broad portfolio of products that support the implementation of predictive maintenance processes, as well as provides consulting services to help companies adapt to the predictive model. While at a plant, Goetz and his team help set up a CMMS to ensure that the data truly represents the assets. At most locations, the implementation of the predictive maintenance methodology can take anywhere from six months to a year. In the process of designing a predictive maintenance strategy, a Failure Mode and Effects Analysis is usually conducted to determine which assets require predictive maintenance and which are appropriate for time-based, or preventive, maintenance.

BASF’s Scott Waguespack says the company rolled out a new corporate strategy in December that focuses heavily on digitalization and predictive maintenance, chiefly through new wireless infrastructure.

Bayer’s Luling facility uses a handful of Emerson products to identify performance issues associated with instrument and valve health, wireless predictive vibration monitoring and consolidated equipment health alerts. The company is investing $10 million to $14 million in a fully integrated predictive maintenance solution as part of its current expansion, which will be transferable to its global operations.

CULTURE CHANGE BASF’s Waguespack says today’s predictive maintenance technology is more user friendly, and as such doesn’t require a lot of laborious training. “There is some training for our folks, but the devices have come so far in the last few years that it’s almost like your home electronics,” he adds. “Now, things are infinitely easier, and you can actually set up some of these devices from your cell phone.” Nonetheless, the shift from reactive to predictive maintenance represents a significant cultural change for many plants. “In some cases, you’re working on equipment that did not fail, so you’re asking operations to take something out of service to avoid a much bigger issue down the road,” Waguespack says. “It doesn’t necessarily change your planning schedule or your maintenance execution process, but it does change the maintenance culture.” As plants transform their maintenance operations by incorporating more technology-based applications, one thing is clear: the implementation

of predictive maintenance methodology will likely require a dramatically different skill set from its workers. That’s good news for the Millennial, as Taravella says Luling’s Bayer plant will need workers who are computer literate and comfortable using the technology. This is particularly important as Baby Boomers retire in greater numbers. “It’s definitely one of the discussions that we’ve had,” he adds. “How is this going to change how our people work? And how do we make sure we’ve got the right people and the right skill sets to utilize these tools? “So far, it has been pretty well received. Obviously, a lot of what we’re doing is still early, because it is a production facility still under construction. But we’re making a lot of progress and steps in a direction that I think will set us up for the future.” While some companies have managed to standardize predictive maintenance processes on a national or global scale, Emerson’s Goetz says local site leadership typically drives implementation.

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INSIGHT

A tenuous recovery

rude oil has recently moved to some of its highest pricing levels since last October, when prices touched close to $85 per barrel (“Bbl”) on the Brent trading hub. This pricing surge led to a major late fall correction that slashed prices, at one point, by as much as half. Currently, West Texas Intermediate (“WTI”) prices are marching upwards again to around $62/Bbl, while internationally-based Brent is closing in on $70/Bbl. Gasoline prices are also marching ever higher towards a national average of around $3 per gallon. This recovery, however, looks a lot like the one experienced late last year, and is tenuous and based, in large part, on geopolitics. Consider that OPEC’s commitment to additional production cuts toward the end of last year has helped stymie, but not eliminate, the growth in global crude oil inventories. The geopolitical uncertainty in Venezuela and Iran adds a few dollars per barrel to prices on any given day. On the refined product side, typical spring refinery maintenance and production slate reconfigurations to summer gasoline are pushing prices upward. Refinery challenges in meeting more stringent international marine fuel standards are also re-

Lastly, prices at the $80/Bbl level can stimulate accelerated U.S. unconventional drilling activity and more unconventional supplies that ultimately make their way into not just U.S. but global markets. Thus, the closer prices edge to what appears to be their natural “cap” of $80/Bbl ($70Bbl on a WTI basis), the more likely the downward price correction. Second, the global economy is struggling to find its footing over what has been a relatively long business cycle. China, in particular, has been plagued with slowing economic growth that ripples throughout the rest of Asia. While recent Chinese industrial production numbers have “bounced” out of their contractionary range, this recent industrial output gain was purchased through additional central government spending and borrowing: Once that stimulus stops, the slowing economic trend in the Chinese economy will likely continue. In addition, Europe is now facing significant economic growth challenges with Germany, the anchor economy of the Eurozone, anticipating less than 1% a year economic growth over the upcoming year. A slow-down in economic growth in both the Eurozone and China will put a lid on significant increases in crude oil prices.

