10/12 Industry Report [Q3 2016] by Baton Rouge Business Report

THIRD QUARTER 2016

INDUSTRYREPORT REPORT

The productivity

CALCULUS Why worker productivity is in decline and what contractors can do about it.

PLUS:

• Site Selection 101 • Cooperation on the coast • The lost generation

Lee Jenkins Vice President Performance Contractors

• AD WILL RUN AS IS unless approval or final revisions are received by the close of business today. • Additional revisions must be requested and may be subject to production fees. Carefully check this ad for: CORRECT ADDRESS • CORRECT PHONE NUMBER • ANY TYPOS This ad design © Louisiana Business, Inc. 2016. All rights reserved. Phone 225-928-1700 • Fax 225-926-1329

Over 30 years of providing the highest quality and most reliable Onsite Field Machining, Mechanical & Fabrication services in the industry

SERVICES FIELD MACHINING Flange Facing | Line Boring | Milling Drilling & Pipe Cutting | Beveling MECHANICAL Equipment Installation | Repair & Maintenance Laser Shaft Alignment | Consulting (In house and on-site) MACHINE SHOP General Machine Shop Services | CNC Parts Custom Parts & Repairs FABRICATION Fabricated parts including structrual and piping, weld repairs, overlays, common and exotic materials and alloys LASER INSPECTION Part and/or component inspection | Comparison to CAD drawing | Highly accurate measurment

From routine jobs to middle of the night crisis jobs, Portable Machine Works has a solution for you!

GIVE US A CALL TO DISCUSS YOUR PROJECT @ 225.744.4444 www.portablemachineworks.com | 18230 Swamp Road, Prairieville, LA 70769 Phone: 225-673-5940 | Fax: 225-673-5942 | Toll Free: 800-256-1446

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10/12 INDUSTRY REPORT • THIRD QUARTER 2016

HEAVY CONSTRUCTION EQUIPMENT

SPECIALTY ATTACHMENTS

RENTALS AND SALES Bottom Line Equipment focuses on heavy construction equipment needs of every major section of the construction industry along the Gulf Coast including:

ENERGY • INDUSTRIAL • PETROCHEMICAL DEMOLITION • INFRASTRUCTURE • COMMERCIAL ST. ROSE, LA | BATON ROUGE, LA

SULPHUR, LA | BAYTOWN, TX

877.332.7187

WWW.BOTTOMLINEEQUIPMENT.COM 4

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

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10/12 INDUSTRY REPORT • THIRD QUARTER 2016

CONTENTS

Publisher: Rolfe McCollister, Jr. EDITORIAL Editorial Director: Penny Font Editor: Jerry Martin Director of Research: Sierra Crump Contributing Writers: Sam Barnes, Erin Z. Bass, Jen Bayhi-Gennaro, David Jacobs, Meredith Whitten Contributing Photographers: Lee Celano, Terri Fensel, Cheryl Gerber, Don Kadair, Collin Richie

The productivity

ADVERTISING Special Projects Manager: Jennifer Finley Account Executives: J.C. Applewhite, Angie LaPorte, Michelle Lawrence, Rebecca Robinson Marketing Director: Jennifer Guillot Advertising Coordinator: Lacie Thibodeaux Community Liaison: Jeanne McCollister McNeil

CALCULUS

PRODUCTION/DESIGN Production Manager: Melanie Samaha Art Director: Hoa Van Vu Graphic Designers: Tammi deGeneres, Melinda Gonzalez, Rachel Parker, Emily Witt

PAGE 30 LAUNCH

ICYMI Industry briefs

16 18

New products

Chemicals David Vitter gets a signature win with a new law regulating chemicals. Workforce The graduation of Louisiana’s first CWD class is a step forward for workforce development. Update Plans for a $1.85 billion methanol plant in St. James Parish remain on track.

The big picture Four enormous coke drums were offloaded in New Orleans after their journey from Spain.

Regulations With a crackdown on methane emissions looming, local oil and gas producers predict the EPA will soon target existing facilities.

Environment A new project at BASF’s Geismar plant is aimed at helping the monarch butterfly. People Meet Erick Knezek, PE, founder & managing partner of Truston Technologies Inc. in Lafayette.

NEWS

The Great Crew Change A lost generation of oil workers leaves few answers or options for the next boom. The LNG option With applications spreading from marine to rail to garbage trucks, LNG expands its role in the global fuel mix.

Cranes at work Competition, technology and safety are the key drivers in today’s heavy lifting industry. Cooperation on the coast Despite the lawsuits in the headlines, industry and environmental advocates have become critical partners in saving the Louisiana coast. Top shelf In building their specialty welding and turnaround business, Jimmy Quick and Johnny Holifield put the emphasis on workforce quality and productivity right from the start.

Site Selection 101 Site selection decisions rest on many factors. How does south Louisiana measure up?

Send your ideas and company news to editor@1012industryreport.com. 6

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

INSIGHT

Guest columnists weigh in on the impact of the Legislature’s tax changes, changing fuel consumption habits and what you should know about the new overtime law.

CLOSING NOTES

65 66 68

Executive moves

My toughest challenge Anne Duncan, Almatis Burnside

DON KADAIR

Why worker productivity is in decline and what contractors can do about it.

ADMINISTRATION Chief Financial Officer: Jonathan Percle Chief Innovation Officer: Curtis Heroman Business Manager: Adam Lagneaux Business Associate: Danielle Daly Office Coordinator: Debbie Lamonica Courier: Jim Wainwright Receptionist: Cathy Brown AUDIENCE DEVELOPMENT Audience Development Coordinators: Kenna Maranto, Brittany Titone A PUBLICATION OF LOUISIANA BUSINESS INC. Chairman: Rolfe H. McCollister, Jr. President and CEO: Julio A. Melara Executive Assistant: Millie Coon SUBSCRIPTIONS/CUSTOMER SERVICE 9029 Jefferson Hwy., Suite 300 Baton Rouge, LA 70809 225-421-8140 • FAX 225-928-5019 1012industryreport.com email: circulation@businessreport.com Volume 1 - Number 3

Company news Project maps Our maps of the megaprojects and medium-sized projects that are driving the industrial boom.

© Copyright 2016 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.

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“

SPECIALTY WELDING AND PIPING HEATER SERVICES BOILERS

Quality matters, Safety matters, Team matters, Our word matters. – JOHNNY HOLIFIELD

EXCHANGERS, TOWERS, AND DRUMS ASME & NBIC CODE REPAIRS

”

24 HOUR EMERGENCY RESPONSE

AS SEEN IN GREATER BATON ROUGE BUSINESS REPORT’S 2016 TOP 100 PRIVATE COMPANIES

Johnny Holifield,

211 E. Industry Street | Gonzales, LA

(225) 644-1200 | SWATservice.com

PRESIDENT

Jimmy Quick, VICE PRESIDENT

IN THIS ISSUE

Blaming the millennials

I PENNY FONT EDITORIAL DIRECTOR

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

t’s so easy to blame it on the millennials. The hot topic this summer at the 2016 Petrochemical Engineering & Construction Conference in New Orleans was productivity—specifically how it’s noticeably declining and compounded by rising rates of turnovers and absenteeism. As with so many other sectors, the discussion at one point turned to a perceived poor work ethic among that generation. But as writer Sam Barnes’ cover story in this issue of 10/12 Industry Report points out, the problem runs deeper than that. Employment levels are unprecedented. Numbers of migrating skilled laborers are chasing higher wages along the Gulf Coast. An aging workforce is driving the loss of laborers with at least five or 10 years of experience. Increasingly rigorous safety protocols require greater chunks of planning time. And yes, there’s the millennial factor. Performance Contractors VP Lee Jenkins thinks the latter is less generational and more a function of experience. “I haven’t really seen that the millennials are nonproductive,” he tells our writer. “I think good employees are good employees, and they’re productive when they’re welltrained and prepared to do the job that’s out there. I think the key to being successful is minimizing newness on the job.” Regardless of the driver, the productivity problem runs deep. A May report from Construction Industry Resources notes 79% of companies reported productivity had not improved or had actually dropped more than 10%. But as is so often the case, challenges beget ingenuity. And many contractors are tackling the problem head-on—before the improving oil and gas market intensifies productivity declines. Fluor Corp., for example, has moved work off-site to lessen the burden of managing sizeable workforces. Sasol has partnered with community college and workforce systems to secure workers at the source of the supply.

Read our cover story, “The productivity calculus,” starting on page 30, for more innovative solutions. ALSO IN THIS ISSUE • Will the new methane directive from the Environmental Protection Agency be expanded to include existing facilities? Hear what local producers predict on page 26. • It’s not often we get to write about butterflies in a magazine devoted to industry. But BASF has unveiled an official monarch butterfly waystation at its Geismar site. Get the story on page 27. • Meet Erick Knezek. He’s a former Navy diver who founded a Lafayette firm that provides ocean engineering services to the U.S. Navy and other domestic and foreign customers. And he’s working to develop Anytime Fitness franchises in Panama. Read about him in our Executive Profile on page 28. • Site selection or site elimination? Get some insight into how south Louisiana measures up when companies are on the hunt for a location for new development projects on page 44. • Often adversaries—particularly in the courtroom, industry and environmental advocates have become partners in saving the Louisiana coast. Don’t believe me? Read about it on page 54. • In this issue, we also profile a company that has yet to miss a project window or budget. That’s the record set by Specialty Welding and Turnarounds—or SWAT— since it was founded in April 2014. These days, the company has experienced demand for specialty piping—particularly chrome or stainless. And those specialty welds are SWAT’s bread and butter. Read more about the company on page 59. REACH US As always, we want to hear your ideas and company news. Send them to editor@1012 industryreport.com. If you have other decision-makers in your company who should receive this publication, send them to 1012industryreport.com/signup.

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MOVING UP

BRINGING VALUE

Most of our management team has worked their way up through the ranks at Westgate. That means we have learned to ask lots of questions and sweat the details. It also means that joining our team opens up all kinds of opportunities for those that want to grow and improve themselves and our company. Westgate rewards our team for paying attention to the details that make jobs safe, on budget, and on time. This is a career company, not just a job.

Westgate has given me the opportunity to be a valuable contributor to our’s and our clients’ success. This is a real career opportunity, not just a job. The strength of our industry and company mean there are plenty of career opportunities for professional craftsmen. By building relationships based on our training and integrity, we create more opportunities and bring more value each day.

N OF O I T A SA D FE N N O VAT N I U D IO N N O A

YEA

RS AVER AG E

TIM

r su e p er v isors have worked for W

DEDICATION “By dedicating ourselves to continued education and training, the Westgate team is given the opportunity to grow our careers and our company. Westgate’s name in the industrial specialty contractor market oﬀers us all great career opportunities. While part of this team, I’ve had the chance to grow and learn to help lead our team.” – GREG RANSOME, 23 year Westgate team member with 35 years experience in the industry

Westgatellc.com (225) 749-2635 1355 Beaulieu Lane Port Allen, LA. 70767

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– BUD CAMPBELL , 35 year Westgate team member with 40 years in the industry

– STEVE HUGHES, 20 year Westgate team member with 28 years in the industry

a stg

FOCUS “With so much opportunity for growth in our industry, Westgate stands out as a great place to work. Our people make the diﬀerence. Our team’s focus on safety an d education let us serve our clients like no one else. This whole team is focused on making Westgate a great place to work and a great company to do business with.” – BRAD MISNER, 13 year Westgate team member with 13 years in the industry

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

LAUNCH ICYMI

The streak continues

outhern Business & Development magazine named Louisiana the top Southern state for attracting significant capital investment and job-creation projects per capita for the seventh straight year. Louisiana breezed to the top of the list with a combination of large employment projects and significant capital investment projects in 2015. However, the magazine named Tennessee its 2016 State of the Year, a title Louisiana has held outright or shared six of the last 10 years. “The petrochemical sector in Louisiana continues to march on with lots of projects in Baton Rouge, New Orleans and the Lake Charles region,” the editors wrote for Louisiana. [See “Project by project” maps, pages 68-73.] Only Texas scored more points in the overall category than Louisiana, which easily outdistanced Tennessee, which finished more

than 15 points behind Louisiana in the south region. Lake Charles earned the distinction of 2016 Small Market of the Year. New Orleans and Baton Rouge earned honorable mentions in the top markets of the year category. “Louisiana remains a leading destination for companies planning expansions or new investments, and [this] recognition from Southern Business & Development validates the confidence we have in our state’s ability to sustain a strong business climate and attract new job-creation projects,” Gov. John Bel Edwards said in a statement. Among the statewide project highlights were IBM’s 400-job client innovation center in Monroe; EPIC Piping’s 560-job pipe fabrication complex and corporate headquarters in Livingston; and Formosa Petrochemical Corp.’s potential $9.4 billion industrial complex in St. James Parish.

IN SO MANY WORDS

“While it is difficult to determine if activity levels are reaching a bottom, we have seen some signs of encouragement.”

—daily-report.com

RISING COSTS SASOL LTD. IS PROJECTING its Lake Charles facility that will convert ethane into plastics and other products will cost as much as $11 billion—a significant increase over the $8.9 billion originally projected. Sasol says high rainfall, increased labor costs and higher-than-expected contract prices have pushed back construction and driven up the projected cost. The project’s increased price tag comes as the South African-based fuel producer is set for its biggest profit decline in more than seven years. Sasol says it expects its fiscal full-year profit to drop by as much as 30%, following a collapse in energy prices that forced it to write down assets by about $760 million. As of the end of April, Sasol reports, it had spent $4.5 billion on what it calls its Lake Charles Chemical Project, and work is more than 40% complete. The company expects the ethane cracker to reach “beneficial operation” in the second half of 2018. —Bloomberg, Sasol

—GARY LUQUETTE, president and CEO of Frank’s International, speaking in the company’s Q2 results report on oil and gas drilling activity

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

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REFINERIES TO FLY SHELL FLAG SHELL ANNOUNCED THAT it has signed a nonbinding Letter of Intent to divide the assets of Motiva Enterprises LLC. The Motiva joint venture was formed in 1998 and has operated as a 50/50 refining and marketing joint venture between Saudi Arabian Oil Co. and Shell since 2002. In the proposed division of assets, Shell will assume sole ownership of the Norco, Louisiana, refinery (where Shell operates a chemicals plant), the Convent, Louisiana, refinery, nine distribution terminals, and Shell branded markets in Florida, Louisiana and the Northeastern region. Saudi Refining Inc. will retain the Motiva name, assume sole ownership of the Port Arthur refinery in Texas, retain 26 distribution terminals, and have an exclusive licence to use the Shell brand for gasoline and diesel sales in Texas, and in the majority of the Mississippi Valley, the Southeast and Mid-Atlantic markets. In its second-quarter operations report near the end of July, Shell also noted it is deferring a final investment decision this year on its Lake Charles LNG facility to export liquefied natural gas, citing a current oversupply of the fuel and the affordability of the project amid lower oil prices. It is the second delay Shell has made to a big LNG project. Earlier in July the Anglo-Dutch oil giant said it was delaying a final investment decision on an LNG export project in Kitimat, Canada. —Shell, MarketWatch

NUMBERS

$61.6 BILLION What the 2010 Deepwater Horizon oil spill disaster cost oil giant BP Source: BP

A NEW OPTION ON THE GULF PORT CAMERON LLC plans to develop a new deepwater staging port on the Calcasieu Ship Channel in Cameron Parish. As the largest private energy services facility on the Gulf Coast, the new port complex will facilitate energy development in the Gulf. Construction on the $1.5 billion project will commence in November, and Phase I of the project is slated for completion by the third quarter of 2017. Phase I will encompass 500 acres, with an additional 750 acres available for expansion in the future. In addition to the new port, the project includes constructing approximately 25,000 linear feet of all-weather roads and two new concrete bridges. Lanis J. “Bud” Viator, executive chairman of Port Cameron, calls the facility “a new deepwater port of choice in the western Gulf of Mexico.” “Port Cameron is on course to be a major game changer for the economy of Cameron Parish, the entire Lake Charles area, and Louisiana,” said Ted Falgout, director of operations, in a press release. —Staff report

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10/12 INDUSTRY REPORT • THIRD QUARTER 2016

LAUNCH: ICYMI

UP UNTIL IT’S DOWN

TOTAL FORECASTED HEADCOUNT PER YEAR 2006-2016 Greater Baton Rouge Industrial Construction

14000 Capital Projects Average

12000

Job Headcount

THE LATEST Greater Baton Rouge Industry Alliance’s Semi-Annual Contract Labor Forecast shows a reduction in large capital projects in 2017 with spikes in turnarounds occurring in late2016 and early-2017 and an overall slowing of turnarounds beginning midto second quarter 2017. GBRIA completes an 18-month outlook semi-annually to help education providers and industry recruit skilled workers. The survey of industrial plants also reveals that the top three industrial crafts in demand include welders, pipefitters and instrument and electrical technicians. Millwrights, scaffold builders and boilermakers are also in high demand. Currently, the GBRIA area has approximately $31 billion of capital expansions planned or in execution. These projects will generate nearly 13,500 permanent jobs and almost 30,000 temporary construction jobs over the next eight years if the investment climate remains favorable.

Maintenance Average

10000 8000 6000 4000

Turnaround Average

2000 0

2006

2007

2008

2009

2010

2011

2012

2013

2014

2015

2016

Year Source: GBRIA

—GBRIA

INDUSTRY ON THE WEB

EPIC EXPANSION EPIC PIPING, the pipe fabrication company created in early 2015 by Baton Rouge-based Bernhard Capital Partners, is expanding into the Middle East with the addition of a 400,000-square-foot fabrication facility in Abu Dhabi, United Arab Emirates. The new facility, which will have an average production capacity of about 6,000 spools a month, is the fifth production facility for the rapidly growing company. Epic is also nearing completion of a 268,000-square-foot, state-ofthe-art, air-conditioned facility in Livingston, Louisiana. Other facilities include a 300,000-square-foot facility in Texas, an 80,000-square-foot facility in Canada, and a 60,000-square-foot warehouse on Choctaw Drive in Baton Rouge. The addition of the Abu Dhabi facility marks an important development for the company’s international expansion and overall manufacturing capabilities. It will enable Epic to expand production to more than 20,000 spools per month with a total fabrication capacity exceeding 1 million square feet.

• The Greater Lafourche Port Commission released the redesign of its website at portfourchon.com. The website’s new responsive design is user-friendly, with enhanced features that allow for easy navigation and viewing from any device. The site prominently features the port commission’s two brands, Port Fourchon and South Lafourche Airport. In addition to a crisp new look and neat, simple navigation, the redesigned website includes a new feature: the NOTIFY ME page. This new option gives regular users the opportunity to update, add or modify subscriptions to port commission communications, making it even easier to get the latest up-to-date information on Port Fourchon and the surrounding area.

—Stephanie Riegel

NUMBERS

• The Louisiana Gulf Coast Oil Exposition released a new and improved LAGCOE.com, which features two websites in one space: one for the organization and one for the exposition. LAGCOE says the new website, aside from being aesthetically pleasing, is more agile and interactive and is easier to scan, read and navigate, enabling visitors to find what they need quickly. It uses a responsive design, which means that users will see essentially the same design optimized for their smartphone, tablet and desktop. —Staff report

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

7.5%

Louisiana’s estimated construction unemployment rate for May 2016, ranking 45th among states Source: BLS and estimates for ABC

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BUSINESS TICKER • Iowa Sen. Chuck Grassley called for a “careful analysis” of the Dow-DuPont merger by the Department of Justice, expressing concerns the proposed merger could negatively impact competition within the seed industry. • Chemours is selling its Sulfur Products Division to Veolia for $325 million. The sale will include seven sites in North America, including the Burnside, Louisiana, plant near the Sunshine Bridge.

• Westlake Chemical reached a deal to acquire Axiall for about $2.4 billion. LACC, a joint venture of Axiall and Lotte Chemical, held a groundbreaking for its $3 billion chemical manufacturing project in Lake Charles in June. • Gulf South Pipeline received FERC OK to proceed with the Coastal Bend Header project to deliver natural gas to Freeport LNG in Texas. Expansion of existing facilities will cost $145 million and new header $545 million.

BELL HELICOPTER

• Phillips 66 will move all of its Houston area employees to a new global headquarters in Westchester District.

—Homesite

FLYING AWAY IN SO MANY WORDS

“EPA’s methane rule is just another part of the Obama administration’s plan to shackle and shut down Louisiana’s oil and gas industry, and quite frankly, we can’t afford it.” —SEN. DAVID VITTER (See our update on the new methane rule on page 26.)