THE ASSOCIATED PRESS/ NATACHA PISARENKO

DAVID DISMUKES

ported to be creating a new wrinkle in refinery operations and efficiencies that are also impacting supplies and driving up prices. Midwestern floods are exacerbating these seasonal increases by increasing the complexity of securing ethanol stocks for gasoline blending purposes. The outlook for future crude oil prices over the summer months is more complicated, particularly in what can be considered the later parts of an increasingly strong, yet very mature (almost 10-year) global economic business cycle. There are several considerations to keep in mind when thinking about future crude oil prices as markets move from the spring to early summer. First, global energy markets have shown pretty clearly that they do not like Brent crossing the $80/ Bbl threshold, which translates to around $70/Bbl on a WTI basis. The last time this happened—in early October of last year—the market pulled back quickly and decisively. Prices at this level tend to dampen energy demand and increase crude oil inventories, as they started to do toward the end of 2018. Equity analysts and investors are wary of the upcoming impacts that currently rising wages and energy prices will have on 2019 corporate earnings.

Saudi commitments to maintaining production cuts and geopolitical unrest in Venezuela (above) are two primary reasons crude oil prices are holding up.

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Third, U.S. unconventional energy production is still a global force with which to be reckoned. The U.S. is now the leading crude oil producer in the world at around 11.7 million Bbls per day (“MMBbls/d”) and will likely reach 12 MMBbls/d by the end of 2019. The U.S. is also a major crude oil exporter, putting over 2 MMBbls/d to global markets as well as several million barrels of refined product on any given day. Higher energy prices only increase the incentives to produce more, particularly as prices reach the $80/ Bbl cap. U.S. production represents a form of “just-in-time” inventory that can be quickly and effectively delivered to the market. The fact that there are over 7,000 drilled but uncompleted unconventional wells awaiting commercial operation only underscores the just-in-time nature of this production. Thus, as we move through the middle part of the year, energy markets are much in the same place they were last year: wanting to move higher, but constrained by important fundamentals, the most significant of which is continued prolific U.S. unconventional production. There are two primary props holding prices up right now: Saudi commitments to maintaining production cuts and geopolitical unrest in Venezuela. Both are tenuous, since the Saudis recognize their own precarious position in the Middle East and their need to stay in good graces with the U.S., and the hope that the issues in Venezuela will find a resolution sooner, rather than later, particularly as the humanitarian crisis becomes increasingly precarious. David Dismukes is a professor and the executive director of the Center for Energy Studies at LSU. He holds a joint academic appointment in the department of environmental sciences where he regularly teaches a course on energy and the environment. 1012industryreport.com

INDUSTRY

LEADER

Learn more at: www.iscgrp.com BATON ROUGE / BEAUMONT / HOUSTON / LAKE CHARLES

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10/12 INDUSTRY REPORT • SECOND QUARTER 2019 53

INSIGHT

Is it dangerous to work in industry? Are plants harming the environment?

CONNIE FABRÉ

ave you ever heard someone ask one or both of these questions? Did you feel equipped to discuss the issues, or did you dodge the conversation? Most people working in industry enjoy the prosperity that their jobs have brought to them and their families; however, when people claim that industrial jobs are unsafe or that industry is harming our environment, some might wonder whether there’s any merit to these claims. Although the vocal few are able to cause people to pause and question, the data does not support their claims. When it comes to safe jobs, industrial plant, maintenance and construction work fare better than working in many service jobs. The Greater Baton Rouge Industry Alliance recently celebrated achievements in the safety of industrial plants and contractors along the 10/12 corridor with our 23rd Annual Safety Excellence Awards. This year’s nominees represented the work of 137,000 employees who worked 318 million hours during 2018. Their Total Recordable Incident Rate (TRIR) was 0.22, which is a remarkable achievement.

The TRIR number measures the number of people who sustain a nonfatal injury among 200,000 hours worked. In 2017 (the latest information available from OSHA), Louisiana chemical plants and refineries averaged a 0.6 and private construction a 1.2. As a comparison, the arts and leisure industry had a 5.6, hospitals a 3.6 and government construction a 4.8. A review of private industry fatalities shows that goods producing jobs had 39 fatalities and service providing jobs had 67 fatalities in 2017. The category of “goods producing” reports zero fatalities for manufacturing and 23 in construction (all construction, industrial is not broken out). So, how does this industry achieve such a record? Sharing best practices and tackling common issues through GBRIA and other associations is a hallmark of this industry. However, it is each company and each employee’s attitude and focus on safety that makes the difference. Companies expend incredible resources to ensure that employees meet daily, complete Job Safety Analyses, Hazard Analyses, and training upon training in every aspect of hazards possible and how to avoid injury. Companies have pep rallies for safety and are unrelenting in convincing employees that ZERO incidents is an achievable goal. The communities in which industrial facilities are located also fare well in health outcomes. For example, in looking at the 2019 County Health Rankings Key Findings Report at countyhealthrankings.org, it’s clear that overall health outcomes in industrial parishes fare better than rural parishes. Northeast Louisiana’s rural parishes fare the worst in these health rankings.

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The Louisiana Department of Health’s Annual Health Report Card for 2017 shows that cancer incidence rates are often lower in industrial parishes than rural parishes. Many rural parishes in North Louisiana have low cancer incidence, but many rural parishes of coastal Louisiana have the highest rates. This is almost opposite their overall health rankings. Contradicting and puzzling, isn’t it? In the 2019 County Health Rankings Key Findings Report, Ascension Parish, where there are over 30 industrial sites, ranked second-best parish in the state for its health outcomes in 2018. St. Charles Parish, which also has a large concentration of plants, achieved the rank of sixth best. Although I’m no health scientist, I know that there are many factors contributing to cancer and overall health outcomes. I believe that the presence of industrial plants seems to have more positive effects on health than negative effects. Have you ever heard of an industrial hygienist? These are scientists and engineers committed to protecting the health and safety of people in the workplace and the community (visit aiha.org). One of the duties of industrial hygienists at industrial facilities is to place monitoring equipment on employees at regular intervals to test for any chemicals that could cause a health issue. If plants were emitting amounts that caused problems for people, their own employees would be identified first. Don’t you think that if industrial employees, who go into plants every day for years upon years, were getting diseases at a rate greater than the general population, someone would have noticed? In fact, employee data actually has been used to identify problems, and industry has

self-disclosed to protect others. One could say that the communities on the fence lines of industrial facilities are protected by the thousands of employees, suppliers and contractors working inside Louisiana plants every day because the employees provide the data to show that exposure to what is being manufactured is safe. The fact that cancer rates in St. Charles and St. John parishes fall in the lowest incidence category but also have significant numbers of industrial facilities located there should give pause to people critical of industrial growth in this area. Some of the other heavily industrial parishes such as Ascension, East Baton Rouge and Calcasieu have the next lowest rates. In addition to providing good jobs, industrial companies do much to support and invest in the communities in which they locate. From whooping crane reintroduction, to Certified Wildlife Habitats, and thriving cattle herds and farming on plant property, the land and wildlife next to plants is thriving. Industrial companies sponsor many United Way programs, community health and wellness fairs, festivals, music groups, schools and much more as a means to ensure that people in their communities thrive as well. Maybe it’s my “rose colored glasses” or the statistics I’m reading, but it seems to me whether it’s health and wellness outcomes, sales and property taxes, or other factors that make a community thrive, the presence of industrial facilities seems to improve the quality of life, much to the chagrin of the vocal few who try to use false claims and fear to convince us otherwise. Connie P. Fabré is the executive director of the Greater Baton Rouge Industry Alliance Inc. 1012industryreport.com

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CLOSING NOTES COMPANY NEWS

PORT NOLA WINS NATIONAL PLANNING AWARD The Port of New Orleans’ Strategic Master Plan, Port NOLA Forward, will earn a Silver 2019 National Planning Achievement Award for Economic Development Planning from the American Planning Association for identifying and seizing upon economic growth opportunities. The two-tier awards are selected through a juried process. Achievement Awards recognize accomplishments in areas of specialization within the planning profession. For more than 50 years, the awards have recognized outstanding community plans, planning programs and initiatives, public education efforts and individuals for their leadership on planning issues. NOLA is one of 20 Achievement Award recipients this year.

The port also received the Plan Excellence Award in October from the APA’s Louisiana Chapter for its strategic master plan, which aims to deliver significant, sustained economic benefit throughout the Port’s three-parish jurisdiction: Jefferson, Orleans and St. Bernard Parishes.