The 505 Jet Ranger X won’t be built in Lafayette after all.

LESS THAN A YEAR after opening its 82,300-square-foot manufacturing facility in Lafayette, Bell Helicopter is shifting gears and changing the products it makes in the city. It’s unclear how the change will impact employment at the Lafayette facility—or the company’s financial pledge to Louisiana. Company president and CEO Mitch Snyder said in May that Bell is relocating several programs across the United States as it deals with a downturn in the commercial market. “The 505 Jet Ranger X manufacturing facility in Lafayette … will relocate to our Maribel manufacturing and distribution facility in Canada,” Snyder said. “We remain committed to our Lafayette employees in the state of Louisiana. Therefore the Lafayette facility will receive the Bell 525 Relentless cabin sub-assembly, relocating from Amarillo.” The state funded the $26.3 million construction of the assembly center, which opened in August 2015. The building is owned by the Lafayette Regional Airport. Bell has been leasing the facility and has committed to making an additional $11.5 million capital investment in equipment and tooling. —The Advertiser

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10/12 INDUSTRY REPORT • THIRD QUARTER 2016

LAUNCH: ICYMI

RAIL UPGRADE

NUMBERS

UNION PACIFIC says it plans to invest $58 million in 2016 to improve Louisiana’s transportation infrastructure. The company’s multimillion-dollar private investment will enhance employee, community and customer safety and increase rail operating efficiency, Union Pacific says in a press release. Freight railroads like Union Pacific operate on track built and maintained without taxpayer funds. Union Pacific’s planned investment covers a range of initiatives, including $52 million to maintain railroad track and $6 million to maintain bridges in the state. Key projects planned this year include:

Number of oil and gas companies that have filed for bankruptcy since 2014 Source: Creditsafe USA

ALBEMARLE SELLS COATINGS BUSINESS BATON ROUGE-BASED Albemarle Corp., a leader in the global specialty chemicals industry, announced it has signed a definitive agreement to sell its Chemetall Surface Treatment business to BASF in a cash transaction valued at approximately $3.2 billion. Commenting on the transaction, Albemarle president and CEO Luke Kissam said, “The sale of Chemetall reflects Albemarle’s continued commitment to maximizing shareholder value by investing in the future growth of our high priority businesses, reducing leverage and returning capital to shareholders. I would like to thank the Chemetall management team and employees for their exceptional performance and professionalism. For BASF, the purchase of Chemetall represents a unique opportunity to acquire an industry-leading surface treatment business with a proven track record of success.” The transaction is subject to regulatory approvals and other customary closing conditions and is expected to close by year end. The acquisition is the largest under BASF CEO Kurt Bock in his five years at the helm of the company, Bloomberg reported.

• $13 million investment in the rail line between Iowa and Sulphur to replace 29 miles of rail • $6 million investment in the rail line between Dequincy and Kinder to replace 44,140 railroad ties and install 22,144 tons of rock ballast • $6 million investment in the rail line between Lawtell and Livonia to replace 42,525 railroad ties and install 22,666 tons of rock ballast This year’s planned $58 million capital expenditure in Louisiana is part of an ongoing investment strategy. From 2011 to 2015, Union Pacific invested more than $619 million in Louisiana’s transportation infrastructure.

—PR Newswire

—Union Pacific

STATE

JOINT VENTURES • DISPUTE RESOLUTION • INTELLECTUAL PROPERTY

ECONOMIC DEVELOPMENT INCENTIVES • INDUSTRIAL REAL ESTATE • ENGINEERING • CONSTRUCTION • PROCUREMENT • ENVIRONMENTAL

& LOCAL TAX • UTILITIES REGULATION •

KEANMILLER.COM | G. BLANE CLARK, JR., MANAGING PARTNER

OSHA

CONTRACTS

BATON ROUGE | NEW ORLEANS | SHREVEPORT | LAKE CHARLES

•

PERMITTING

•

LABOR

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

E M P LOY M E N T

•

AGREEMENTS

•

MERGERS

ACQUISITIONS

•

DISPUTE

RESOLUTION

•

COMPLIANCE

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Winter

AD WILL RUN AS IS

DELAYED NO LONGER BELGIUM-BASED global shipping company Katoen Natie is kicking off the first phase of its planned $150 million plastics storage, custom packaging and distribution facility in north Baton Rouge. Construction was expected to begin on the 127-acre facility on Scenic Highway in August. The first phase will include the construction of offices, a maintenance shop, and a 500,000-square-foot processing, storage and handling facility, the company said in a news release. The total cost of this phase is expected to be about $36 million. Company spokesman Sam Dhollander noted the location was attractive to the company because of its proximity to the many chemical and petrochemical producers in the Baton Rouge area, as well as the presence of two major Class I railroads—Canadian National and Kansas City Southern— on the property. Katoen Natie and Louisiana officials first announced the project in 2013, but the company delayed construction until contracts were secured for the site and market conditions were studied. —daily-report.com

IN SO MANY WORDS

“Despite recent low oil and gas prices, we have found robust appetite for U.S. LNG on a long-term basis all around the world. This interest reaffirms the price competitiveness of U.S. LNG for customers looking to diversify their gas supply on a global level.” —KATHLEEN EISBRENNER, CEO of NextDecade, which has filed for permits to build a $20 billion LNG export facility in deep south Texas

we are energy

MARATHON AGREES TO CLEAN UP EMISSIONS THE U.S. ENVIRONMENTAL PROTECTION AGENCY and the Department of Justice announced in June an agreement with Ohio-based Marathon Petroleum Co. that will reduce air pollution from the company’s petroleum refineries in Illinois, Kentucky, Louisiana, Michigan and Ohio. Marathon will spend $319 million to install state-of-the-art flare gas recovery systems (FGRSs), which will capture and recycle gases that would otherwise be sent to combustion devices known as flares. Marathon will also spend $15.55 million on projects to reduce air pollution at three of the facilities and will pay a civil penalty of $326,500. Under the agreement Marathon will install seven FGRSs at five of its refineries, including the one in Garyville, Louisiana. Marathon will be required to operate these FGRSs at a higher percentage of time than EPA has ever secured in prior enforcement actions. Marathon will also maintain two duplicates of a critical spare part to be delivered immediately to any of these refineries as necessary, to help make sure the FGRSs have minimal downtime. Marathon will also spend $9.55 million on projects to reduce NOx emissions at its Canton and Garyville refineries. —EPA

w w w . h s i . e n e r g y 1-800-349-7560 technical bolting

• pipeline services

ﬁeld machining

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hydrostatic testing •diamond wire cutting

• LAKE CHARLES • HOUSTON 10/12 INDUSTRY REPORT • THIRD QUARTER 2016

LAUNCH: NEW PRODUCTS

Drilling down

STAFF REPORT

MUDBUG and Spider highlight new products.

het Morrison Contractors of Houma debuted a new tool for cleaning drilling and production risers that the company says is safer, faster and more cost-effective than current methods. MUDBUG is an air-actuated, self-propelled device that uses oscillating brushes to clean debris build-up inside risers, moving through the length of the riser and back out again. “MUDBUG is a giant leap forward in deepwater riser cleaning,” said John DeBlieux, vice president of Deepwater Riser Services for Chet Morrison Contractors. “It’s not only more cost-effective and safer, it’s also better for the environment and customer’s bottom line.” Issue Date: Spring Ad1 proof #1 • Please respond by e-mail or fax with your approval or minor revisions. Unlike other methods, MUD• AD WILL RUN AS IS unless approval or final revisions BUG does not require high-presare received by the close of business today.

CHET MORRISON CONTRACTORS

THE MUDBUG: Uses air instead of water to clean risers.

• Additional revisions must be requested and may be subject to production fees. Carefully check this ad for: CORRECT ADDRESS • CORRECT PHONE NUMBER • ANY TYPOS This ad design © Louisiana Business, Inc. 2015. All rights reserved. Phone 225-928-1700 • Fax 225-926-1329

CONCRETE CUTTING for the

Gulf South & Nationwide

A&B is your complete solution for high-quality concrete demolition and cutting services. Although we primarily work in the Gulf South, we have served industrial and commercial clients across the United States. For decades we have offered clients like yourself a variety of concrete cutting and demolition services.

Call Today for a Free Estimate 225-654-2873 20975 Plank Road | Zachary, LA 70791 16

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

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Issue Date: 3rd Qtr. Ad proof #1

• Please respond by e-mail or fax with your approval or minor revisions. • AD WILL RUN AS IS unless approval or final revisions are received by the close of business today. • Additional revisions must be requested and may be subject to production fees. Carefully check this ad for: CORRECT ADDRESS • CORRECT PHONE NUMBER • ANY TYPOS This ad design © Louisiana Business, Inc. 2016. All rights reserved. Phone 225-928-1700 • Fax 225-926-1329

sure water to remove the rust, scale and drilling mud that builds up in drilling and production risers. Instead, MUDBUG uses only 120psi air to operate, thus eliminating the problem of water disposal and risk associated with high-pressure washing. MUDBUG can be operated by a two- or three-man crew instead of the usual five-man team required to clean a riser. Because the device is portable, it can easily be transported via plane or helicopter to any remote location either onshore or offshore. Its small job box (2 feet x 4 feet) takes up very little space, making it ideal for rigs or other offshore operations. When operational, MUDBUG is approximately 3 feet long and 19 inches in diameter. The “MUDBUG” name was inspired by the crawfish, which pushes back mud and debris to make its home. It has been successfully tested and used in the offshore environment by major drilling contractors. The device comes with an extra motor and all brushes, and is available exclusively through Chet Morrison Contractors (mudbugrisercleaner. com) in the United States, Gulf of Mexico, the Caribbean and Trinidad. A video of the MUDBUG in action is also available at the website. STRING WEIGHT REDUCTION SYSTEM In June Frank’s International deployed its patented 1,250-ton Buoyancy Module (BM) Spider along with ExPert Landing String Solutions’ Drill Pipe Buoyancy Modules to help Anadarko achieve a nearly 250,000-pound reduction in total weight. It was the industry’s first run of this groundbreaking weight reduction system, which saves time and money and improves safety, according to a release. Working closely with Anadarko and ExPert to deliver a customized solution, Frank’s completed the job safely and successfully aboard the Diamond Ocean BlackHawk drillship positioned on the Walker Ridge Block 51 Shenandoah V Well in the Gulf. The job also involved using Frank’s 1,250-ton Slip-Type Elevator and Split Bushing Spider to install 19,821 feet of casing and the company’s new 1,250-ton BM Spider and 1,500-ton Drill Pipe El1012industryreport.com

evator to install 5,929 feet of landing string. The original expected buoyed string weight of casing and drill pipe was approaching the rig’s weight capacity. Anadarko achieved a 10% reduction in string weight by running ExPert’s Drill Pipe Buoyancy Modules and applying Frank’s BM Spider. ACETYLENE REPLACEMENT FUEL Florida’s MagneGas Corp. reached a milestone in the development of its contract to manufacture and sell to Green Arc Supply LLC a 100kw Plasma-Arc Gasification System that will allow Green Arc to distribute MagneGas2 fuel for the metal-cutting market as a replacement to acetylene. Green Arc signed an agreement for exclusive distribution rights for MagneGas2 for certain regions of Louisiana and Texas, with non-exclusive distribution rights in remaining regions of Louisiana and Texas and all of Arkansas, Mississippi and Oklahoma. As specified in the $775,000 deal between the two companies, MagneGas originally received payments totaling $392,500 at the signing of their agreement in November 2015 and was due to receive $191,250 upon 75% completion of the system’s construction. MagneGas met this 75% benchmark in early June 2016, ahead of schedule. The balance of the $775,000 is due and payable upon completion of the system. After payment, MagneGas will ship the unit to Green Arc, which is expected to occur in the third quarter of 2016. Green Arc has the right to expand its exclusivity in the above states with the purchase of additional systems, and has told MagneGas it may purchase several additional systems. MagneGas owns the patented process that converts various renewable and waste liquids into hydrogen-based fuels that can be used as a replacement to natural gas or for metal cutting. The company’s testing has shown the fuels are faster, cleaner and more productive than other alternatives on the market. Green Arc Supply is a welding supply and industrial gas distributor operating in Tyler and Palestine, Texas, as well as Shreveport, with future plans to expand throughout Texas and Louisiana.

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10/12 INDUSTRY REPORT • THIRD QUARTER 2016

ISTOCK

LAUNCH: CHEMICALS

Better chemistry Vitter gets a signature win with a new law regulating chemicals. STAFF REPORT

t took five years and lots of bipartisan wrangling, but Republican Sen. David Vitter of Louisiana can finally claim victory in his battle to pass landmark legislation reforming the country’s chemical safety law, The USA Today Network reported.

“It wasn’t easy,” Vitter said on the Senate floor. “This is long overdue.” The U.S. Senate approved the bill in June and sent it to President Barack Obama, who signed it into law June 22. Vitter basked in the spotlight after Congress approved the chemical

safety bill he crafted with Sen. Tom Udall, D-N.M. The legislation—the Frank R. Lautenberg Chemical Safety for the 21st Century Act—is named for the late senator from New Jersey. It overhauls the 40-yearold Toxic Substances Control Act, which authorizes the Environmental Protection Agency to regulate chemicals in consumer products. “Louisiana is the nation’s second largest chemical manufacturing state and the industry supports around 150,000 direct and indirect jobs for Louisiana workers,” Vitter noted. “This issue is very near and dear to us. TSCA hasn’t been updated in over 40 years, despite the fact that chemicals are all around us and play a fundamental part in the building of everyday products ranging from cars and computers to the fertilizers and pesticides used to improve our crops. … Forty years is a long time to go without updating a law, especially when considering that there is a constant influx of new chemicals that are brought to market that cannot be adequately regulated under the old policy.”

The law creates a predictable and transparent federal system to regulate the safety of chemicals based on the latest science, providing greater regulatory certainty to the chemical manufacturing industry and striking a balance between state and federal roles in chemical safety management. It grants the EPA a new mandate to evaluate the risks of all chemicals by certain deadlines and provides the money for the agency do so. It also limits companies’ abilities to hide chemical information behind confidentiality claims, according to a summary published by NOLA.com. “The scope of the law’s reach is vast, increasing scrutiny on almost every substance that goes into most household products, from rugs to paint to children’s toys,” NOLA.com notes. “The most immediate impact will be at the point a company applies to use a new chemical or to create a new use for an existing chemical. The EPA is now required to evaluate and approve that application before an item goes into production.”

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LAUNCH: WORKFORCE

Second to none The first Louisiana Certified Workforce Developer class graduates. THE 2015-2016 CWD CLASS YaSheka Adams, Senior Manager, Talent Management LED FastStart Dean Baugh, Director of Economic and Workforce Development Louisiana Delta Community College Dale Doty, Chancellor River Parishes Community College Joseph Fleishman, Vice Chancellor of Economic and Workforce Development SOWELA Technical Community College Ernest Frazier, Director of Workforce Development Nunez Community College Charlie Freeburgh, Senior Vice Chancellor for Workforce Development Baton Rouge Community College

DON KADAIR

Larissa Littleton-Steib, Vice Chancellor, Workforce and Technical Education Delgado Community College

WORKFORCE SOLUTIONS: A Baton Rouge Community College training program for industry.

he Inaugural Louisiana Certified Workforce Developer (CWD) class was recognized at the June meeting of the Louisiana Community and Technical College System board, where graduates also received their certificates of completion. The CWD program is a first-of-its-kind certification program designed to advance knowledge, skills and relationships relative to economic and workforce development in Louisiana. The CWD is a premier workforce development credential that was developed as a result of the successful partnership between LED FastStart and Louisiana’s community and technical colleges, along with support from local and state economic and workforce development professionals. “What we’ve developed here is second to none. I’ve been in programs in other states and this program is one of the strongest I’ve ever seen. We are strong and we will continue to be very competitive,” 1012industryreport.com

said Jeff Lynn, executive director of Workforce Development Programs at LED FastStart and one of the key facilitators of the program. Graduates of the CWD program will demonstrate mastery in the following: • understanding the elements of successful workforce development best practices within the field • the significance of workforce development as it relates to the state’s economic development objectives • knowledge of key partners in the economic development process and clear understanding of roles and responsibilities • best practices for serving on a prospect team in recruitment and retention efforts • researching and understanding workforce demographics • best practices for assessing business and industry needs relative to training and workforce development • knowledge of curriculum and training resources available • knowledge of funding strategies

to support program development and conduct • techniques for evaluating training requirements in conjunction with employers, including skills and task analysis at the position level • development of custom and comprehensive training plans • pricing strategy and development of successful proposals • effective strategies for maintaining strong relationships with clientele over time The first cohort began training in September 2015 and included workforce solutions personnel from community and technical colleges throughout the state of Louisiana, select personnel from the LCTCS system office, and colleagues from LED FastStart. Future iterations of the program will include key players from other areas of LCTCS institutions, individuals from local and regional economic development organizations, and personnel from other key state agencies and four-year institutions.

David Lloyd, Director of Workforce Development Northshore Technical College Barry May, Regional Manager, Project Operations (BPCC) LED FastStart Earl Meador, Interim Chancellor Fletcher Technical Community College Cindy Poskey, Vice Chancellor of Workforce Development South Central Louisiana Technical College Todd Rossnagel, Manager of Media Services LED FastStart Willie Smith, Vice Chancellor of Economic and Workforce Development South Louisiana Community College Curtis Storms Northwest Louisiana Technical College Brenda Thompson, Vice Chancellor of Workforce Central Louisiana Technical Community College Lisa Vosper, Associate Commissioner for Workforce Education and Training Louisiana Board of Regents Barbara Waiters, Director, Community and Economic Development Delgado Community College

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

LAUNCH: UPDATE

Betting on methanol Chinese investment in St. James Parish remains on track.

uhuang Chemical’s multiphase, $1.85 billion methanol plant in St. James Parish is on track for a late 2016 groundbreaking despite uncertain market demand for methanol, a spokesman for the Chinese company says. Jerry Oliver, vice president of U.S. manufacturing operations, says a contract has been signed with Amec Foster Wheeler for the plant’s design and construction, with design about 30% complete as of June. Oliver discussed the project at the Petrochemical Engineering & Construction Conference in New Orleans. Despite the postponement of other methanol projects, due in large part to a sustained drop in oil and SERVING LOUISIANA THE BARRIERE WAY natural gas prices, Yuhuang expects to begin producing methanol at the site by early 2019. “Our plan is to produce 4,000 to PAVING THE WAY 5,000 tons per year at the plant, and FOR A BETTER COMMUNITY add another 15,000 tons over the next 10 years,” Oliver says. “The idea Learn more at www.barriere.com is to become a major player in the market.” A later phase to construct a secOFFICES ANDAND FACILITIES ACROSS ACROSS LOUISIANA LOUISIANA OFFICES FACILITIES ond methanol unit—similar to the BATON BATON ROUGE ROUGE • NORTHSHORE • NORTHSHORE • JEFFERSON• JEFFERSON • ST. CHARLES • ST. CHARLES first unit in design and scope—will begin in 2019. Oliver could not say FOR INFORMATION ON OUR CAPABILITIES AND RESOURCES AND RESOURCES FORMORE MORE INFORMATION ON OUR CAPABILITIES when a planned third phase for a CONTACT 225-753-1121 CONTACT 225-753-1121 methane derivatives chemical plant

SAFETY AND QUALITY

22 10/12 INDUSTRY REPORT • THIRD QUARTER 2016

ISTOCK

BY SAM BARNES

might begin. Yuhuang Chemical finalized the deal for the 1,300-acre property last August. It first announced the project in July 2014. The plant represents the largest grassroots, greenfield project by a Chinese company in the U.S. and is a sign of changing Chinese-U.S. relations and strengthening business ties between China and Louisiana. “Louisiana provided them with some comfort that this would be a place where they were welcome,” Oliver says, explaining why the company selected a Louisiana site over one in Texas. “Your governor at the time did a wonderful job of making them feel like they were going to be part of the community, and in providing the right incentives,” Oliver adds. “I’m not saying Texas did a bad job, but obviously Louisiana did a better job because the sites in Texas were pretty good.” The Yuhuang plant will be managed primarily by a U.S.-based team that understands the area’s business climate, Oliver says. “They’re going to let us run as a business that has to work in the U.S.” See page 47 for more on Yuhuang’s decision to locate in St. James Parish. 1012industryreport.com

1012industryreport.com

10/12 INDUSTRY REPORT â&#x20AC;¢ THIRD QUARTER 2016

LAUNCH: THE BIG PICTURE

DRUM DROP

LONG JOURNEY In June Intermarine LLC transported four coke drums on the MV Ocean Freedom from Gijon, Spain, to New Orleans. The cargo was transported for forwarder Agility Project Logistics with end clients Phillips 66 and Wood Group Mustang. HEAVY LOAD The coke drums measure 34.4 x 8 x 8.2 meters (112 x 26.2 x 27 feet) and weigh 333 metric tons each. The MV

Ocean Freedom was selected due to the vessel’s ability to move items via single crane lift and/or tandem lift. The holds of this vessel also allowed for below deck stowage, providing further protection of the cargo. CUSTOM SOLUTION “This project is a perfect example of what Intermarine does best—we have the tools, skills and personnel to create custom solutions and safely transport

24 10/12 INDUSTRY REPORT • THIRD QUARTER 2016

challenging cargoes,” said Justin Miller, commercial manager – U.S. Flag Services. “Our WorldWide, Technical and U.S. Flag departments worked seamlessly to deliver on our word and provide all parties with the safe transportation of their cargo.” DELICATE TRANSFER The coke drums were discharged directly to barges in New Orleans. Double banking required precision as Intermarine was responsible for arranging the barge location and crane outreach and placing the units in the perfect position on board the barge. WHAT IS A COKE DRUM? Coking is a refinery unit operation that upgrades material called “bottoms” from the atmospheric or vacuum distillation column into higher-value products and, as the name implies, produces petroleum coke. Coking occurs at pressures slightly higher than atmospheric and at

temperatures greater than 900 degrees that thermally crack the feedstock into products such as naphtha and distillate, leaving behind petroleum coke. Coke drums are the large reactors used to hold the heated feedstock while the cracking takes place. Coke is deposited in the coke drum as a solid. ABOUT INTERMARINE Intermarine calls itself “the global leader in the transport of project, breakbulk and heavylift cargo.” Founded in 1990, the company controls an international fleet of more than 50 vessels with lifting capacity up to 1,400 metric tons. Intermarine provides ocean transportation and marine logistics services with regular sailings in the Americas, West Africa, Europe, Asia and the Middle East. The company operates the largest U.S. flag heavylift fleet and controls Industrial Terminals (Houston), the busiest project cargo terminal in the United States.

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10/12 INDUSTRY REPORT â&#x20AC;¢ THIRD QUARTER 2016

LAUNCH: REGULATIONS

Methane crackdown

BY SAM BARNES

Local oil and gas producers predict the EPA will soon target existing facilities.

aking what they say is a sizeable step toward corralling methane emissions by U.S. oil and gas producers, the Environmental Protection Agency issued a controversial directive in May requiring that all methane from new or modified sources be contained and transported offsite rather than flare burned. Producers must also regularly monitor and repair methane leaks, also known as “fugitive emissions.” Oil and gas producers fear the regulations will soon be expanded to include existing facilities, perhaps as early as 2017. The new rule falls under President Obama’s Climate Action Plan: Strategy to Reduce Methane Emissions, which aims to cut methane emissions from the oil and natural gas industry by up to 45% by 2025. Methane is a primary component of natural gas. SIGNIFICANT INVESTMENT Don Briggs, president of the Louisiana Oil and Gas Association, 26

says the new rule is a case of incredibly bad timing given the current economics of the oil and gas industry. “Still, I’m more concerned about it being pushed back than I am it being pushed forward,” he adds. “It’s a lot easier for us going forward because we can plan for it. If it gets pushed back to include all facilities, then we’ll have to refabricate and re-do, which will be a significant investment.” Erik Milito, who handles regulatory and legislative policy for the American Petroleum Institute in Washington, D.C., says the process of developing a subsequent rule to cover existing facilities has already begun. “They [EPA] recently issued an Information Collection Request,” Milito says. “That is the first step in the process toward regulating existing sources. Based upon the data they collect from the ICR, EPA will devise a plan for eventual implementation.” API was generally in agreement with an earlier EPA rule in 2012, which focused primarily on the reg-

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

ulation of VOCs (volatile organic compounds). “When you do that, as a co-benefit you get methane, because those gases are intermingled,” Milito adds. “That’s the approach we thought they should have taken here.” Briggs feels the stringent regulations are unnecessary, given the progress the industry has already made. “While we’ve significantly increased our natural gas production since 2005, at the same time we’ve voluntarily decreased emissions,” he adds. “We’re already more efficient today, as technology has developed to help eliminate CO2 emissions.” STOPPING THE LEAKS Richard Metcalf, director of environmental affairs with Louisiana Mid-Continent Oil and Gas Association, expects possible impacts to drilling in the Haynesville Shale formation in northwest Louisiana, where a significant pipeline infrastructure already exists to transport the methane offsite. “In areas where there is no existing infrastructure,

you will still be allowed to flare [burn] the methane.” The leak detection component of the rule is particularly troublesome for Louisiana producers, Metcalf says. “You have to go around and check to see if there are any leaks from flange connectors, valves, compressor seals, etc. Those types of things you have to monitor twice a year. That’s problematic for Louisiana, where a lot of our facilities are remote. A two-hour boat ride to a facility in a marsh and a two-hour boat ride back can be very expensive and time consuming. He says the EPA did not account for such costs when formulating the new rule. Compliance will be labor intensive, since producers will have to physically tag, monitor and maintain every valve. Additionally, more expensive “low flow valves” will need to be installed to minimize leaks, effectively prohibiting companies from re-using older valves from decommissioned facilities. “One of the more critical components of this ruling requires that producers change their reciprocating compressors,” Metcalf adds. “Operating like a piston in your car, these compressors deliver gases at high pressures. Now, according to the rule, you have to change the packing once every three years.” Prior to the ruling, the packing was typically changed every five years. A study conducted by Environmental Resources Management Inc., under contract with API, estimates that the limits placed on flaring from oil wells will cost the industry $304 million nationwide by 2025. According to the EPA, methane has a global warming potential more than 25 times greater than that of carbon dioxide and is the second most prevalent greenhouse gas emitted by human activities in the U.S. The agency estimates that about one-third of those emissions come from oil production and the production, processing, transmission and storage of natural gas. 1012industryreport.com

LAUNCH: ENVIRONMENT

Industry and insects

STORY COURTESY BASF

BASF unveils monarch butterfly waystation in Geismar.

1012industryreport.com

BASF BASF

BASF

ISTOCK

arlier this year, BASF employees unveiled an official monarch butterfly waystation at the company’s Geismar, Louisiana, site in time for the insect’s spring migration and as a compliment to BASF’s Living Acres program. This biodiversity research initiative focuses on the creation and rehabilitation of monarch butterfly habitat alongside production agriculture. The nationally certified and registered waystation provides the necessary milkweeds, nectar sources and shelter to sustain the monarch butterflies as they migrate through North America. The Geismar waystation is one of several located at BASF sites across North America. Monarch butterflies and other pollinators serve an important role in sustaining human food sources and helping promote healthy ecosystems that clean the air, stabilize soils and support other wildlife. “Helping to ensure a healthy monarch butterfly population is part of BASF’s commitment to sustainability and being responsible environmental stewards,” says Tom Yura, senior vice president and manager of the BASF site in Geismar. “We are the world’s largest chemical company, having just celebrated 150 years in operations. A business with such long-term success requires acting with conscientious care toward the environment and society.” BASF hosted a group of customers at its Geismar site in conjunction with the large agricultural trade show, Commodity Classic, which took place in New Orleans. As part of the customer event, guests visited the Geismar monarch waystation while learning more about the company’s Living Acres initiative and how planting milkweed can assist in promoting a healthy monarch butterfly population.

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

LAUNCH: PEOPLE

Executive Profile: ERICK KNEZEK, PE Where did your career start, and how did you get to where you are today?

I served in the Navy for six years after Annapolis as a U.S. Navy Seabee and Diver. My last two years in the Navy were after the USS Cole bombing in Yemen and the attacks of 9/11. I was thrust into the new industry of port security. I traveled the world implementing port security measures and quickly became one of the leading experts on port security barriers. This led me to take a chance in business, providing ocean NAME engineering services to Erick Knezek, PE the U.S. Navy and other POSITION domestic and foreign Founder & Managing Partner, customers. Our business Truston Technologies Inc. has grown to providing design, fabrication and AGE installation services to 41 the defense and marine HOMETOWN markets worldwide. Lafayette EDUCATION

United States Naval Academy, B.S., Ocean Engineering; Texas A&M University, M.E., Ocean Engineering

Along with my business partner, I handle the strategic vision and direction of the company. My primary focus is developing our long-term business opportunities. What is your secret to leadership and advancing in your field?

To me, leadership is making the right decision for the long-term benefit of your organization. Leadership decisions are not always popular and require courage. Good leaders possess the vision to recognize the direction they need to move their organization and the courage to make the tough decisions to do so. What is your favorite part about what you do?

My job is adventurous. Each job is in a different location and has a slightly different scope. We are typically working on the water or 28

TERRI FENSEL

What are your responsibilities at Truston Technologies?

near the water. I could be in Virginia one week, Italy the next and Japan the following. What do you see for the future of your industry?

I am always pushing for more innovation in my industry. These could be innovations in safety, corrosion resistance or new patents. We recently were awarded two new patents. One is a mooring system that increases the efficiency of deep draft vessels performing lightering operations, and the other involves using lightweight concrete as a part of coastal protection solutions. What are your next goals both professionally and personally?

I enjoy the excitement of growing

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

a business. Outside of Truston, I am working to develop Anytime Fitness franchises in the country of Panama. My kids are entering college, so I hope to help them get the education and experience to achieve their goals. I recently suspended my campaign for the Louisiana 3rd congressional seat. I enjoyed the experience and learned a lot. Serving in the House of Representatives to improve our state and nation is definitely still a long-term goal of mine. I’ll consider another run when the time is right for me. What is your most satisfying professional accomplishment?

Becoming a Navy Diver was quite an accomplishment for me. My training was four months long and

put me through extreme physical and mental challenges. What is your favorite way to spend your time?

Time with my kids is my favorite way to spend my time. My daughter is 19, and my son is 17. They are my two best friends. I love hanging out with them, no matter what we are doing. What is your go-to spot in Lafayette?

La Pagua Mexican restaurant. The food is the real deal. My grandparents were Mexican, so I grew up eating real Mexican food at all of my family events. La Pagua is the closest thing to my mom’s and grandmother’s cooking. 1012industryreport.com

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COVER STORY

DON KADAIR

PERFORMANCE VP LEE JENKINS: “When you are dependent upon a large percentage of your workforce coming in as new employees, you’re going to be affected in all areas.”

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

1012industryreport.com

The productivity

CALCULUS Why worker productivity is in decline and what contractors can do about it. BY SAM BARNES

ontractors typically lean upon established industry norms to calculate their expectations for a typical hour’s labor, or productivity rate, but some in the Gulf South are becoming increasingly concerned that the output side of the equation is in decline. While most agree that the tightening of the labor market and a corresponding decline in the proportion of experienced craftsmen are the primary culprits, others suggest more long-term causes are at play—including an aging workforce, a different generational work ethic and a greater, albeit necessary, emphasis on safety protocols. In its May report, Construction Productivity in an Imbalanced Labor Market, Construction Industry Resources LLC showed a clear correlation between the decline in productivity and the shortage of essential skilled craft labor, asserting that an imbalanced labor market is a clear leading indicator of poor productivity. In the report, 79% of companies reported that their productivity had not improved or had actually dropped by more than 10%, primarily due to the tight skills market. While project delays in certain regions have granted a temporary reprieve to the labor crisis in Louisiana, some worry productivity declines will intensify as projects ramp up with an improving oil and gas market. Therefore, many who work in and for the petrochemical industry are looking for answers. Earlier this summer, an industry panel at the 2016 Petrochemical Engineering & Construction Conference in New Orleans pointed to labor shortages, lackluster labor productivity and high labor costs as serious impediments to future investment and profitability among Gulf Coast owners. In particular, an increase in the number of “traveling” skilled laborers chasing higher wages, they say, has led to a decline in productivity.

1012industryreport.com

Panel member Dan Spinks, vice president and general manager of Fluor Corp. in Houston, said there has been a noticeable decline in productivity across the industry, compounded by rising rates of turnovers and absenteeism. As one solution, his engineering-procurement-construction company has turned to moving work off-site to lessen the burden of managing sizeable workforces. “Productivity is not getting better from what I’ve seen,” Spinks says. “We’ve got some work to do there, in order to improve.” While productivity issues have been especially severe along southeast Texas’ industrial corridor, due to a convergence of sizeable projects there, Louisiana is experiencing its own regional workforce strains. The most immediate concern is in Lake Charles, the site of the state’s largest industrial project—the $8.9 billion Sasol ethane cracker and derivatives plant. Kim Cusimano, Sasol North America public affairs director, says she expects challenges finding necessary, qualified labor as other projects in the area break ground. “With the number of projects expected to kick off in southwest Louisiana (an estimated $90 billion-plus), we expect there to be significant competition for the local workforce and businesses,” Cusimano says. Much of the impact will likely be felt by Sasol’s 5,000-worker construction force, since the plant’s permanent positions are already 70% filled (350 of 500). Lee Jenkins, vice president at Performance Contractors in Baton Rouge, which is currently working at the Sasol project, has a “high level of confidence” that his company will be able to man the work there with seasoned, skilled laborers, with the help of the company’s new training facility in Lake Charles. Performance also targets jobs that “make the most sense for us to execute. It’s the type of work, it’s the location, but it’s also the timing, so we can transition employees from one job to the next.” 10/12 INDUSTRY REPORT • THIRD QUARTER 2016

COVER STORY

DON KADAIR

BROWN & ROOT’S MCMANUS: “As contractors come closer to maximizing the available workforce, the abilities of the craft that you’re hiring go down.”

Jenkins says unprecedented employment is having an indisputable impact upon productivity. “The industry work horse is larger than it has ever been, and there’s no doubt that productivity has been impacted where the megaprojects have affected the workforce the most,” he adds. “When you see multiple megaprojects in close proximity in that area, there’s no question that the construction workforce is impacted by that.” Fred McManus, chief operating officer for Brown & Root in Baton Rouge, says it could have been worse. Had all of the work projected for 2016 and 2017 actually come to fruition, “we would really be in a tough spot, because there’d not be enough people to do the work. As contractors come closer to maximizing the available workforce, the abilities of the craft that you’re hiring go down.” 32

FUNCTIONS OF OUTPUT Jonathan Shi, endowed chair in industrial construction at LSU, teaches a class in productivity and says current productivity woes are simply a matter of supply and demand. Some members of Shi’s class hold upper management positions in some of Louisiana’s largest industrial construction firms. “When you have more demand and the labor supply is about the same, you have problems,” Shi says. “Most of the shortage is in the highly skilled category—they want someone who has at least five or even 10 years’ experience. And someone who just went through the training process does not have that kind of experience.” Another function of output is the industry’s aging workforce. In the next 10 years, it is estimated that 30% of the construction workforce will be over 60 years of age. While some say an infusion of younger

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

workers will likely bring its own productivity problems, due to a poor work ethic among millennials, that opinion is not shared by all. Performance’s Jenkins says he thinks it’s less “generational” and more a function of “newness.” “I haven’t really seen that millennials are nonproductive,” he says. “I think good employees are good employees and they’re productive when they’re well-trained and prepared to do the job that’s out there. I think the key to being successful is minimizing newness on jobs, and when you are dependent upon a large percentage of your workforce coming in as new employees, you’re going to be affected in all areas.” Jenkins points to a convergence of megaprojects in eastern Texas as an example, where productivity has declined due to unprecedented worker demand. “When you look at what’s going on around Mont Belvieu (Texas),

these are monster jobs with huge amounts of people on them,” he adds. “If you go out and have to bring in hundreds or maybe even thousands of people to man a job, and 70% of them are people that have never worked for your company, productivity is going to be affected.” Brown & Root’s McManus says the increased emphasis on jobsite safety can’t be ruled out as another factor. “Some of these calculations have been based upon the fact that we all have a higher level of expectation for good safety performance,” McManus adds. “We are taking a portion of a person’s day and then we want them to dedicate more time to planning the activities.” He stresses, however, that there is “definitely a return on that investment” in regards to safety protocols. IMPACT TO THE BOTTOM LINE When estimating projects, con1012industryreport.com

Montalbano says. “When these clients come calling for a major renovation or new construction, they look internally to see what kind of staff they have and how productive is this staff. That’s going to affect how much the job cost will be.” Montalbano says rising wages have further increased the squeeze on profit margins, as contractors fight for the same pool of workers. This has also led to the growth of the migrating workforce, or “travelers,” as workers move along the Gulf Coast searching for a higher wage rate. This exacerbates the productivity decline, as these workers must become acclimated to the region and a new plant. TRAINING, RECRUITMENT AND OTHER SOLUTIONS Many in the industry are tackling the productivity problem head-on by focusing on the supply side of the equation, primarily through enhanced recruitment and training efforts. In this regard, Sasol in Lake Charles has been impressively proactive in its approach. “When you are planning to deliver a project the size of ours, it is critical to assess the capacity of the local community, including the local community college and workforce development systems,” Sasol’s

DON KADAIR

tractors typically adjust their “productivity multiplier” based upon the available crew’s level of experience. If manpower availability is low, the amount of work expected per man hour is adjusted upward. “If we know the site manager, the superintendent and have confidence in the team of people, we’re going to more aggressively estimate production,” Brown & Root’s McManus says. “Conversely, if we realize we’re only going to know 25, 30 or 40% of that workforce we’re going to add to that factor.” In some situations, Brown & Root has used a “hybrid contract” with its clients, which sets a target price for labor and thereby accounts for the risk in estimating labor cost. In such an arrangement, Brown & Root is penalized when labor cost exceeds the projected amount and earns a bonus if it falls below. Jay Montalbano, a financial planner with Hannis T. Bourgeois CPA in Baton Rouge and former president of the Construction Financial Management Association’s South Central Chapter, says productivity declines, regardless of the reason, will have a detrimental impact on profitability. His firm specializes in accounting for construction firms. “It definitely impacts how these guys are estimating their profits,”

SCHOWEN: “What we’re doing is building greater efficiencies into the labor market.”

FAST STARTING PRODUCTIVITY RECOGNIZED AS AN increasingly reliable solution to Louisiana’s productivity woes, Louisiana Economic Development’s nationally recognized FastStart program strives to tie future labor needs with customized training programs. FastStart was recently named the nation’s best state workforce training program by Business Facilities magazine. It provides customized employee recruitment, screening, training development and training delivery for eligible, new or expanding companies—all at no cost. To date, FastStart has designed and delivered comprehensive workforce solutions for numerous Fortune 500 companies. “What we’re doing is building greater efficiencies into the labor market,” says Susana Schowen, director of workforce initiatives at LED FastStart. “That means aligning education and training with the needs of employers, both now and in the future. What we’re really trying to do is provide a company with the right number of workers, with the right number of skills, and not just a giant pool of people.” The program is tailored to meet projected needs outlined by the Craft Workforce Development Task Force of the Louisiana Workforce Investment Council, in its 2013 report, Building Louisiana’s Craft Workforce. In the report, the board predicts future workforce demand, provides an asset inventory of skilled workers in the field and identifies steps for meeting projected demand. “The conclusion was that we would need approximately 86,000 new skilled craft workers over the coming years,” Schowen says. FastStart and other entities are now engaged in an update of the analysis. Based upon a company’s immediate and long-term workforce needs, the FastStart team crafts unique programs that ensure the availability of high-quality, flexible workers. The team is comprised of dozens of experienced professionals from a range of businesses, including manufacturing, corporate headquarters, digital media, customer support centers and R&D, among others. “From an economic development standpoint, FastStart represents the consumers of the workforce development system and helps to work with the workforce and training providers to align their efforts to [employers’] priorities,” Schowen says. The community and technical college systems, Associated Builders and Contractors, and others play critical roles by expanding the production of skilled craft workers in response to these needs.

GETTING THE SKILLS: Industry has been successful at ramping up training opportunities, such as this program at ABC Pelican Chapter, but still needs to do better recruiting at the secondary level.