CN INVESTING MORE THAN $95 MILLION IN LOUISIANA INFRASTRUCTURE CN plans to invest more than $95 million in Louisiana in 2019 to strengthen its rail network across the state. Plans include developing the Positive Train Control System designed to prevent collisions and derailments, and beginning a multiyear project to rebuild the two-mile bridge over the spillway near the southwest shore of Lake Pontchartrain. The railway company will also replace more than 15 miles of rail, install 55,000 new railroad ties,

56 10/12 INDUSTRY REPORT • SECOND QUARTER 2019

rebuild 18 road crossing surfaces and do maintenance work on bridges, culverts, signal systems and other track infrastructure. The Louisiana investments are part of CN’s 2019 record $2.9 billion capital spending plan nationwide to handle growth in energy and other sectors. LINDE PLANS $250 MILLION HYDROGEN PLANT IN ST. JAMES PARISH Industrial gases and engineering company Linde has announced its plans to build a $250 million hydrogen plant in St. James Parish. The project was first initiated by Praxair prior to its merger with Linde. It is expected to be one of the largest hydrogen plants in the nation. The new plant will integrate with Linde’s Mississippi River corridor hydrogen pipeline system, which is connected to some of the leading chemical manufacturing companies

in Louisiana. Once operational, this project is expected to enhance Linde’s Gulf Coast hydrogen capacity to more than 1.7 billion standard cubic feet a day. Construction of the new facility is expected to begin later this year, with commercial operations set for 2021. INDUSTRIAL FABRICS OWNER ACQUIRES GEC INC. Local engineering firm GEC Inc., known for its expertise in state transportation infrastructure, is slated to be sold to investor and businessman Cary Goss, owner of Baton Rouge-based Industrial Fabrics, Inc. An attorney for Goss confirms the businessman has signed a Memorandum of Understanding to acquire the 33-year-old firm, and that a month-long due diligence process is underway. The sale is expected to close in early May. Terms of the deal are not being disclosed.

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CompanySPOTLIGHT

AD V E RT I SE ME N T

Dwayne Davis, Vice President, Maintenance & Reliability; Marcus Deal, President, Maintenance & Turnaround Groups; Mike Firmin, Vice President, Maintenance; Ross Campesi III, Vice President, Tunaround Services

BROWN & ROOT INDUSTRIAL SERVICES, LLC MAINTENANCE & TURNAROUND GROUPS ABOUT OUR COMPANY

When Brown & Root Industrial Services, LLC (“Brown & Root”) became a privatelyheld company in 2015, its new leadership team had a clear vision for the future: Create the most complete offering of industrial services backed by the most safety and operationally focused team in the business. Today, the Brown & Root team delivers a full spectrum of complementary solutions and is one of the only companies offering both dedicated maintenance capabilities and specialized turnaround services.

WHAT WE DO

Brown & Root is a complete provider of industrial services including engineering, construction, turnaround, maintenance and specialty services. Since 2015, the company has built an impressive pipeline of work. The team maintains an industry leading safety record and consistently exceeds customer expectations. As an example, the Turnaround team had its most successful year in 2018. Led by Marcus Deal, the group completed their fall turnaround season by onboarding and mobilizing more than 1,500 team members in less than three weeks and executing without a recordable incident. 1012industryreport.com

“We bring in proven leadership teams and empower them to execute at the highest levels of performance,” says Deal, president of the Maintenance and Turnaround groups. “As a result, our clients repeatedly entrust us to execute their critical projects. We’ve built a stellar reputation for delivering on our promises.”

WHAT TO EXPECT

Plans include a more significant presence in the midstream market as well as the build-out of additional infrastructure to support the company’s growing business and strategic initiatives. The company is also investing in new technologies to drive added efficiencies and cost savings for customers. The Maintenance and Turnaround groups utilize connected mobile worker and smart safety programs and recently brought on a new director of Reliability & Technology to lead the development of additional innovative capabilities. “As an operationally focused company, we always work to identify new solutions that increase consistency and help keep people safe and productive,” Deal says. “We’re actively partnering with our customers to identify other areas where we can apply technology to help save them time and money.”