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COVER STORY

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to get you prepared to go to college. What I should have been doing is getting you prepared to enter the postsecondary world in such a way that you could pursue some specialized skill.” Alexander says one way to change the college-bound mindset of most faculty could be through six- to eight-week summer “externships,” where teachers get to see the courses they teach in real-world applications. “That’s when that math teacher goes out and actually sees math and trigonometry in a millwright lab, or when a chemistry teacher actually goes to Dow and sees chemistry in action,” Alexander says. “The problem is there are a lot of high school teachers that have never seen or experienced the subject they teach being used in the workplace.”

DON KADAIR

Cusimano says. “The Louisiana state community college and workforce systems, particularly McNeese State University, Louisiana State University and Southern University, were among the first we reached out to during site selection. They have a built-in, statewide network of workforce development experts, centers, candidate pools and technology support.” “We’ve had a number of successes in our workforce preparation efforts due in large part to our partners at the state level and locally,” she adds. “The state invested $20 million into a regional training facility at SOWELA Technical Community College, which will be utilized by Sasol to support its workforce needs for temporary and full-time employees.” Additionally, Louisiana Economic Development’s FastStart program developed a comprehensive Workforce Solutions Plan to ensure that Sasol has qualified applicants, and the Louisiana Community and Technical College System and SOWELA have been key partners in developing new programs locally for high-demand curriculums. “Sasol has also partnered with McNeese State University’s Engineering Department for employee training and development courses,” Cusimano says. “In turn, Sasol assists with the McNeese student career planning and professional development programs.” Sasol provided more than $600,000 in advance funding to the Southwest Louisiana Construction Users Council—tasked with maintaining a steady flow of construction and maintenance workforce—enabling the organization to ramp up training infrastructure and increase accelerated course offerings. Brown & Root’s McManus says while training has been beefed up at area training centers, the recruitment side of the equation is the greatest challenge. “For most of us in the industry, our fathers, grandfathers and a lot of our relatives were in this business,” he adds. “We grew up with our parents coming home and talking about working a plant, building a refinery, pouring concrete, welding pipe and building forms. We understood that. A lot of the young folks today have no interest in getting into our business. In the end,

LOST PROFITS: Jay Montalbano, a former president of the Construction Financial Management Association’s South Central Chapter, says productivity declines, regardless of the reason, will have a detrimental impact on profitability.

we’re drafting folks that, on a lot of occasions, don’t have that family heritage.” An influx of Hispanic workers has also had an impact, he adds. While having a strong work ethic, many require additional skills training to work in area plants. McManus credits local industry for making significant strides in ramping up training opportunities. “We’re beyond the capacity of the training centers that we’ve developed along the Gulf Coast,” he adds. “Folks such as Baton Rouge Community College and others are starting to realize that there’s a market to provide electrical, welder and carpentry training. We’re taking the expertise that we’ve developed and we’re networking with the educators and bringing them into the craft training world.” Organizations such as Associat-

ed Builders and Contractors have long recognized the importance of recruitment at the high school level, and as such hire former school administrators to lead their training efforts. David Alexander, who served as director of education at ABC Pelican Chapter from January to July, was previously the director of secondary schools in the Ascension Parish school system and principal at Dutchtown High School. (He was hired in late July as the new superintendent of Ascension Parish schools.) Alexander says recruitment for industrial jobs is difficult because most schools feel that college is the overall objective. “We need to balance the food chain,” Alexander says. “What we have not promoted well is careers in construction. We just haven’t done a good job of that. For me, my role as a high school principal was

MANAGING WITH TECHNOLOGY Baton Rouge’s Alliance Safety Council leans heavily upon technology to help its members manage current productivity levels, primarily through a records management tool that is gaining widespread popularity. “The tool helps companies maintain not just an employee’s job history in training but also performs a quick gap analysis,” says Kathy Trahan, Alliance Safety Council president/CEO. “They can quickly query the system to determine how many people they have 100% job ready for a particular site, how many are at 80%, etc. From that, they can prescribe the steps for getting their workers job ready.” The records management tool provides members with an inventory of current skillsets to determine if additional training is needed when moving an employee from one site to another, or one job function to another. Hannis T. Bourgeois’ Montalbano has also seen an increase in the use of technology as a productivity management tool. “That can be anything from simply upgrading accounting software to figuring out how to use software to be more productive in the billing cycle, estimating cycle, bid proposal cycle, etc.,” he adds. “There are a lot of programs that are fully integrated; they’ll do it all, from bidding to billing to capturing costs in the field.”

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

COVER STORY

I N N OVAT I V E , T U R N - K E Y S O LU T I O N S F O R

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READY OR NOT: Record management software is helping employers focus on job readiness, says Kathy Trahan, Alliance Safety Council president/CEO.

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10/12 INDUSTRY REPORT • THIRD QUARTER 2016

According to panel members at the Petrochemical Engineering & Construction Conference in New Orleans, owners and contractors have drastically increased their reliance on electronic process design and scheduling tools in order to improve efficiency. However, they say controlling capital costs, managing risk and dramatically improving project performance in the current market environment will take more than adopting new technology. Fluor’s Spinks says his company works to minimize the number of hand-offs and interfaces throughout the lifecycle of a project to drive the certainty and predictability that owners are looking for in their projects. The company is also pushing forward a more integrated and construction-driven approach to its projects that starts as early as the front-end development phase. To mitigate some of the con-

struction risks, Fluor and other contractors are moving a lot of their engineering and fabrication work offsite, and looking at new modularization approaches and innovations. Spinks says moving the work to a more controlled environment is often more cost-competitive and could drive more efficiency around capital investment projects even as it creates additional project logistics and planning requirements. While many project owners on the U.S. Gulf Coast are not familiar with modular construction approaches, he said, modularization can significantly offset the impact of falling productivity rates. Additionally, using high-value engineering centers abroad, especially Asia, has become crucial to how Fluor delivers its projects, and the utilization of these offices is increasing as their capabilities continue to rise. 1012industryreport.com

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NEWS WORKFORCE

The Great Crew Change

BY ALEX NUSSBAUM AND DAVID WETHE

ISTOCK

A lost generation of oil workers leaves few options for next boom.

he oil industry is fighting a generation gap. Already contending with a global price slump, U.S. explorers are also grappling with the demographic hangover of the last great industry downturn in the 1980s, when scores of drillers went out of business. That rout drove a generation away from the business, leaving a shortage of workers in their late 30s to 50s today just as companies try to replace the baby boomers who make up much of senior management. What the industry calls the Great Crew Change—the looming

retirement of thousands of older workers—has companies trying to plug the gap by training younger employees, recruiting outside the industry and enticing veterans to hang on longer. It’s also forced drillers into a delicate balancing act amid the current downturn, as they lay off thousands but try to hold on to hard-to-replace scientists and engineers. “Everybody that’s going through the process of downsizing their business right now is faced with this extra complication,” said Bob Sullivan, a management consultant for New York-based AlixPartners. “Decisions that get made right now on how you

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

right-size the company are going to have a huge impact when the market turns.” Employers have spent years trying to prepare. Baker Hughes Inc., the oilfield services company, runs a mentoring program for young engineers. Exxon Mobil Corp. has spent about $2.6 million on workforce training initiatives in the Gulf Coast over the last decade, Bill Holbrook, a company spokesman, said. It’s also sponsored ad campaigns to entice more Americans into engineering careers. Houston-based Apache Corp. has been bracing for the Great Crew Change for 15 years, Chief Execu-

tive Officer John Christmann said by phone. The driller has asked some senior staff to extend their careers past retirement age. It also runs a three-year professional development program for new hires designed to cement their ties to the business. About half the company’s technical staff are 36 or younger; another third are over 50. “There’s a big gap from 1985 to 2000 when not very many people entered this business,” said Christmann, 50. While Apache is prepared for the transition, the industry as a whole is “reeling a little bit because we don’t have a lot of those managers,” he said. 1012industryreport.com

The wave of retirements comes as the oil sector is already bleeding talent. Worldwide, oil and natural gas companies have cut more than 350,000 jobs since crude prices started to fall in 2014, according to a May report by Houston-based consultant Graves & Co. HIRING NEEDS The oil, natural gas and petrochemical industries employed 1.4 million people last year, according to the American Petroleum Institute. Those companies will need to hire almost 30,000 workers annually over the next two decades to replace departing and retiring employees, the trade group said in March. The challenge is partly the residue of the industry meltdown in the 1980s, when a glut of oil sent prices tumbling below $20, about where they stayed on average for the next 15 years. More than 6,000 U.S. companies disappeared. By the early ’90s, oil looked like a lousy career path for new graduates in the cohort known as Generation X—roughly, those born between the

mid-1960s and mid-1980s. “There was a fairly significant amount of time when there wasn’t nearly as much recruiting as there should have been,” said Robert Gruman, a partner at PricewaterhouseCoopers who advises companies on hiring. Now, “there is a gap in leadership and management ranks across the industry as people retire,” he said. The biggest area of concern is in the 45- to 55-year-old age bracket, said Bill Ebanks, co-head of the oil, gas and chemicals practice at AlixPartners. Layoffs in the late ’80s forced many young engineering graduates to flock to other industries including automotive and aerospace, he said. “I see a lot of angst and hand-wringing right now among companies really struggling with what to do with their workforce in that age group,” Ebanks said in an interview. “Those people would be in the prime of their careers and they’d be in key managerial and supervisory roles.” Companies today are trying to be

more judicious with layoffs, consultants said, keeping on seasoned technical employees who may be hard to replace even if their paychecks are among the biggest. Newfield Exploration Co., a driller based in The Woodlands, Texas, is down about 450 positions since 2012. Still, “we’ve been very careful at trying not to cut too much of our technical talent,” said Cindy Hassler, a spokeswoman. “We still have significant operations and you are going to have to have talent to operate those when things turn around.” NEXT GENERATION Millennial-age workers have also benefited. Companies have expanded benefits thought to attract younger employees, offering more flexible work schedules, on-site gyms or stripped-down medical plans with lower premiums. Apache runs a Young Professionals’ Network with networking and educational opportunities for employees. “We’re spending time with employees earlier in their careers and mapping out their plans,” said

CEO Christmann. “We’re trying to fit their career aspirations with the company’s aspirations.” At the other end of the spectrum are staff like Dave Monk, Apache’s 61-year-old director of geophysics. Over a 36-year career, Monk has traveled the world helping companies vet petroleum reserves from Suriname to the North Sea. Now, training the next generation is a big part of his job as well. Until last year, Monk oversaw a team of more than a dozen scientists. He relinquished day-to-day leadership in August but still travels the globe working particularly knotty geological challenges along with younger colleagues. “I’m trying to pass along some of the knowledge that I’ve gained over the years,” said Monk, who joined Apache in 2000. “Right now, there just aren’t enough people in that demographic who are ready to step in.” Used with permission of Bloomberg LP. Copyright© 2016. All rights reserved.

CREATING CHEMISTRY. CREATING CAREERS. CAREERS.BASF.US

1012industryreport.com

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

NEWS: TRENDS

The LNG option

STAFF REPORT

With applications spreading from marine to rail to garbage trucks, LNG expands its role in the global fuel mix.

CHERYL GERBER

HARVEY GULF’S VERRET: “It’s cheap, it’s clean, it’s abundant, it’s domestic.”

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

uel is always a controversial topic in America. What should we use for fuel? How much will it cost? Where will we get it? What are the environmental consequences of our fuel choices? These are all politically loaded questions. But when it comes to fueling our trucks, ships and heavy equipment, natural gas is becoming an important part of the answer. “It’s cheap, it’s clean, it’s abundant, it’s domestic,” says Chad Verret, executive vice president with Harvey Gulf International Marine. “It’s the only fuel that Democrats and Republicans can be hand-in-hand on. It’s ‘drill, baby, drill’ for the Republicans, and it’s clean and green for the Democrats.” Harvey Gulf recently added to its fleet three offshore service vessels that mainly run on liquefied natural gas. Three more are under construction. The company also has unveiled North America’s first marine LNG fueling terminal at its Port Fourchon operations headquarters, where Harvey Energy, the first American-flag vessel primarily powered by LNG, was loaded with 43,000 gallons of LNG in January. The LNG ships, which can use diesel as a backup fuel, cost about 20% more to build than a comparable non-LNG vessel, Verret says. But when design advantages and fuel costs are taken into account, they’re about 30% more efficient. And while the LNG ships are cheaper to operate, for Shell, Harvey’s customer, the environmental benefits might be even more important. LNG has a smaller carbon footprint than diesel, and it helps operators abide by new standards on sulfur and nitrogen oxide emissions. “Shell’s investment underlines our confidence in LNG becoming a bigger part of the global fuel mix,” says John Hollowell, executive vice president for deep water with Shell Upstream Americas. 1012industryreport.com

CHERYL GERBER

NEW MARKET: Harvey Gulf has three LNG-powered offshore supply vessels in service for Shell, with three more under construction in Gulfport, Mississippi.

LNG FOR HIGH HORSEPOWER Even while the kind of LNG fueling terminal Harvey Gulf has introduced at Port Fourchon is brand new, a coalition of marine industry stakeholders is at work on bringing LNG to much broader accessibility for marine use. A “best of industry” team plans to make LNG widely available to ship owners as a propulsion fuel, MarineLog reported in December. The team, led by Siemens Drilling and Marine, Dresser-Rand and Lloyd’s Register, aims to provide an end-to-end solution, encompassing the entire supply chain, that will remove obstacles that can hold back widespread adoption of natural gas as the marine fuel of choice. “Our integrated solution, encompassing the entire supply chain of LNG including gas-fueled marine propulsion systems, will remove the chicken-and-egg hurdle from the LNG-equation,” says David Grucza, Siemens Drilling and Marine. “This is a disruptive concept for the maritime industry, and the technology exists for immediate adoption. This joint solution is not limited geographically, and we stand ready to support the marine industry globally, although our initial focus is on deploying U.S. shale gas.” The service, which would initially be offered to the North American inland and coastal waterways community, combines a liquefaction barge, a bunkering (fueling) barge and a river pushboat to supply 1012industryreport.com

LNG-powered vessels with fuel. Meanwhile, North America’s leading railroad giants continue to quietly test the waters with natural gas locomotive trials, Gladstein, Neandross & Associates reports. Companies are evaluating both GE and Caterpillar gas engines, while running pilot LNG locomotives across the country to assess their durability in diverse climates. Florida East Coast Rail began full-system, revenue-service trials of LNG, running GE dual-fuel locomotives between Jacksonville and Miami earlier this year, extending its previous trial route between Jacksonville and New Smyrna Beach, just south of Daytona. “Experts predict that oil will rebound to $70 to $80/barrel in the near-term,” writes Gladstein, Neandross & Associates CEO Erik Neandross. “With natural gas prices in the $2.50 -$3.00/MMBtu range, HHP [high horsepower] operators have an opportunity to save 30 to 50% on fuel costs. In addition, as we have seen from $2.00 - $4.00/ MMBtu natural gas for the last seven years, the lack of volatility in the North American natural gas market provides significant budget predictability for large energy consumers well into the future.” In the past year, the website HHP Insight [hhpinsight.com], has also reported on growing traction for LNG as a fuel for cruise boats, tankers, container carriers, tugs and towboats, heavy construction

equipment, and mining and drilling. Tote Maritime, which brought the first LNG-fueled container ship into service between Florida and Puerto Rico last November, committed to LNG not because it’s cheaper, but because it’s cleaner, the website reported. A GROWING SECTOR For use as a transportation fuel, natural gas can be converted into LNG or compressed natural gas (CNG). Last year, transportation represented only about 0.13% of the overall consumption of natural gas in the United States, according to the U.S. Energy Information Administration. “But it’s still one of the fastest-growing sectors out there,” says David Dismukes, executive director and professor at LSU’s Center for Energy Studies. That growth has been hampered lately by the relatively low cost of crude oil. But restrictions on sulfur emissions from diesel fuel, in effect for years on land vehicles, are just now starting to kick in for marine traffic, Dismukes says, so vessel owners and operators increasingly are looking to natural gas. Lower gasoline prices mean the everyday car buyer is less likely to be interested in a natural gas-powered vehicle, says Matt Godlewski, president of Natural Gas Vehicles for America. However, some municipalities are moving toward natural gas-fueled buses, while AT&T,

which deployed its 8,000th CNG vehicle in 2014, probably has the largest light-duty natural gas fleet in the country, he says. “Where we continue to see growth, and where there’s the greatest opportunity for growth in the future, is in the heavy-duty segment, where you’ve got high fuel use and high mileage,” Godlewski says. The average consumer who is interested in an alternative fuel vehicle is more likely to shop for an electric car, says Ann Vail Shaneyfelt, executive director for Louisiana Clean Fuels, a nonprofit association that works to diversify transportation fuel options. For small commercial vehicles, it’s probably not economically beneficial to convert to natural gas unless you’re idling a great deal, in which case a dual-fuel vehicle that idles while on natural gas might make sense, she says. Shaneyfelt says natural gas is most attractive for large heavy-duty vehicles. She says trucking, transit and especially garbage companies such as Republic Services are moving to natural gas. Republic started deploying CNG trucks in select markets in 2005, says company spokeswoman Jennifer Eldridge. By 2015, about one-third of the company’s replacement vehicles were CNG-powered, including 79 in Baton Rouge and 14 in Shreveport. Republic operates almost 2,500 CNG-powered vehicles, which represents about 16% of their entire

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

fleet. The company has installed 38 natural gas fueling stations across the country. CNG garbage trucks cost about $25,000 more than the diesel-fueled equivalent. But they’re cheaper to maintain, and they’re helping Republic work toward its goal of reducing emissions by 3% by 2018, Eldridge says. While Republic mostly uses natural gas shipped by pipeline, the company is evaluating ways to recycle gas produced by its landfills. Don Briggs drives a CNG-fueled Ford Expedition while on the job as president of the Louisiana Oil & Gas Association. But he agrees that the bigger opportunity for natural gas as a transportation fuel is with bigger vehicles, noting that LNG is attractive for large offshore vessels, 18-wheel trucks and heavy equipment. “We have such an abundant supply of natural gas [in the United States] that we’ve created our own market,” Briggs says. And it’s a market that can’t be controlled by the whims of OPEC or other global

HARVEY GULF

NEWS: TRENDS

FIRST OF ITS KIND: The Harvey Energy bunkering at Port Fourchon, where Harvey Gulf has opened North America’s first LNG fueling terminal. Total onsite LNG storage is 270,000 gallons.

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players that might be hostile to American interests, he notes. AN AMERICAN PRODUCT Natural gas isn’t a perfect fuel, if such a thing as a “perfect fuel” even exists. It creates greenhouse gases and other unwanted emissions, albeit less than oil or coal, and for the most part it is a nonrenewable fossil fuel. Much of it is recovered by companies that use fracking, a process that is controversial in some circles. It is flammable, and transporting it generally requires expensive pipelines (of which Louisiana has plenty, although maintenance sometimes is an issue). Natural gas is cheap—too cheap, for producers’ tastes—but as the price of oil has fallen, the competitive advantage of using natural gas has narrowed. But natural gas prices since the shale revolution have been stable, in contrast to often-volatile oil, so gas can be appealing for companies that try to plan their expenses well into the future. As with any emerging fuel, there’s

a bit of a chicken/egg problem with natural gas as a transportation fuel: Users will be reluctant to transition to natural gas if it’s hard to get, but it’s hard to justify building the infrastructure until you have enough users. There are 1,677 CNG fueling stations for vehicles nationwide, Godlewski says, and 140 LNG stations.

“Infrastructure’s always a problem,” Dismukes says. “It’s starting to improve, but there’s still a long way to go.” Louisiana Clean Fuels, and other local affiliates of the U.S. Department of Energy Clean Cities program, can help connect private sector station developers with fleet owners, Shaneyfelt explains. LCF covers every

CONSUMPTION OF NATURAL GAS IN THE U.S. As of July 2015

3.3%

Pipeline & Distribution Use

0.12%

Vehicle Fuel

5.84%

Field and Well Operations

30.39%

Electric Power

12.9%

Commercial Consumers

28.54%

18.91% Residential Consumers

Industrial Consumers Source: Clean Cities

Louisiana parish except Jefferson, Orleans, Plaquemines, St. Bernard, St. Tammany, St. Charles, St. John the Baptist and Tangipahoa, which are represented by the Southeast Louisiana Clean Fuel Partnership. If a commercial fleet, or multiple fleets, is willing to commit to using enough natural gas fuel, a station developer will build the station for them and make up the $2 million or so capital cost in fuel markups, she says. “Over the long term, you’re still saving money,” Shaneyfelt says, adding that some companies are happy to only break even on their investments, for both environmental and patriotic reasons. “It’s an American product,” she says. “We pull it out of the ground here, we stick it in the pipeline, and it’s ours. We know where it came from.” More information about the use of natural gas as a transportation fuel, including details about state and federal incentives, is available at ngvamerica.org and louisianacleanfuels.org.

—Reporting by David Jacobs

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10/12 INDUSTRY REPORT • THIRD QUARTER 2016

NEWS: ECONOMIC DEVELOPMENT

Site Selection 101

BY SAM BARNES

Site selection decisions rest on many factors. How does south Louisiana measure up?

ite selection has become an increasingly competitive process in the U.S., as hundreds of regional and state economic developers fight to qualify for investors’ coveted “short lists” by complementing their regional strengths with a host of innovative strategies. Unfortunately, the desire to get noticed is sometimes mired by regional complications. In Louisiana, developers have been sounding the

alarm as of late, as they fear that increased economic burdens placed on business by state government will make their task of attracting and/ or retaining industry immeasurably more difficult. This was perhaps summed up best by Louisiana Chemical Association President Dan Borne, speaking at the Petrochemical Engineering & Construction Conference in New Orleans earlier this summer. Borne placed the blame squarely

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

on state government for potentially jeopardizing billions of dollars in industrial investment, saying recent actions have resulted in $2 billion in additional taxes for the state’s business community. “We at LCA are concerned about all of the factors that impact investment, but this change in business climate, and how government looks at business in Louisiana, has evolved into a situation that we think will severely impact our state,” Borne

says. “You can’t sugarcoat that.” His comments reflect the concerns of many regional and state economic developers, who must compete nationally with hundreds of other municipalities and regions to attract business. “It’s less of a site selection process than it is a site elimination process,” says Louisiana Economic Development Secretary Don Pierson. “Those that make these kinds of decisions have many options before them, and 1012industryreport.com

SAM BARNES

LCA’S BORNE: “We at LCA are concerned about all of the factors that impact investment, but this change in business climate, and how government looks at business in Louisiana, has evolved into a situation that we think will severely impact our state.”

move through them very rapidly … so it’s easy for a site to fall into a disqualified status.” More often than not, these potential investors remain anonymous, as they are represented by site selection consultants who desire to quickly scratch off potential sites in order to whittle the number down to a short list of four or five locations. Kyle Zeringue, who occupies the newly created role of senior vice president of business development at the Baton Rouge Area Chamber, says the state’s current economic woes create an additional challenge to making the short list. “It diminishes the value proposition of coming to Louisiana,” 1012industryreport.com

Zeringue says. “When they’re looking at Texas versus Louisiana, it all boils down to risk. If you’re making a personal investment, you’re going to evaluate what that risk is and if that risk versus reward is there. If it comes down to a comparison, where the reward is about the same in two different locations but the risk is higher at one of the locations, it seems like that decision is a lot easier to make.” Zeringue says some business has potentially been lost due to Louisiana’s perceived risk. “We have deals to the tune of $10 billion and above that are evaluating not only the Capital Region, but the rest of the state as a potential place for investment.

Some have put those decisions on hold indefinitely, some just temporarily to see what happens, and some have completely removed us from the short list because of that.” Michael Hecht, president and CEO of Greater New Orleans Inc., the economic development organization for southeast Louisiana, argues that stability in government is critical. “The most fundamental thing that government provides, which gets missed a lot in the Legislature and in the press, is a stable political and economic environment,” Hecht says. “A stable political and economic environment that a company sees as reliable is actually far more important than a specific tax rate or incentive level.” AN ACE IN THE HOLE Given Louisiana’s current economic environment, Pierson says the state’s “ace in the hole” continues to be LED’s Certified Sites program, which qualifies potential industrial sites based upon zoning restrictions, title work, environmental studies, soil analysis and surveys. The sites certified through the program are 180-day development ready and have had substantial due diligence

studies performed. [See map, page 48.] The program separates Louisiana from the pack, and Pierson hopes to expand it to further increase its impact, though he admits that Louisiana’s budget woes might force him to tap the brakes. “We certainly have had some restrictions in terms of challenges that the state is facing, so we’re not advancing the Certified Sites program as rapidly as we would like,” he adds. “However, we still have enough resources to undertake this effort, and it’s in the planning stages to broaden the program.” Currently at 66 sites, LED hopes to expand the program to about 100 sites statewide, as well as provide a greater variety of available sizes and types. To complement the program, LED relies upon certain technological tools, such as GIS (Geographic Information System), which can digitally overlay pipelines, water and other utility locations. BRAC’s Zeringue says the Baton Rouge area is one of the state’s leaders in the number of site certifications. “I think you could make an argument that BRAC is better at certifying sites than most places in

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

NEWS: ECONOMIC DEVELOPMENT

DON KADAIR

LED’S PIERSON: “It’s less of a site selection process than it is a site elimination process.”

GIANT PROJECTS WEIGHING LOUISIANA AND TEXAS SABIC AND AN affiliate of Exxon Mobil Corp. announced July 25 they are considering the potential development of a jointly owned petrochemical complex on the U.S. Gulf Coast. If developed, the project would be located in Texas or Louisiana near natural gas feedstock and include a world-scale steam cracker and derivative units. Before making final investment decisions, the companies will conduct necessary studies and work with state and local officials to help identify a potential site with adequate infrastructure access. “We are focused on geographic diversification to supply new markets,” said Yousef Abdullah Al-Benyan, SABIC vice chairman and chief executive officer. “The proposed venture would capture competitive feedstock and reinforce SABIC’s strong position in the value chain.” Just days later, Houston-based LyondellBasell announced it plans to build a large plastics plant in either Texas or Louisiana near the Gulf Coast. FuelFix.com reports the petrochemical giant, which recently expanded its plants in the Houston and Corpus Christi areas, is looking to build near its existing footprints. The aim is to use LyondellBasell’s increased ethylene capacity to produce 1.1 billion pounds a year of high-density polyethylene. The plant will produce the high-density polyethylene using a new technology to make plastics that don’t crack as easily. LyondellBasell won’t reveal project costs or the exact location, but the goal is to finish the project by 2019.

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

the country,” he adds, crediting Jim Cavanaugh, BRAC’s site development director, for advancing the program locally. NATURAL RESOURCES, WORKFORCE AND INTANGIBLES GNO Inc.’s Hecht says there are also certain intangibles that Louisiana, and particularly New Orleans, have to offer, which often become the deciding factor when selecting a site. “The first step is that they want to understand the costs such as utility and labor rates, and assets such as site availability, water access, etc.,” Hecht says. “The second step typically revolves around workforce, and them wanting to understand about the quality and quantity of the workforce.” He refers to the third step in a locally appropriate way—“lagniappe.” “That has to do with culture and connection,” he adds. “That is having them understand that the culture in southeast Louisiana is particularly

attractive for people to work and live relative to other places in the country. In an increasingly homogenous world, the special nature of New Orleans is a real differentiation.” That differentiation is important when competing with Texas for industrial investors. “They come to believe that they’re going to get a level of service and ongoing support that they’re not going to necessarily get in Texas, where they are relatively less important and where people feel relatively less ownership.” Hecht’s assertions appear to be borne out in recent statistics—this past spring, Site Selection magazine released its 2015 “Governor’s Cup” rankings of economic development performance in 2015, and Greater New Orleans and Louisiana placed high in a number of categories—the Greater New Orleans area ranked seventh Top Metro Area by total wins, while Louisiana placed second in wins per capita regionally and sixth by wins per capita in the U.S. In Lake Charles, the Southwest Louisiana Economic Development Alliance, under the guidance of President/CEO George Swift, similarly seeks to emphasize regional strengths as part of a unique collaboration of various public and private entities, including the Chamber of Southwest Louisiana, McNeese State University and others. The success of the approach is easy to see, as Swift points to the $2 billion Sasol plant currently under construction, development at Chennault International Airport and a host of liquefied natural gas projects. “We have more than $100 billion in announced projects and are on the verge of unprecedented growth and opportunity,” Swift says. Lake Charles is able to attract industry primarily because of its confluence of natural resources. “If we didn’t have the natural resources here, such as the shale deposits, a lot of this wouldn’t have happened,” Swift says. “If we didn’t have the ship channel, we would not have the growth because it drives most of the industry that we have here. Combine that with a robust pipeline network and we’ve got all the necessary ingredients for industry.” Local support from academia has undoubtedly contributed to the area’s economic development 1012industryreport.com

prowess. In fact, Swift’s office is physically located within McNeese’s Southwest Louisiana EntrepreneurCASE STUDY: YUHUANG’S DECISION TO PICK ial and Economic Development LOUISIANA HINGED ON INTANGIBLES (SEED) Center. The center facilitates the development of new and JERRY OLIVER, vice president of U.S. manufacturing operations for China-based Yuhuang Chemical Inc., existing business ventures, aligns says the decision to choose Louisiana over Texas for its new, multiphased, $1.85 billion methanol plant was, with McNeese’s vision to create a in the end, based largely on feelings. The St. James Parish plant is on track for a late 2016 groundbreaking, while a later phase to construct a culture of innovation, and plays an second methanol unit—similar to the first in design and scope—will begin in 2019. The timeline for a planned active leadership role in the civic and third phase has not been publicly announced. economic renaissance in southwest “Louisiana provided YCI with some comfort that this would be a place where they would be welcome,” Louisiana. Oliver says. “Your governor at the time did a wonderful job of making them feel like they were going to be “Being housed here sends a pretty part of the community. I’m not saying Texas did a bad job, but obviously Louisiana did a better job because the sites in Texas were pretty good.” good signal that we’re working By 2014, YCI had whittled its short list down to just two sites, one in Orange, Texas, and the other in St. together,” Swift adds. “It shows that James Parish. Ultimately, the chemical company found that Louisiana was more business-oriented under we’re serious about business and Bobby Jindal’s administration. provides us with a nice place to bring Other factors that tilted the decision in Louisiana’s favor? State and local officials appeared more knowlprospects and business people. From edgeable and better organized. “Jindal knew YCI, what it was, and he knew the parent company because someone had briefed him well,” Oliver says. “He was able to articulate the value he saw to the community. here, we can assist a prospect with He showed a genuine interest and genuine knowledge that made the difference.” utilities, zoning or whatever they Oliver says relationships, especially from the Chinese perspective, are more important than other factors. need.” “Showing that you are a trusted business partner was significant,” Oliver says. “State officials met with the In Baton Rouge, BRAC has also YCI team, along with the presidents of St. John, St. James and St. Charles parishes, and the head of the Port increased its collaboration with of New Orleans. You had people that were actually business drivers, all there, all shaking hands, saying we want this, we welcome you.” local academia, as well as parish As icing on the cake, Louisiana provided some attractive tax and employment incentives, and offered an and state partners, to create more experienced, available workforce. Of course, other factors more material in nature were critical to the final devalue for local industry. “If you need cision, such as available natural gas and plentiful land. The plant represents the largest grassroots, greenfield a new market study or a business project by a Chinese company in the U.S., and is a sign of changing Chinese-U.S. relations and strengthenplan, work10/12 with you through Ad proof #3 ing business ties between China and Louisiana. Issuewe’ll Date: Industry —S.B. • Pleaseorrespond by e-mail or fax with your approval or minor revisions. LSU Southern’ s MBA program,” • Ad will run as is unless approval or final revisions BRAC’ s Zeringue says. “If you are received by the close of business today. • Additional revisions must be requested and may be subject to production fees. Carefully check this ad for: CORRECT ADDRESS • CORRECT PHONE NUMBER • ANY TYPOS This ad design © Louisiana Business, Inc. 2014. All rights reserved. Phone 225-928-1700 • Fax 225-926-1329

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10/12 INDUSTRY REPORT • THIRD QUARTER 2016

NEWS: ECONOMIC DEVELOPMENT

TOP LED CERTIFIED SITES

A LOUISIANA ECONOMIC DEVELOPMENT Certified Site is a development-ready industrial site that has completed a rigorous review process by Louisiana Economic Development and URS, an independent, third-party engineering firm. Listed are sites of 100 acres or more.

1 RAPIDES

VERNON

AVOYELLES

WASHINGTON

WEST FELICIANA

EAST FELICIANA

5 10 8 14 2

ST. LANDRY

EAST BATON ROUGE

12 JEFFERSON DAVIS

WEST BATON ROUGE

13 11

BATON ROUGE

LAFAYETTE

ST. MARTIN

LAFAYETTE

24 22

ST. TAMMANY

LIVINGSTON

HAMMOND

IBERVILLE

ASCENSION

25 23 20 17 3

ST. JOHN THE BAPTIST

ORLEANS

ST. JAMES

IBERIA

CAMERON

16 27

ACADIA

LAKE CHARLES

TANGIPAHOA

POINTE COUPEE

CALCASIEU

EVANGELINE

ALLEN

BEAUREGARD

ST. HELENA

NEW ORLEANS

ASSUMPTION

VERMILION

ST. CHARLES

ST. MARTIN

ST. BERNARD

1. England Airpark Mega Site 1611 Arnold Drive, Alexandria Parish: Rapides • Acreage: 1,573 Contact: David H. Broussard Jr., 318.427.6407 2. Pointe Coupee Power Park 7807 River Road/La. 415, Jarreau Parish: Pointe Coupee • Acreage: 1,541 Contact: Les Cantrell, 225.638.3500 3.

Schexnayder Site 2000 Gautreau Road, Donaldsonville Parish: Ascension • Acreage: 1,000 Contact: Jim A. Cavanaugh, 225.339.1163

Pointe Sunshine La. 18, Donaldsonville Parish: Ascension • Acreage: 987 Contact: Lisa Laws, 225.675.1750

Kent Site 5564 Normandy Road, Batchelor Parish: Pointe Coupee • Acreage: 903 Contact: Les Cantrell, 225.638.3500

6. Dow Louisiana Operations West 59270 La. 1148, Plaquemine Parish: Iberville • Acreage: 883 Contact: Larry Rushing, 225.353.5360 7. England Airpark Heavy Industrial Site W2 1611 Arnold Drive, Alexandria Parish: Rapides • Acreage: 865 Contact: David H. Broussard Jr., 318.427.6407 8. Angel Ranch 9666 Ferry Landing Road, New Roads Parish: Pointe Coupee • Acreage: 731.56 Contact: Jim A. Cavanaugh, 225.339.1163

LAFOURCHE

IBERIA

PLAQUEMINES

ST. MARY

TERREBONNE

England Airpark Heavy Industrial W1 1611 Arnold Drive, Alexandria Parish: Rapides • Acreage: 708 David H. Broussard Jr., 318.427.6407

10. NRG Industrial Park 4007 Highway 981, Ventress Parish: Pointe Coupee • Acreage: 640 Contact: Les Cantrell, 225.638.3500 11. Freeland Site Jasmine Road, Crowley Parish: Acadia • Acreage: 536.94 Contact: Amy Thibodeaux, 337.788.0177 12. Grace Farms West 15910 Ramah Road, Ramah Parish: Iberville • Acreage: 515.4 Contact: Jim A. Cavanaugh, 225.339.1163 13. Grace Farms East 15820 Ramah Road, Ramah Parish: Iberville • Acreage: 457.2 Contact: Jim A. Cavanaugh, 225.339.1163 14. Moseley South Site La. 981, New Roads Parish: Pointe Coupee • Acreage: 378.59 Contact: Jim A. Cavanaugh, 225.339.1163 15. Moseley North Site La. 981, New Roads Parish: Pointe Coupee • Acreage: 349.45 Contact: Jim A. Cavanaugh, 225.339.1163 16. Nord du Lac Just north of Interstate 12 and west of Highway 21, Covington Parish: St. Tammany • Acreage: 309.5 Contact: Bruce Wainer, 504.834.5511

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

17. Grezaffi South Site 6088 Industrial Drive, Geismar Parish: Ascension • Acreage: 212.87 Contact: Jim A. Cavanaugh, 225.339.1163

24. Chennault Air Park Site 5 Perimeter Road, Lake Charles Parish: Calcasieu • Acreage: 160 Contact: Randy Robb, 337.491.9961

18. Allstar Site La. 76, Port Allen Parish: West Baton Rouge • Acreage: 200 Contact: Jim A. Cavanaugh, 225.339.1163

25. Waterloo Site 9604 La. 75, Geismar Parish: Ascension • Acreage: 155.8 Contact: Lisa Laws, 225.675.1750

19. LSU Innovation Park 8000 GSRI Ave., Baton Rouge Parish: East Baton Rouge • Acreage: 200 Contact: Rachel Pierson, 225.381.7146

26. City of Bunkie Industrial Park 1209 La. 115 West, Bunkie Parish: Avoyelles • Acreage: 148.8 Contact: Mike Robertson, 318.717.0501

20. Parks Geismar Site 7238 La. 75, Geismar Parish: Ascension • Acreage: 183.51 Contact: Jim A. Cavanaugh, 225.339.1163

27. River Chase Interstate 12 and Brewster Road, Covington Parish: St. Tammany • Acreage: 124.8 Contact: Townsend Underhill, 985.246.3785

21. HC Drew Development Area 4151 U.S. 90, Vinton Parish: Calcasieu • Acreage: 183 Louie D. Barbe III, 337.433.6392

28. The Aviation Business Park at Baton Rouge Metropolitan Airport 9430 Jackie Cochran Drive, Baton Rouge Parish: East Baton Rouge • Acreage: 125 Contact: Jim A. Cavanaugh, 225.339.1163

22. Chennault Air Park Sites 2 and 2A 4605 East Prien Lake Road, Lake Charles Parish: Calcasieu • Acreage: 180 Contact: Randy Robb, 337.491.9961 23. Grezaffi North Site 6468 La. 73, Geismar Parish: Ascension • Acreage: 171.53 Contact: Jim A. Cavanaugh, 225.339.1163

29. Franklinton Industrial Park Taft St., Franklinton Parish: Washington • Acreage: 100 Contact: Ryan Seal, 985.735.7565

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CHERYL GERBER

labor shortage can slow the flow of available workers, Pierson stresses certain innovative training opportunities, such as LED’s FastStart Program. The FastStart team has designed and delivered comprehensive workforce solutions for a wide variety of Fortune 500 companies, as well as high-tech companies funded by leading venture capital firms.

GNO INC.’S HECHT: “The first step is that they want to understand the costs such as utility and labor rates, and assets such as site availability, water access, etc.”

1012industryreport.com

attract new industry. “SOWELA Technical Communication College is investing $20 million in a new regional training center—that’s a pretty serious commitment,” Swift adds. “When talking to prospective industry, we show them our different training programs, such as SOWELA, the Associated Builders and Contractors GOOD SIGNALS: In addition to providing a flagship facility for area economic development, the SEED Center in Lake Charles signals the cooperation of industry and higher education. school, McNeese etc. We also have about 6,500 folks in the existing industry, so it’s part of our culture.” Statewide, LED’s Pierson says Louisiana’s strengths are obvious. “We are blessed with ports; we’re blessed with six Class One rails that are already here. More importantly, we have the ability to deliver a trained workforce that is part of a pipeline that will allow you to continue, over time, to get the workers you need.” While the current skilled 10/12 INDUSTRY REPORT • THIRD QUARTER 2016

SEED CENTER

need to streamline your operations, we’ll work through MEPOL (the Manufacturing Extension Partnership of Louisiana) and other entities. I think we’ve been most successful with respect to workforce, where we have worked closely with the Baton Rouge Community College system in the creation of certification programs.” Highlighting recent initiatives is the creation of the Office of Research and Economic Development at LSU. Under the guidance of Vice Chancellor of Research and Economic Development Kalliat Valsaraj, the LSU facility strives to expand economic development through technology transfer, as well as advancing and supporting the economic and workforce development emphasis in the state. SWLA Economic Development Alliance’s Swift points to a significant workforce training apparatus as a major reason Lake Charles can

THE NEXT BIG THING “Innovation Districts” are a recent creation gaining traction in the U.S., whereby metro areas or regions encourage unprecedented collaborations among academia, private industry and government to create geographic epicenters for specific industries. Within these districts, leading-edge anchor institutions and companies cluster and connect with startups, business incubators and accelerators. Doug Rasmussen, current director of site selection and business incentives for financial advisor Duff & Phelps LLC in St. Louis, was instrumental in guiding the “innovation district” concept in St. Louis in his previous position with the St. Louis Economic Development Partnership’s Business Development Division. The endeavor ultimately became a model for collaboration in developing an attractive site selection package. The effort began two decades ago, when St. Louis began taking steps to capitalize upon the heavy concentration of plant science institutions in the area, ultimately creating The Coalition of Plant Life Sciences. The group—comprised of intellectuals from area universities and economic

developers—worked hard to develop a long-range plan. Subsequently, St. Louis was able to attract agriscience giant KWS SAAT AG of Germany, and became a prime example of a metro area adeptly leveraging its existing strengths to attract biotech companies. Ultimately, KWS was attracted to the region because of the world-class research facilities available at the city’s Bio-Research & Development Growth Park. Rasmussen says a willingness of the community to collaborate and work together was vital to the endeavor’s success, noting that cooperativeness on the part of the local and state government provides the foundation of a good collaborative environment. “I think one of the most effective ways you can get the word out is to decide who you are, and get the community buy-in for who you are,” he says. “By that, I mean don’t focus on things that aren’t in your realm, or aren’t your core strengths.” He adds that most effective regional economic development organizations are focused on certain industries and stay “on message.” “There are certain communities that do that really well—when you get an industrial project you think of a certain area; when you have an animal health project, you think of a certain area … because that message has been delivered over and over, and infrastructure has been built around that brand and strategy.” He says communities that are organized, prepared, able to answer questions and willing to troubleshoot issues “win the day more often than not.”