TOP EXECUTIVES Marcus Deal, President, Maintenance & Turnaround Groups Mike Firmin, Vice President, Maintenance Dwayne Davis, Vice President, Maintenance & Reliability Ross Campesi III, Vice President, Turnaround Services

YEAR FOUNDED

Originally founded in 1919, Brown & Root Industrial Services became a privately-held organization in 2015 with new leadership and a vision to build the most complete offering of industrial services backed by the most safety and operationally focused team in the business.

HEADQUARTERS

2600 Citiplace Drive, Suite 500 Baton Rouge, Louisiana 70808

WEBSITE

BrownandRoot.com

COMPANY OUTLOOK

With thousands of dedicated and experienced team members working on more than 150 facilities throughout North America, Brown & Root is experiencing tremendous growth. The company has major execution centers in Baton Rouge and New Orleans, as well as Mobile, Alabama and Deer Park and Corpus Christi, Texas. Additional expansion is currently underway to support rapid growth in the company’s engineering, construction and specialty services businesses. The company will soon open two additional facilities in the Houston area and is also increasing its presence in the midstream sector. 10/12 INDUSTRY REPORT • SECOND QUARTER 2019 57

CLAIBORNE

CLOSING NOTES: PROJECT MAPS

Project by project

BOSSIER

WEBSTER

CADDO

($25M-$250M)

BIENVILLE

Active Louisiana industrial projects announced or proposed since Jan.1, 2014, with projected capital investment of $25 million to $250 million. Second line shows projected capital investment and direct new jobs. List is representative, not complete; statuses and costs change frequently. 1 Entergy (New Orleans East) $212M | 20 jobs Location: Orleans Parish Status: Pending

2 Ergon

$200M | N/A Location: St. James Parish Status: construction set to begin Q4 2019

3 Nucor upgrade (St. James)

$200M | N/A Status: completion end of 2019

4 First Bauxite

$200M | 100 jobs Location: St. John the Baptist Parish Status: announced June 2015, but still seeking financing

5 Cornerstone

$157.3M | N/A Location: Jefferson Parish Status: FEED

6 Kinder Morgan La. Pipeline expansion $151M | 0 jobs Location: Southwest Louisiana Status: permitting

7 BASF

$150M | 15 jobs Location: Ascension Parish Status: under construction (first phase of larger MDI production expansion)

8 Shell Norco

$150M | NA Location: St. Charles Parish Status: under construction

9 Praxair

$150M | 10 jobs Location: Ascension Parish Status: completion set for 2020

10 Occidental Chemical

$145M | 12 jobs Location: Ascension Parish Status: near completion

11 Air Products (Geismar)

$145M | 7 jobs Location: Ascension Parish Status: N/A

12 Westlake Chemical

$140M | N/A Location: Ascension Parish Status: N/A (PVC expansion)

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RED RIVER

DESOTO

13 Advanced Refining Technologies $135M | 325 jobs Location: Calcasieu Parish Status: project has been placed on hold, but is not canceled

NATCHITOCHES

14 BASF Phase 2 MDI Expansion

SABINE

$87M | Jobs N/A Location: Geismar Status: Begin Q4 2019; completion anticipated in 2021

15 Cleco/Cabot Corp.

$80M | 20 jobs Location: St. Mary Parish Status: broke ground October 2016 VERNON

16 Huntsman/Rubicon

$78M | 17 jobs Location: Ascension Parish Status: on hold awaiting construction

17 Florida Fuel Connection, LLC $75M | 50 jobs Location: Orleans Parish Status: Pending

BEAUREGARD

18 Gulf South Pipeline

$56.2M | 2-3 jobs Location: Calcasieu Parish Status: planning

19 ExxonMobil upgrades (Baton Rouge) $50M | N/A Status: Q1 2019 start

20 Air Products

$25M | N/A Location: Ascension Parish Status: under construction

CALCASIEU

21 Stupp Corp.

$22M | 128 jobs Location: Baton Rouge Status: N/A CAMERON

22 Southland Steel $18M | 70 jobs Location: Amite Status: N/A

23 Arcosa Marine

$7.5 M | 49 jobs Location: Madisonville Status: 2019 start

BLUE = NEW PROJECT ADDED SINCE LAST EDITION

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UNION

MOREHOUSE

WEST CARROLL EAST CARROLL

LINCOLN

OUACHITA

RICHLAND MADISON

JACKSON

FRANKLIN

CALDWELL

TENSAS WINN