NEWS: CONSTRUCTION

Cranes at work

Competition, technology and safety are the key drivers in today’s heavy lifting industry. BY SAM BARNES

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

COLLIN RICHIE

s industrial owners design vessels and structures that are heavier, taller and in increasingly tighter spaces, the facilitators of their installations—the heavy lifting industry—have learned to adapt and differentiate to remain competitive. This summer, staying lean has also been the name of the game, as crane and rigging operators say an expected influx of work has never materialized. “This year has been a challenge,” says Jeremy Landry, project manager with Deep South Crane and Rigging in Baton Rouge. “We’ve had a very slow summer. We had a lot of projects that were supposed to happen this year but got canceled. We’re coming through one of the slowest summers that we’ve ever seen.” Much of the slowdown is due to the depressed oil and gas market, and contrasts sharply with expectations—2016 was originally forecast to be a record year. This makes differentiation a driving force in such a highly competitive, low-profit-margin environment. The number of heavy lift and haul companies in Louisiana has trended upward in recent years in anticipation of the $140 billion in announced industrial projects since 2012. “I counted 15 crane companies in the Baton Rouge area,” Landry says. Heightened safety standards are also topping the list of priorities, as owners ramp up safety protocols in light of recent high-profile crane accidents across the U.S. and abroad. This has led to an intensified industrywide effort to improve safety standards. In July, the National Commission for the Certification of Crane Operators, a nonprofit orga-

1012industryreport.com

STANDING OUT In the heavy lifting industry, differentiation usually comes in the form of new technology and proprietary processes. “It’s a function of what we see in the field, along with the bid packages that come across our desk and what they require,” Deep South’s Landry says. “If you don’t have that size crane, then obviously you can’t bid. Then, it’s a function of your competition. What does your competition have? Do they have one that big? If the answer is yes, then you want to be able to provide all the services that your competition can.” Mark Polson, project sales with Barnhart Crane & Rigging in Gonzales, says his company—while large nationally—is relatively new to Louisiana. Barnhart’s target market in the state is the removal and replacement of vessels within existing plants. Polson has an engineering degree from LSU and has worked in the industrial market for 20 years. “It’s coming in, getting those difficult to reach, difficult to access vessels, compressors, etc., and getting them out,” he adds. “We think that’s where we can offer value. If it’s easy, that’s probably not one of our targets. We can quote it, we can do it, but if it’s easy anyone can do it.” 1012industryreport.com

COLLIN RICHIE

nization that develops performance standards for safe crane operation, announced that applications for NCCCO Certified Lift Director examinations are running at more than double the regular pace. “Registrations received in the first three months of this year have been far ahead of expectations, and inquiries from prospective candidates and employers have spiked,” says NCCCO Director of Program Development Joel Oliva in a recent press release. OSHA’s increased emphasis on the need for lift directors in the planning and execution of crane operations has been the catalyst for the increased interest. The requirement is also more frequently finding its way into bid documents. Oliva said that there are moves afoot to require that lift directors play a more prominent role in crane operations following the publication of a report by a technical review group in the wake of a fatal New York City crane collapse in February.

GAINING AN EDGE: Polson feels that Barnhart’s size and national scope, as well as its lower mobilization costs, give it a competitive edge.

It’s especially important for a newcomer to stand out from the crowd, and Polson feels that Barnhart’s size and national scope, as well as its lower mobilization costs, give it a competitive edge. The contractor’s network of branches enables it to station cranes across the U.S., leading to reductions in the cost to mobilize a large crane for a project. “While we have a large engineering group, it’s more than just that,” Polson says. “For the challenging projects, we’ll likely have a project guy from somewhere who has had to work something similar.” Barnhart conducts a series of brainstorming sessions to examine options and develop a plan of action, bringing in others from across the company to provide input. During the meetings, Barnhart team

members share experiences, lessons learned and SOPs (standard operating procedures) to develop the best plan of action. “Yesterday, I was here in Gonzales, but there was someone from Mobile, two engineers from our Memphis branch, and someone from the Chicago branch, all in the same meeting, because they had input to provide. We all came together to determine how best to use the knowledge of the company specific to this application.” THE SAFETY FACTOR Dustin Brown, director of safety and human resources at Bengal Industries in Geismar, says OSHA regulations governing the crane and rigging industry, issued in 2010, have placed a greater emphasis on

certifications not only for operators, but also “anyone who touches a crane.” The OSHA rule replaced a decades-old standard (last updated in 1971) and addresses critically important provisions for crane operator certification, crane inspection, set-up and disassembly, and was designed to prevent the leading causes of fatalities, namely electrocution, crushed-by/struck-by hazards during assembly/disassembly, collapse and overturn. In the last five years, there has been an increased emphasis on lift planning and task designations, such as lift director and assembly/disassembly director. As such, finding the necessary skilled craftsmen has been a challenge given the current labor shortage. “Not a lot of people realize it but these new cranes are full of technology and computer driven,” Brown says. “It’s not the friction rigs from 20 years ago. Because of that, there’s more specialized training required. You have to have specialized mechanics that can diagnose these problems, and understand computer, electrical and hydraulic systems.” Of course, every contractor’s safety record is directly tied to profitability, and in the crane industry accidents can be catastrophic. “Therefore, crane companies carry a great deal of liability, not only for the items that might be lifted but for the complete area around the lift,” Brown says. “If you fail to have the right insurance in place, that can be a very devastating blow if you have an uninsurable loss on a crane.” Barnhart’s operators and riggers carry qualification cards, or QualCards, which is the company’s stamp of approval that a person is qualified to safely operate a piece of equipment. Polson says Barnhart also practices “tactical self-preservation,” which means having a detailed, comprehensive plan of action intended to prevent injuries to property or workers. The responsibility is placed on the individual to take initiative before a task to develop a detailed, specific plan that protects themselves and others from harm. Starting with a pre-job hazard analysis, Barnhart crews scout the site for potential hazards and implement systems to deal with those

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

NEWS: CONSTRUCTION

DEEP SOUTH

Deep South takes particular care to monitor wind speeds during heavy lifts. “If the wind is projected to be a certain mile per hour or above, we lower our cranes and halt the lift.” Anemometers are mounted on the cranes for the operators to monitor, and operations are halted when winds reach 40 to 45 mph.

HIGH ABOVE: For a recent job at a refinery in the Midwest, Deep South hoisted and set the four sections of the coker derrick structure, the heaviest of which weighed 256 tons, and two 450-ton coke drums using its 2,500-ton VersaCrane TC-36000 and its 275-ton Demag CC-1400.

hazards. Additionally, in the performance of their job, any Barnhart employee can stop a job without fear of reprisal. Deep South hired an ex-Exxon-

Mobil employee to revamp its safety program. “We put a lot of time and effort into training our people,” Landry says. “It’s a big expense, but at the end of the day it’s worth it. If

you don’t have a good safety culture, you can have all of the procedures and documentation you want, but if the people don’t buy into it you’re not doing anything.”

TECHNOLOGICAL ADVANCES When Deep South Crane sees a need for a new crane, it relies upon its four-person engineering staff to craft a solution, then its in-house fabrication and testing team finishes the job. Deep South designs and manufactures its own crane line— VersaCrane—with nearly 300 cranes in inventory ranging from 8 tons to 2,500 tons in capacity. “The cranes have gotten bigger, more extravagant and more technical to keep up with the market,” Landry says. “Right now, we’re fabricating a 3,500-ton machine, which will be the largest we offer.” During the design and manufacturing process, all welds endure a nondestructive test that meets

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Reserve your spot TODAY! Contact Jennifer Finley at 225.928.1700 or jfinley@businessreport.com

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alternative to the more commonly used wood mats. About 400 of the mats have already been fabricated, with a goal of 1,000. The steel mats weigh about the same as a wooden mat, but can more easily distribute the load and have greater longevity. Eventually, Deep South plans to also begin fabricating crane components at the facility. Highlighting Barnhart’s technological portfolio are its moveable counterweight rigging system and “tri-block” rigging system. Polson says the moveable counterweights make cantilevered operations more efficient and easier to perform, and are especially useful when avoiding obstructions through lateral movement. During operation, the remote-controlled counterweight can easily be adjusted to balance load. The tri-block system enables the contractor to “self-tail” equipment in tight work areas, without the use of a second, tailing rig. BIG AL: Barnhart Crane & Rigging now has its 400-ton barge crane, “Big Al,” home-ported in Louisiana.

BARNHART

industry standards. Once the crane is complete, it is subjected to a rigorous testing process that meets the ASME standard for cranes and derricks. A third-party consultant is also used to verify that the crane meets code. The entire process from conception to design to completion and testing takes approximately two years. “Perhaps most unique is our cranes’ hinged counterweight system,” Landry says. “Most cranes come with a main counterweight and an auxiliary counterweight system. With the hinged system, we have a more compact tail swing than most other cranes in that category.” As such, the VersaCranes are designed to work within the tight confines of a functioning petrochemical plant. Deep South also recently opened a 30,000-square-foot fabrication shop in DeQuincy, Louisiana, equipped with a $1 million, stateof-the-art robotic loading machine that enables it to weld around the clock. At the facility, the company manufactures steel crane mats, an

Supplying the pulse of Louisiana since 1922

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10/12 INDUSTRY REPORT • THIRD QUARTER 2016

NEWS: ENVIRONMENT

Cooperation on the coast

BY MEREDITH WHITTEN

Despite the lawsuits in the headlines, industry and environmental advocates have become critical partners in saving the Louisiana coast.

ension between development and the environment is not a uniquely Louisiana issue. From logging in the Pacific Northwest to fracking in water-scarce states, the search for balancing development and economic activity with the environment and 54

its essential natural processes has been debated around the country— and around the world—for years. The most prominent way this issue plays out in the Bayou State occurs along the coast, where land loss and damage has resulted in a loss of 1,880 square miles of land from 1932 to 2010. This land loss

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continues today, with an estimated 25-30 square miles lost each year along Louisiana’s coast—or another 1,750 square miles at risk of being lost by 2060. The energy industry— particularly oil and gas production—has often been blamed for the damage. Recently, four coastal parishes filed several lawsuits, drawing

attention to the industry’s impact on the health and sustainability of the coast and, once again, highlighting the conflicted relationship between industry and the environment. As The Associated Press reported in July, Vermilion Parish is suing dozens of oil and natural gas companies over damage the parish’s district 1012industryreport.com

tion that identifies and implements large-scale restoration projects across the Barataria and Terrebonne basins. “We have to learn from those mistakes and move forward.” More important than assigning blame, Maloz and others say, is ensuring all stakeholders are committed to restoring and protecting the coast today. “Most of the conversations where you see tensions are over what happened in the past,” says Scott Kirkpatrick, president of Coast Builders Coalition, a nonprofit trade association comprised of private sector companies in the business of restoring and protecting the Gulf Coast. “Certainly things happened in the past, but going forward we see more of a common mission to be responsible. There’s been a paradigm change in what’s happened along the coast.”

CHERYL GERBER

ON AN ISLAND: Crews work on a Coastal Protection and Restoration Authority project at Elmer’s Island, near Port Fourchon, Louisiana.

attorney says drilling caused to the coast. District Attorney Keith Stutes filed the lawsuit in state court. Vermilion is the fourth parish to file suit against oil and gas companies over such claims, joining Cameron, Jefferson and Plaquemines parishes. The suits accuse oil and gas companies of violating coastal permits or not obtaining permits when they dug oil access canals and dumped toxic waste into pits along the coast. The oil industry dismisses the suits as being without merit and says companies have followed the rules. Yet those involved in coastal restoration and protection, as well 1012industryreport.com

as industry itself, contend that this tension is typically oversimplified. In reality, the relationship is much more interdependent and cooperative. Further, they point out that the factors that led to coastal damage and land loss are too complex and broad to lay at the feet of just one industry. “There are so many factors to how we got here today. It’s always easy to pit two different sides against each other, but it’s more complex than that. Mistakes were made across the board,” says Simone Maloz, executive director of Restore or Retreat, a nonprofit coastal advocacy organiza-

KATRINA AND THE CPRA Many cite Hurricane Katrina as the impetus for this paradigm shift. Katrina exposed the large-scale dire consequences and vulnerability of coastal land loss and resulted in reactionary expenditures of $250 billion. Without a healthy coast, future storms could replicate this. “Attention, efforts and dollars to protect the coast have begun to flow since Katrina,” Kirkpatrick says. Before Katrina, between $100 million to $200 million annually was spent on coastal restoration and protection efforts, but post-Katrina this figure has risen to $1 billion annually, he says. Hurricane Katrina also led to governance changes. After Katrina and Rita, the State Legislature established the Coastal Protection and Restoration Authority and required it to develop a plan for building a safe and sustainable coast. The state’s first Coastal Master Plan was published in 2007. Updates are required every five years, with the next update due in 2017. Last year, the CPRA reported findings of research it commissioned from the LSU Economics & Policy Research Group and the RAND Corp. This research found that increases in storm damage to capital stock (nonresidential structures, pipelines, etc.) due to Louisiana’s coastal land loss range from less

than $10 billion to as much as $133 billion at 50 years. Even more daunting, the research found, were storm damage impacts to future economic activity if no coastal restoration actions are taken, ranging between $5 billion and $51 billion nationwide from a single storm event in 50 years. Louisiana’s Coastal Master Plan stresses the urgency of restoring the coast: “Barrier islands, marshes and swamps throughout our coast reduce incoming storm surge, helping to reduce flooding impacts. If we continue to lose these habitats, the vulnerability of communities, nationally important navigation routes and energy infrastructure will increase substantially.” The master plan goes on to cite both man-made and natural factors that have led to this land loss. These factors include dredging canals for oil and gas exploration, building levees and floodgates that channeled the Mississippi River, sea level rise, subsidence, storms and invasive species. A WORKING COAST Underscoring the critical need to combat coastal land loss is the recognition that Louisiana’s marshy coast is primarily a working coast and not a vacation destination like other coastal areas. This concept of a working coast is emphasized in the CPRA’s Louisiana’s Coastal Master Plan, which lays out specific actions and projects for restoring and protecting the coast. A key partner in these actions and projects is industry. “Our mandate is to protect the citizens of Louisiana and restore the coast by developing, implementing and enforcing a comprehensive coastal protection and restoration master plan,” says Michael Ellis, the CPRA’s executive director. “We involve stakeholders, including fisheries, oil and gas, and navigation, through focus groups that dive deeply into coastal issues. Some of our best partners are industry. We all know we need to co-exist.” Kirkpatrick adds that focusing on the state’s working coast provides a more inclusive approach to coastal management. “I appreciate it when people talk about Louisiana’s coast as a working coast because that distinguishes us

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NEWS: ENVIRONMENT

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habitat restoration, shoreline protection, and freshwater and sediment diversions, viable. “A number of restoration test projects we’ve done have occurred on the property of large coastal landowners that happen to be energy companies,” says Ben Haase, chief of planning for the CPRA. “They’ve provided us right of access to their property for various projects.” Maloz says working with private landowners is essential for success. “You have to engage the landowner because almost every restoration project has some connection with private land,” Maloz says. “Their property is affected by coastal damage and erosion, too.” Maloz adds that landowners have “a tremendous ecological knowledge of their land,” which is an asset in identifying and implementing restoration and protection projects. Another example of industry support for coastal restoration is an online data viewer, which Shell funded. Users input an address and the viewer will show current and future flood risk, as well as resilience options, thus enhancing awareness and understanding of the critical situation that will result without coastal restoration and protection. Industry also is a primary funding source for the state’s restoration activities. For example, through the Gulf of Mexico Energy Security Act— dubbed GOMESA—37.5% of revenues from oil and gas leasing activities go to Louisiana and other states bordering the Gulf of Mexico. In 2006, Louisiana citizens voted to dedicate this funding to coastal protection and restoration in the state. DON KADAIR

from other coastal areas that are more focused on resorts,” he says. “A great element of being a sportsman’s paradise is so many people who work along the coast also live and recreate along the coast, so they have seen the degradation and the impacts of land loss.” Louisiana’s coast is home to more than 2 million people. In addition to having homes and being part of coastal communities, many of these residents work for industries on the coast, including energy, fisheries and transport, as south Louisiana is also home to global energy companies and other multinational industries. “There’s a lot more understanding of the needs of industry,” Ellis says, citing the oil and gas focus group that contributed to development of the 2012 Coastal Master Plan. “One of the things we heard from that focus group is ‘we want more land to protect our infrastructure and we need a more sustainable coast.’ That was a little bit of a surprise.” Indeed, the industries typically blamed for damage are just as reliant on a sustainable coast as other industries and residents and communities. “Working out of all the different ports along the coast are thousands of our employees,” says Don Briggs, president of the Louisiana Oil and Gas Association. “Looking at a map, you can see all the infrastructure we have on the THE CPRA’S ELLIS: “Some of our best partners are industry. We all know we need to co-exist.” coast and how that is a huge artery that feeds the rest of the country. So, our industry is very Vic Lafont, CEO of the South coastal area. Further, Briggs says, much a part of the coast, and coastal Louisiana Economic Council, agrees. lawsuits filed by four coastal parissues are extremely important for “We’re literally a society that lives on ishes for violations of coastal zone our industry.” the water’s edge,” he says. “We have permits, which are the same type of Industries that work along the to co-exist with the environment, permits industry is currently regucoast are an economic engine for the and not just oil and gas, but other lated by, will prohibit investment. state. Yet, without a healthy sustainindustries, such as seafood and Still, the energy industry has a able coast, these industries could not agriculture.” good relationship with those worksurvive. ing on the coast, he says. Indeed, in“Whether you’re talking about ACCESS AND FUNDING dustry and coastal restoration work oil and gas, navigation, manufacturYet Briggs says lawsuits blaming together in a number of ways. ing—anything in this working coast the energy industry ultimately hurt For example, energy companies has an interest in Louisiana’s coastal the state’s economy. At a time when are some of the largest coastal landenvironment’s well-being,” Maloz industry needs investment dollars owners and providing access to their says. “You can’t have a business here for exploration, Briggs says, those land has made many restoration if we don’t have a coast.” dollars will not flow into Louisiana’s projects, including marsh and other

THE INDUSTRY OF RESTORATION The critical and urgent need to restore the coast and protect it from further land loss has also buoyed Louisiana’s water management industry, the firms, organizations and professionals who restore and protect the coast, most of which are Louisiana-based businesses. 1012industryreport.com

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CHERYL GERBER

The relationship between the water management and energy industries illustrates how both are working toward the common goal of a healthy, sustainable coast. Indeed, Kirkpatrick notes, “A lot of our members do work for oil and gas companies as well as environmental mitigation banks, so we have clients in both camps.” Maloz adds: “The water management sector and the oil and gas sector working together is an interesting, new dynamic. It’s taken 10 years since Katrina to build these relationships and they’re working. That might seem like strange bedfellows, but, at the end of the day, we have the same interests.” As the water management industry has grown, it provides an opportunity for economic diversification during downturns in the energy industry, as many skills are transferrable between the energy and water management sectors. For example, surveyors working in oil and gas could work on coastal restoration projects. And, as more funding for coastal restoration becomes avail-

BUILDING A REEF: Scott Kirkpatrick visits a site near Hopedale, Louisiana, where Professional Construction Services is building an artificial reef. The structure will be subject to a 10-year test on wave action and coastal erosion.

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NEWS: ENVIRONMENT

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CHERYL GERBER

RESTORE OR RETREAT’S MALOZ: “We’re in a critical time. We need to take advantage of all this momentum.”

able, more jobs will be available, the South Louisiana Economic Council’s Lafont adds. “There are coastal restoration funds coming down the pike creating jobs that weren’t here before,” he says. “We’re preparing our region for that inflow of funding and activity. This involves knowing what jobs will be available, polling communities to see who has that skill set, getting our community colleges ready to prepare our people and discerning how our smaller firms can be prepared to participate. We’re connecting the dots.” Further, the knowledge and skills that workers are learning in dealing with coastal issues in south Louisiana could be applied elsewhere, allowing Louisiana to export this knowledge and further support the economy. The success that Louisiana has achieved in coastal restoration “really highlights the fact that coastal Louisiana is on the cutting edge of these issues,” Haase says. “Louisiana is at the forefront of what the rest of the world will soon be dealing with.” Indeed, Haase observes that coastal erosion and damage “is not just a Louisiana problem, it’s a problem of national significance.” Ultimately, coastal protection

and restoration would not succeed without industry’s involvement. This does not mean tension does not exist, but many of those involved in coastal restoration and protection are concerned today with focusing on combating both the man-made and natural processes causing coastal damage into the future. That, Maloz says, is the driving force behind a more cooperative relationship. “We’re in a critical time. We need to take advantage of all this momentum,” she says. “If we don’t achieve, we’ll have to face some harsh realities. We certainly have such a vested interest in the future of coastal Louisiana. I think both sides know it has to work. In any good relationships, there’s give on both sides. We have to get there or everyone’s going to lose.” Haase agrees. “Certain things were done, not just by industry, that have had impacts on our coast,” he says. “There’s a role for industry for what has happened and what will happen. It’s not an either/or situation. The two are very intricately woven together. Without a healthy, resilient working coast, we can’t provide a good economy. The two are inseparable.” 1012industryreport.com

NEWS: COMPANY PROFILE

Top shelf

BY SAM BARNES

SWAT assembles elite turnaround team, raises productivity threshold.

y 2014, Johnny Holifield and Jimmy Quick had several years of experience under their belts, along with some clearly defined notions about what it means to be an “elite” welder and turnaround specialist. After all, they had honed their skills working 15 years for an elite turnaround contractor, and had mentored numerous others in the process. As sometimes happens, a series of corporate buyouts and recapitalizations led to a change in their employer’s corporate culture. “They went from being the best and hiring the best people, to how much can we 1012industryreport.com

DON KADAIR

QUICK START: Jimmy Quick, left, and Johnny Holifield put the emphasis on workforce quality and productivity from the beginning.

do and how much work can we get,” Holifield says. “They started taking on too much work and grew too fast, and they ceased to be successful.” The two began to feel a profound sense of job dissatisfaction, and following another buyout they decided it was time to leave. With the goal of assembling an elite group of welders specializing in enhanced welding services, they founded Specialty Welding and Turnarounds (SWAT) in Gonzales in April 2014, with Holifield as president and Quick as vice president. THE RIGHT EXPERIENCE Construction was a significant

departure from Holifield’s original goal as a young man of becoming a dentist. A native of Lafayette, he majored in biology for two years at the University of Louisiana at Lafayette before deciding to turn his part-time construction job into a career. Construction was a more obvious choice for Quick—he grew up in a construction family. “I’d get off the school bus in the evening and walk in the shop there,” he says. “I’d meet all the welders and fitters. I was around it all of the time.” While starting a new business can be daunting, the two found that their reputation for fast, expeditious work preceded them, and work came

easily. Finding a good quality staff of supervisors wasn’t difficult either. “When we left, we took our core group of supervisors with us—all of the guys that we trained through the years,” Holifield says. “From 1999 to 2014, most all of the project managers and superintendents were trained by Jimmy or me.” The supervisors’ willingness to leave the safety and security of an established company for the risk of joining a fledgling business was testament to their loyalty. “These guys were fitters and welders, and became foremen and superintendents under our guidance,” Quick says. “We trained them in planning,

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NEWS: COMPANY PROFILE

scheduling and cost control. They knew that the positions they were in were based upon what we did to make them better.” Tapping into that level of experience from “Day One” was crucial, enabling SWAT to begin working in the field as if it had been in operation for years. Relationships were key to getting work, at least in the beginning. A catcracker project at Placid Refining Co. in Port Allen was the company’s first job, and was awarded mostly because of an existing business relationship the owners had with the plant and maintenance manager there. At the time, SWAT only had seven employees on staff. Alon USA Refinery (formerly Valero) in Krotz Springs was another job that came easily. Wayne Ardoin, maintenance planning superintendent and turnaround manager at the refinery since 2007, says he had worked with Holifield and Quick for years. Additionally, many of SWAT’s supervisors had worked at the Alon plant and were familiar with the refinery’s stringent safety requirements. Alon uses SWAT welders on emergency piping jobs, and leans upon their mechanical division to perform exchanger and tower work. “We call them when we need somebody here now,” Ardoin says. “The quality of the work is important; if it’s not quality, we have to do a lot of 60

SWAT

THE ELITES: Holifield meets with his SWAT supervisors at a job site.

rework. I don’t have to take them by the hand and babysit them. If I give them a set of plans, they can go out there and do the work.” Ardoin also uses SWAT supervisors to oversee mechanical work at the site, a task typically performed by Alon employees. THE PRODUCTIVITY FACTOR Since beginning operations, SWAT has not missed a project window or budget. That’s important to its clients, since time is money. “Our guys are geared to be functional,” Holifield says. “We structure ourselves to get the most out of our people. Some of these others, their productivity rates are typically running at .65 or .7 for every man-hour planned while we’re running a 1.2 or 1.3 [according to norms established by Page & Nations, a labor productivity norms standard]. We’re actually getting more than a man-hour of work out of our guys. It comes down to aggressiveness. “If a plant’s making $1 million a day on a unit and they have a 20-day turnaround, a contractor that’s running a .85 productivity rate might cause them to miss that window. For every day they don’t make that date, they’re losing that production.” Petrochemical owners hire SWAT for highly specialized, high-productivity projects. They know costs are high for such a firm,

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but that the costs of project delays and delayed production are higher. “They call us when they have critical path areas, problem areas or difficult tasks that have to be done in a short duration,” Quick says. “They know we have good people, our productivity rate is high and that our guys are job knowledgeable and skilled so we don’t have safety issues.” As of late, SWAT has noticed a particular need in specialty piping, such as chrome and stainless. While “run of the mill” welders might be working on carbon steel, many petrochemical owners turn to SWAT for these specialty welds. SWAT’s mechanical division focuses on exchangers, towers and drums. “Based upon what we’ve seen in the industry, the mentality of other companies has not been aggressive,” Holifield says. “We hired an elite, hand-picked group. They have the same philosophy and structure that we do. Now, we’re trying it out and seeing how it works. So far, it’s working unbelievably.” To accommodate its rapid growth, SWAT recently purchased 5.5 acres of land off La. 44 in Gonzales for a new 12,000-square-foot facility. Already designed, the facility will more than double the size of its existing office once it opens in May 2017. HIRING BY REFERRAL Finding available welders and

pipefitters is not that difficult when you pay over and above the prevailing wage—the tricky part is finding a dependable group that will meet a higher level of productivity. “We don’t hire people without a work history,” Holifield says. “We hire on a referral basis only and a prior history that works with us.” To shorten the list, Holifield and Health, Safety and Environmental Manager Troy Rembert pore over a list of referrals provided directly by supervisors in the field. Holifield accepts or rejects applicants based upon experience while Rembert performs an extensive background check. While a large construction company might hire 100 pipefitters for a particular project, only 15 of those would meet SWAT’s more stringent qualifications. By being incredibly selective, it has ramped up productivity and improved its overall safety record, the owners say. These hiring standards never change, regardless of job size. That includes a current mechanical turnaround project in Texas City, Texas, where SWAT employs a 500-man workforce—its highest manpower job to-date. “Every employee we hire here comes from a referral,” Rembert says. “We don’t accept people that weren’t referred, and that’s what makes the difference.” Notably, the recent downturn in the oil and gas market has had 1012industryreport.com

every time a guy works over eight hours, he gets paid double time. If he makes $30 an hour, after eight hours he makes $60. Our scale and rates are not like those of a large construction company. It’s like in anything else—if you pay more money to get somebody, you’re going to get the better qualified person.” To prepare employees for work, SWAT live-streams Comput-

er-Based Training (CBT) safety courses to a safety council close to the jobsite. The company also makes sizeable financial investments in safety, such as the purchase of 400 SRL (Self-Retracting Lifeline) safety harnesses, which restrict falls to just 6 inches. The newest technology on the market and at a price tag of $400 apiece, the SRLs provide additional assurance to industrial owners about

SWAT

a positive impact on the number of available seasoned workers for SWAT, enabling it to more easily ramp up its numbers. SWAT actively looks for a specific set of work-minded qualities in its craftsmen, such as productivity, assertiveness and efficiency. Employees are also expected to be skilled in multiple crafts. “For other companies, welders just weld,” Quick says. “When they come to work for us, we’re asking them to bolt up, hang pipe, do whatever it takes. We’re getting more out of these guys than just welding.” While getting the right craftsmen is undoubtedly important, SWAT feels finding good, quality supervisors is harder. “Getting the right supervision, and making sure it’s the supervision that we want, that’s the tough part,” Holifield says. “We handpick these guys. There are some that just don’t meet our criteria.” Those that make the cut enjoy certain employee benefits that are unparalleled in the industry. “We’re a ‘double-time’ company, so we pay our guys more,” Quick says. “That means,

HANDPICKED: SWAT employees are expected to be skilled in multiple crafts.

SWAT’s commitment to a safe work environment. Contrary to common practice, SWAT prefers to incentivize the reporting of safety incidents rather than dole out safety incentives. “We want them to report all things, no matter how minor,” Rembert says. “Providing monetary incentives can have the opposite effect, and can actually discourage the reporting of safety issues. Number one, we want to get you the best care in such a situation, but we also want to turn it into a lesson learned so that we can take measures to prevent a recurrence.” SWAT supervisors and safety personnel perform “no blame, no name” field audits, where the findings are captured anonymously. The data is then accumulated and discussed during safety meetings so that measures can be taken. “If we’re on a turnaround working 24/7 and three days in a row we have some housekeeping issues out there, then we know that there is the potential for trips, slips and falls,” Rembert adds. “This way, we can take action.”

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10/12 INDUSTRY REPORT • THIRD QUARTER 2016

INSIGHT

Tax changes take aim at industry

S CAMILLE CONAWAY

o I’m a Dow baby. That’s right. Like so many in Louisiana, my dad spent three decades “at the plant,” joining the multinational manufacturer fresh out of Glen Oaks High School [Baton Rouge] and with the help of a vocational training course on Florida Boulevard. The Dow Chemical Co. provided a sustainable wage, quality health care and stability to our family of five, helping to lay the foundation that would eventually allow me to become the first person in our family to obtain a university degree. Today, Louisiana manufacturers remain the backbone of the state’s economy. These diverse companies represent one-fifth of the total economic output of the state and employ nearly 150,000 workers in Louisiana with an average salary of $82,150 (NAM). Petroleum and chemical products represent the majority of these jobs “at the plants,” but Louisiana manufacturers also produce machinery, food products, paper and wood products, and primary and fabricated metal. While national experts have bemoaned the loss of these quality jobs overseas, the output of Louisiana’s manufacturing sector has grown significantly over the past two decades. These high-paying jobs have provided countless opportunities to Louisianans employed by manufacturers and to their families as well, much like me. This valuable industry sector is now grappling with a series of new challenges that could do long-term damage to American manufacturing in general and to Louisiana in particular. Federal regulations are expanding on everything from overtime to environmental rules. Employers are struggling to fund the ever-increasing costs of new health care mandates. Excessive litigation is an ongoing obstacle, brought more

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and more often on behalf of government itself. And most recently, state officials in Louisiana have enacted three rounds of tax changes that take direct aim at this vital sector of the state’s economy. In 2015, Louisiana’s manufacturers felt the impact of acrossthe-board reductions to corporate income tax credits, the dramatic re-definition of deductions for net operating losses that now makes Louisiana stand out nationally, and a 25% reduction to the refundable inventory tax credit. In March 2016, sales taxes were reinstated on business utilities and manufacturing machinery and equipment—again making Louisiana one of a small minority of states to impose these taxes on major manufacturing inputs. In June 2016, a critical sales tax exclusion on materials for further processing was limited, and manufacturers that participate in the Industrial Tax Exemption Program (ITEP) are no longer eligible to receive the refundable inventory tax credit. Finally, Gov. John Bel Edwards acted within hours of the adjournment of the Legislature to administratively constrain the ITEP itself and will now require local approval of contracts, which is expected to severely curtail the program. Louisiana has lost more than 20,000 jobs in 2015 and 2016. As the oil and gas industry struggles through the current global downturn, relatively few bright spots remain in the Louisiana economy. The industrial growth underway along the River Parishes and in southwest Louisiana is helping to buffer what could be even deeper economic pains. These large manufacturing projects assumed certain costs, which will now likely increase as a result of legislative action, potentially slowing or delaying this growth. As a state, Louisiana faces numer-

ous deep-rooted challenges. While the deficit facing state government has consumed the past few years of attention of state officials, I would argue the budget problem actually ranks fairly low on the radar of the average citizen. What is clearly in need of our collective attention is Louisiana’s entrenched poverty, struggling schools, unhealthy communities and a level of violence that is now in the national spotlight. A stable job with good pay and quality health care is obviously not a panacea—but it is one of a series of policy solutions that state and local government can promote to begin to combat these historic challenges. Radically different educational options, improved access to health care, and more efficient infrastructure to connect citizens to jobs are other policies that deserve our best effort. All of these policy roads start and end with providing more opportunities and options to improve the lives of individual citizens and ultimately the state as a whole. Louisiana manufacturers do their part by providing 150,000 high-paying, stable jobs that support stronger individuals and families. We need state leaders to do their part by laying a foundation that grows this industry and the significant opportunities it creates. “Made in Louisiana” is, and should always be, something for us to be very proud of. Camille Conaway is the vice president of policy and research at the Louisiana Association of Business and Industry, where she leads public policy analysis, development and research initiatives across a range of issues important to LABI and the business community. Conaway has served in the public and private sectors in Louisiana with expertise in the state budget, K-12 and higher education, ethics reform, transportation, and public safety.

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INSIGHT

Other ways in which the energy world is changing

ver the past two years, most energy market discussions have focused almost exclusively on production, or supply-oriented factors impacting global energy markets. Supply-side trends, particularly those attributable to U.S. unconventional development, are important and, as is often noted, â&#x20AC;&#x153;revolutionaryâ&#x20AC;? in nature. Yet, at the same time, and perhaps less noticeable, has been an equally important and dramatic revolution occurring in U.S. energy consumption. As a country, the way we use energy is rapidly changing on both a total usage and composition of usage basis. U.S. energy consumption trends [see chart] have been relatively consistent throughout the past 40 years, increasing, generally, in each year at rates that, while slowing on a decade-over-decade basis, were positive, at least until 2007, the last year proceeding the 2008-2009 economic and financial meltdown and the year in which U.S. energy consumption peaked. The economic recession of 2008-2009 represents an inflection point in which U.S. energy consumption growth, and composition of that energy consumption, fundamentally changed. One of the most obvious changes in post-recession U.S. energy consumption has been its contraction since peaking in 2007. The most significant decreases in U.S. energy consumption, not surprisingly, arose

1012industryreport.com

The composition of U.S. energy consumption, post-recession, is fundamentally changing, eschewing petroleum, coal and even nuclear in favor of natural gas and renewables. For instance, U.S. petroleum consumption, while up briefly in 2015, is still down by as much as 10.5% relative to its 2007 peak. Coal consumption is down and down significantly, by as much as 31%, from its 2007 peak. Coal consumption is down by over 4% on an average annual basis since 2007. The primary energy resources that are starting to dominate the U.S. energy consumption mix are natural gas and renewables. Natural gas consumption is up by as much as 20% since 2007, driven almost exclusively by power generation, and increasingly by industrial use. Renewable development, driven primarily by wind, has been motivated in very large part by state mandates and a large set of state and federal tax and financial incentives that allow these resources to displace fossil fuels, and increasingly, nuclear. Recently reported trends in U.S. energy consumption highlight two

important fundamentals driving U.S. and global energy markets. First, the continued contraction of U.S. energy consumption, coupled with increased domestic (unconventional) production, will likely result in a growing surplus in domestic production relative to domestic needs. Exports, and the integration of U.S. energy production into world markets will become increasingly more important. Second, the composition of U.S. energy consumption is fundamentally changing from one concentrated in the use of solid and liquid fuels (i.e. coal, nuclear and crude oil) and towards natural gas and renewables. This is a trend that will have fundamental implications for fuel diversity, environmental quality, and energy costs for households, businesses and industry. David E. Dismukes is a professor and the executive director of the Center for Energy Studies at Louisiana State University. He holds a joint academic appointment in the department of environmental sciences where he regularly teaches a course on energy and the environment.

U.S. PRIMARY ENERGY CONSUMPTION 105

Total U.S. Primary Energy Consumption (Quadrillion Btu)

DAVID DISMUKES

during the recession years where energy demand plummeted by 2% and almost 5% in 2008 and 2009, respectively. Today, U.S. energy consumption, while seeing a few upward bounces, is still down on an overall basis by over 3.5% relative to its 2007 peak, and data for the first few months of 2016 show no signs of change in these trends. Prior to 2007, U.S. consumption typically grew by about 1% per year; since 2007, U.S. energy consumption stopped growing and has begun to contract, on average, by about a half-percent per year. Equally important, and perhaps more dramatic, has been the structural change in the composition of U.S. energy consumption. Prior to the 2007 peak, U.S. energy consumption was concentrated in crude oil and coal. Other sectors, like natural gas and nuclear, were relatively flat, while renewables were starting a slow but steady increase that accelerated considerably in the later part of the last decade and beyond. These trends have been completely reversed in the aftermath of the last recession.

100

1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 Source: Energy Information Administration, Monthly Energy

10/12 INDUSTRY REPORT â&#x20AC;˘ THIRD QUARTER 2016

INSIGHT

Understanding the new overtime pay regulations

Following the Dec. 1 effective date, employees earning less than $47,476 per year, regardless of whether they are hourly or salaried employees, must be eligible to earn overtime.

KYLE FERACHI

MAGDALEN BLESSEY BICKFORD

MCGLINCHEY STAFFORD

he federal Department of Labor has issued its Final Rule on regulations governing overtime pay for white collar employees, which it estimates will impact more than 43 million U.S. workers. While many in the chemical and industrial sectors may not consider their employees white collar, failing to understand this law may subject employers to lawsuits for back wages. Before the rule goes into effect on Dec. 1, 2016, employers must assess their organizations and compliance plans regarding pay, assignment of duties, and organizational flow to ensure employee compensation complies with the Final Rule. Previous classifications that may impact their employees earning overtime pay should also be assessed. HOW CAN AN ORGANIZATION ENSURE COMPLIANCE? Employers should perform a wage and hour audit to ensure people are paid within the law. This includes analyzing actual duties performed by an employee to determine if he or she meets certain designated exemptions: professional, executive, administrative, computer, teaching professionals, outside salespeople and a few others. The audit will also help in converting some employees once thought to be exempt—such as pipeline workers, operators and some engineers—into non-exempt roles. Recognizing and changing

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

classifications now will prevent headaches in the future. This analysis is complex, and should involve legal advice in the process. WHAT DOES THE FINAL RULE ESTABLISH? Following the Dec. 1 effective date, employees earning less than $47,476 per year, regardless of whether they are hourly or salaried employees, must be eligible to earn overtime regardless of assignments, duties or titles. Employers must review all employees that are paid between the former threshold of $23,660 and the new threshold of $47,476. Those who earn more than $47,476 may be exempt from overtime, provided they meet certain duties tests already established (and left unchanged to this point) by law. The Final Rule also resets the highly compensated exemption from $100,000 to $134,004 and implements a mechanism for reassessment of these thresholds every three years. Employers will, however, be able to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10% of the standard salary level. WHAT ARE EMPLOYERS’ OPTIONS BASED ON THIS FINAL RULE? Essentially, employers will have to reconsider pay, compensation and duties for each employee who fits in this wage range, which could

be overwhelming. There are many possible courses employers can take. For example, they could increase an employee’s total compensation to $47,476 following an attorney evaluation of duties under a wage and hour audit to maintain an exemption. Management can also award employees overtime every time they work in excess of 40 hours in a pay period, move management functions to reflect pay rates, or overhaul policies regarding overtime. Some changes may be as simple as adapting former managers to punch in and punch out, and educating these employees on attendance. Most importantly, as these changes occur, employers should be keenly aware of the importance of managing employee morale as change occurs within the organization. Employers in Louisiana’s industrial corridor should conduct audits as soon as possible. Waiting until after Dec. 1, 2016, may result in unforeseen litigation or investigations from the DOL. Kyle A. Ferachi is the managing member of the McGlinchey Stafford Houston office and maintains a Louisiana practice as well. His primary areas of focus include labor and employment law and commercial litigation. Magdalen Blessey Bickford is of counsel in the firm’s New Orleans office and represents management and employers in labor and employment litigation.

1012industryreport.com

CLOSING NOTES EXECUTIVE MOVES

HESS

BROOM

BROWN & ROOT Charlie Hess has joined Brown & Root Industrial Services as president of Infrastructure and Coastal Restoration. In his new role, Hess will work to establish Brown & Root’s presence in the infrastructure and coastal restoration marketplace. He’ll also work to implement projects to restore Louisiana’s coast and wetlands. According to Brown & Root, Hess has had a distinguished career in both the public and private sectors. He has held leadership positions in the U.S. Department of Defense and the U.S. Army Corps of Engineers. His experience has focused on mega-program management and large scale contingency operations in the United States and abroad, specifically targeting the water resources and coastal protection and restoration missions of the nation. In 2008, Hess led the Shaw Corp. team in the development and execution of the $1.1 billion Inner Harbor Navigation Canal Hurricane Protection Project in New Orleans. It’s the largest design-build project undertaken by the U.S. Army Corps of Engineers. DANOS Danos announced the hiring of Tom Broom as executive account manager. In this role, Broom will be responsible for overseeing and maintaining Danos’ long-term relationship with Shell. “Tom is a perfect fit for Danos,” said Executive Vice President Paul Danos. “His experience in the industry and long career with Shell make him the ideal person to oversee this relationship that has endured for 45 years.” In 2015, Broom retired from Shell after a 35-year-career, most recently serving 1012industryreport.com

DANOS

MUNGUIA

as director of coastal issues for Shell Exploration & Production Co. In that role he served as the inaugural director of a 25-person international team focused on collaborating with internal and external stakeholders on coastal management issues. Prior to that position he oversaw workforce development and construction risk mitigation and managed operations training for the United States, Canada and Brazil. He also supervised the daily operations of Shell’s Robert Training and Conference Center, the company’s primary operations training facility. GREATER LAFOURCHE PORT COMMISSION April Danos, director of information technology for the Greater Lafourche Port Commission, has been appointed by Homeland Security Secretary Jeh Johnson to the National Maritime Security Advisory Committee for a three-year term. Comprised of members representing all segments of the maritime industry, the National Maritime Security Advisory Committee provides advice to the Secretary of the Department of Homeland Security via the Commandant of the U.S. Coast Guard on matters such as national security strategy and policy, actions required to meet current and future security threats, international cooperation on security issues, and security concerns of the maritime transportation industry. Danos is a nationally recognized expert in information technology systems and port security projects. PIN OAK HOLDINGS Pin Oak Holdings LLC has ap-

LAGRANGE

CHRISTIAN

pointed Carlos Munguia vice president of operations. Munguia joins Pin Oak after a 30-plus-year career in the terminal business. He recently held the post of vice president of operations for the Northern Area (Midwest and Northeast Regions) at Kinder Morgan Inc. Munguia brings an extensive background designing, constructing and operating marine and pipeline-connected liquid terminals and successfully managed construction and operations of numerous terminals across the U.S. Pin Oak is constructing a liquid and chemicals storage terminal, Pin Oak Terminals, on 431 acres along the Mississippi River in Mt. Airy, Louisiana. WILLBROS GROUP Houston-based Willbros Group Inc. announced in June that Chief Accounting Officer Geoffrey C. Stanford had tendered his resignation effective July 8, 2016. Stanford, who had served as vice president and chief accounting officer since joining Willbros in 2013, has accepted other employment and will return to Baton Rouge. Willbros is a specialty energy infrastructure contractor serving the oil and gas and power industries with offerings that primarily include construction, maintenance and facilities development services. PORT OF NEW ORLEANS The U.S. Department of Transportation Maritime Administration appointed Port of New Orleans President and CEO Gary LaGrange to its Maritime Transportation System National Advisory Committee. The committee includes

NAZARETH

executives of shipping lines, port authorities, and shippers, as well as heads of government agencies involved in marine transportation. Green Marine, an environmental certification program for the North American marine industry, elected Port of New Orleans Chief Operating Officer Brandy Christian to its board of directors during its annual conference in May. The port earned its first environmental certification with Green Marine in May of 2015 and was the eighth U.S. port to achieve the milestone at the time. KBR KBR Inc. announced that Lynn Nazareth will assume the role of vice president of investor relations. Nazareth has been with KBR for five years and most recently served as vice president of finance and chief financial officer for KBR’s Technology & Consulting business. Her financial experience spans over 20 years in both client-service and corporate environments, with significant experience working with executive management from startup companies through the Fortune 500. She has worked as a strategic management consultant to the major oil companies in the E&P industry, as a corporate restructuring and M&A adviser to large corporations, and as a corporate financial strategy professional in large engineering and construction companies. You can submit items for Executive Moves by emailing a press release and a high-resolution headshot to editor@1012industryreport.com. Executive Moves is limited to senior management and board positions only.

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

PAULA BURCH-CELENTANO

CLOSING NOTES: COMPANY NEWS

PolyRMC laboratory director Wayne Reed

TULANE JOINS RESEARCH ON POLYOLEFIN PRODUCTION Tulane University is joining forces with Texas A&M in one of five regional centers located across the United States as part of the $140 million Clean Energy Smart Manufacturing Innovation Institute announced by the White House in June. Texas A&M and the Texas A&M Engineering Experiment Station will lead the new Gulf Coast Regional Manufacturing Center, with Tulane and the University of Texas playing significant roles in its operation. Tulane is among a consortium of 200 partners from across academia, industry and nonprofits that make up the Smart Manufacturing Leadership Coalition, which will lead CESMII in partnership with the Department of Energy. The coalition aims to spur advances in smart sensors and digital process controls that can radically improve the efficiency of advanced manufacturing in the United States. Tulane will carry out its role at the PolyRMC laboratory of the School of Science & Engineering under the direction of physics professor Wayne Reed, the lab’s founding director. “The goal at Tulane is to adapt our advanced monitoring and control technologies—invented and patented at Tulane—to the major challenge of polyolefin production,” said Reed. “Polyolefin production in the U.S. involves tens of billions of dollars per year, and Texas and Louisiana are the main producers.” 66

2016 LANTERN WINNERS ANNOUNCED Methanex was honored as one of the eight 2016 Lantern Award winners by Louisiana Economic Development. The Geismar plant was the Capital Region winner and was lauded, along with the other seven winners, for “excellence in manufacturing and outstanding service to their communities through the involvement of their businesses and employees,” LED says. At the ceremony at the Governor’s Mansion, MMR Group Inc. of Baton Rouge was awarded one of three Louisiana Performance Excellence Awards by the Louisiana Quality Foundation. Other Lantern Award winners are Falcon Rice Mill from Crowley, Conrad Industries Inc. from Morgan City, UPS Midstream Services from Trout, B. Viz Design from St. Joseph, Magnolia Steel of Natchitoches Inc., Boscoli Foods Inc. from Kenner and Howell Industries Inc. from Sulphur. SCHLUMBERGER USES AGCENTER INVENTION IN VIETNAM WELLS Schlumberger Limited has used an LSU AgCenter invention to help stop fluid from leaking while drilling two deepwater wells off the coast of Vietnam. TigerBullets—a product created by Qinglin Wu, a professor in the AgCenter School of Renewable Natural Resources— was used in the drilling expedition that Schlumberger began in August 2015. TigerBullets are owned by the AgCenter and licensed to Hole

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

Pluggers LLC. TigerBullets are made from plastics, wood scraps, minerals and other additives that are pressed into pellets that stop lost circulation, a major and costly problem when drilling oil wells. Lost circulation refers to the leakage of drilling fluid through cracks in the well. Lost circulation is typically addressed by pumping material into the well to fill any cracks. When TigerBullets are used, they absorb water and expand, locking them into the fracture to cut off any leaks. All materials used in TigerBullets are recycled, biodegradable, partially acid-soluble and nontoxic. HARVEY FACILITY RECEIVES QUALITY MANAGEMENT SYSTEM REGISTRATION Chet Morrison Contractors announced that its Harvey-based fabrication facility has been assessed by Hartford Steam Boiler Registration Services and has been found to be in conformance with ISO 9001:2008. With this registration, Chet Morrison Contractors fabrication services is certified to provide the highest standard of quality fabrication services in the industry by utilizing procedures guided by ISO requirements. Fabrication services is the second Chet Morrison Contractors division to attain ISO 9001:2008 registration. The company’s Deepwater Riser division received the registration in 2014, along with API Q1. Chet Morrison Contractors’ Harvey facility is also ASME “U” and “R” stamp-certified to manufacture and repair/alter boilers and other pressure vessels as authorized by the American Society of Mechanical Engineers. LNG EXPANSION PROJECT GETS EXPORT AUTHORIZATION Cameron LNG has received authorization from the U.S. Department of Energy to export an additional 1.41 billion cubic feet of natural gas per day (Bcfd) from its proposed Louisiana liquefaction expansion project to countries that do not have a free-trade agreement with the U.S. With this order, Cameron LNG’s export capacity will be 24.92 million tons per annum or 3.53 Bcfd. Earlier this year, Cameron LNG received approval from the Federal Energy Regulatory

Commission to site, construct and operate the proposed expansion project, which will include up to two additional liquefaction trains (trains No. 4 and No. 5) and one additional full containment LNG storage tank. The expansion project will be located next to the Cameron LNG terminal and liquefaction facilities that were approved for construction in 2014 in Hackberry. KBR AWARDED MULTIPLE GLOBAL DEFENSE CONTRACTS Houston-based KBR Inc. announced in July it has been awarded a string of defense contract awards, further boosting its global Government Services business, which, with the recent acquisition of now-KBRwyle, spans the full spectrum of the life-cycle of aerospace and defense programs. The awards include two contract extensions with the U.S. Department of Defense and a multiyear contract for the Australian Defense Department. For the U.S. Department of Defense, KBR secured two contract extensions for Base Operational Support Services in the Middle East and Africa. In Djibouti, KBR’s support contract was extended for the Naval Facilities Engineering Command Atlantic where KBR provides a full spectrum of base operations and maintenance services, life support and logistics services for a base population of approximately 5,000 personnel. KBR was also awarded a further 12-month extension on its LOGCAP IV contract to provide operational support in the Arabian Peninsula, commencing in September 2016. Finally, KBR secured a five-year contract with the Australian Defense Department—Capability Acquisition and Sustainment Group—to provide Integrated Support Contractor (ISC) services to the CASG AIR90 Project Office, responsible for the upgrade of military equipment. PIN OAK EXECUTES EPC CONTRACTS Pin Oak Holdings LLC announced it has executed an EPC contract with Massman Construction Co. to build Pin Oak Terminals’ first dock and related equipment. Massman, a family-owned and operated company, brings over 100 years 1012industryreport.com

of construction experience to the project. Pin Oak chose Massman after a rigorous decision process and is confident that their staff will adhere to the strict safety requirements that govern Pin Oak’s operations, the company noted in a release. Pin Oak began construction of the dock in June and expects it to be fully operational by May 2017. The dock will be capable of loading an industry-standard Suezmax vessel with its 900-foot dock capacity and will have up to six barge berths. Designed flow rates will be upwards of 30,000 bbl/hr, making Pin Oak’s dock one of the newest and fastest docks in the country. In addition, the company has executed an EPC contract with Smith Tank & Steel Inc. to construct more than 2 million barrels of tank capacity with an option for more in order to be operational by the middle of 2017. Smith, a family-owned and operated company, brings national experience constructing tanks on a turnkey basis and is one of the leading tank construction companies in the U.S., according to a release. Pin Oak is constructing a liquid and chemicals storage terminal, Pin Oak Terminals, on 431 acres along the Mississippi River in Mt. Airy, Louisiana. . APMT SELECTED FOR SMART MANUFACTURING INSTITUTE New Orleans-based Advanced Polymer Monitoring Technologies develops, manufactures and distributes products and services for the real-time monitoring and control of polymer reactions. The startup has been selected to participate in the new Smart Manufacturing Innovation Institute. In June, the Obama Administration announced the Institute was launched through a partnership between the Smart Manufacturing Leadership Coalition and the Department of Energy’s Advanced Manufacturing Office. APMT is one of over 200 participants from 30 states, including industry, academia, and non-profit organizations. The Institute brings over $140 million in public-private investment from leading universities and manufacturers to develop smart 1012industryreport.com

sensors for use in advanced manufacturing. It focuses on innovations that dramatically reduce energy expenses in the industry. APMT will support the development efforts with its new sensor, control and software technologies.

SEABOARD MARINE EXPANDS NEW ORLEANS SERVICE Seaboard Marine launched a new weekly service on July 24 from New Orleans connecting U.S. exporters to Colombia, Panama and Costa Rica in addition to Honduras, Guatemala, El Salvador and Nicaragua. The expanded service, which previously served only north Central America, will now provide U.S. importers and exporters in Colombia, Panama and Costa Rica with fast, direct transit to the United States Gulf. Jose Concepcion, Seaboard Marine vice president, said, “This is a positive development for our existing customers as well as those currently moving cargo between the Gulf and Central and South America. We are very excited about this new weekly fixed-day service and the broad possibilities for increased trade that such a fast transit time—both southbound and northbound—offers our clients.” New Orleans Terminal LLC works ships for Seaboard Marine at the Port of New Orleans’ Napoleon Avenue Container Terminal. DANOS ADDS I&E SERVICES TO AMELIA FABRICATION FACILITY Danos’ fabrication facility in Amelia now features on-site instrumentation and electrical services, including automation, safety and control systems. “As a result of adding I&E capabilities to our Amelia yard, our customers can now access an even broader range of services—all in a single location,” said Mark Danos, vice president of project services. Danos’ Amelia fabrication facility offers an integrated line of services,

including materials management, storage facilities, coatings services, project laydown areas and covered warehouses. With the addition of I&E services, the Amelia facility can also offer customers on-site integration of automation systems, control panels, and installation and maintenance for a broad range of control and electrical systems. SCLTC WINS GRANT FOR WELDING PROGRAM U.S. Assistant Secretary of Commerce for Economic Development Jay Williams announced in July a $1 million Economic Development Administration grant to South Central Louisiana Technical College during a program at the school’s Reserve campus. The grant, which will help build a new welding facility comprised of approximately 4,000 square feet, 40 additional 4’x4’ indoor welding booths and an outdoor welding area will be housed at the Reserve campus. As a result of the new facility, an estimated 576 additional welding students will be trained for jobs during the next several years. “The Department of Commerce has made skills and workforce development a top priority,” said Williams. “This EDA investment will help to establish a welding training center that will ensure that local workers are better prepared and better equipped to meet regional business demands.” LAKE CHARLES HARBOR & TERMINAL DISTRICT EXECUTES LEASE AGREEMENT The Lake Charles Harbor & Terminal District board of commissioners recently authorized executive director Bill Rase to enter into a lease agreement with Southern Ionics Inc., for the use of the district’s Warehouse 15-B and vacant land located at City Docks. The initial term for the agreement will be five years with two additional five-year terms. Southern Ionics manufactures and ships sulfur chemicals, aluminum chemicals, aqua-ammonia and zirconium chemicals, and the products have widespread use for wastewater treatment, air pollution control, catalyst manufacturing, drilling

mud additives and other industrial applications. The company has locations across the southeastern U.S., including Baton Rouge, Mississippi, Alabama and Georgia. COMPANIES CLOSE OPERATIONS, ANNOUNCE LAYOFFS Two Louisiana energy-related employers announced permanent mass layoffs this summer. GE Oil & Gas issued a Worker Adjustment and Retraining Notification (WARN) announcing a change in operations at its facility located in Pineville that will result in approximately 269 of approximately 289 manufacturing, sales/services and engineering employees losing their jobs. The work force reduction is scheduled to begin Sept. 2 and continue through December. Lafayette-based Blue Sky Innovations LLC provided a WARN notice announcing it lost a bid for work with its only full-time client and was given a 30-day notice to end its existing contract. The company laid off all 55 of its hourly employees working at 12 locations across south Louisiana and will end all salaried positions no later than Dec. 31. TEACHER EXTERNSHIPS PROVIDE HANDS-ON EXPERIENCE IN SKILLED CRAFT Twelve teachers from the Baton Rouge area completed a five-day immersive externship in skilled craft in June as part of the North Capital Region Jump Start Team’s Talent Pool, a program made possible, in part, through a grant provided by the Louisiana Construction Education Foundation, administered by the Baton Rouge Area Chamber and coordinated by To the T Consulting. The teacher externship is one of three aspects of the programming, intended to allow students and teachers to explore career opportunities in skilled craft. This is the second cohort of teachers to participate in an externship, which will culminate with the group developing a comprehensive lesson plan to be used regionwide. Externs spent time learning from local industry, including BASF Zachary, BASF Geismar, MMR Group, Performance Contractors, Thompson Pipe Group and ABC Pelican Chapter. Continued on page 70

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

CLAIBORNE

CLOSING NOTES: PROJECT MAPS BOSSIER

Project by project

CADDO

WEBSTER

($250M and up)

BIENVILLE

Louisiana industrial projects announced or proposed since 2009 with projected capital investment of $250 million or more. Second line shows projected capital investment and direct new jobs. List is representative, not complete; project statuses change frequently. (LNG = liquefied natural gas export project) 1 Sabine Pass LNG (Cheniere Energy) $20B | 400 jobs 2 Sasol Ltd. $21.2B-$24.2B | 1,253 jobs 3 G2 LNG $11B | 250 jobs 4 Sempra Energy/ Cameron LNG $10B | 190 jobs 5 Formosa (St. James Parish) $9.4B | 1,200 jobs 6 Lake Charles LNG (aka Trunkline LNG; BG Group and Energy Transfer Partners) $9B | 250 jobs 7 Southern California Telephone & Energy (Monkey Island LNG) $9B | 200 jobs 8 Delfin LNG $7B | 400 jobs 9 Venture Global LNG (Calcasieu) $4.25B | 100 jobs

15 Marathon Petroleum $2.35B | 65 jobs

32 Monsanto $975M | 100 jobs

16 CF Industries Nitrogen, LLC $2.1B | 93 jobs

33 Lake Charles Cogeneration, LLC $820M | 210 jobs

17 Live Oak LNG (Parallax Energy) $2B | 100 jobs

34 Petroplex $800M | Not available

18 Yuhuang Chemical, Inc. $1.85B | 400 jobs

35 Shell Chemical $717M | 20 jobs

19 EuroChem $1.5B | 200 jobs

36 Valero Refining – New Orleans, LLC $700M | 24 jobs

10 Magnolia LNG $3.7B | 50 jobs

26 Castleton Commodities International $1.2B | 50 jobs

11 Nucor Steel Up to $3.4B | 1,250 jobs

27 Dow Chemical $1.06B | 71 jobs

12 Axiall/Lotte Chemical $3B | 250 jobs

28 Cornerstone Chemical Co./ Dyno Nobel $1.025B | 65 jobs

13 Lake Charles Clean Energy (Leucadia Corp.) $2.5B | 215 jobs 14 Revolution Aluminum (formerly American Specialty Alloys) $2.4B | 1,450 jobs

29 Monsanto $1B | 95 jobs 30 Entergy Little Gypsy $1B | 15-20 jobs 31 Benteler AG $975M | 675 jobs

10/12 INDUSTRY REPORT • THIRD QUARTER 2016

RED RIVER

DESOTO

NATCHITOCHES SABINE

VERNON

37 Louisiana LNG Energy, LLC $646.6M | 44 jobs 38 Pin Oak Terminals $600M | 70 jobs 39 Methanex Corp., Methanex 1 $570M | 35 jobs

BEAUREGARD

40 Methanex Corp., Methanex 2 $570M | 120 jobs 41 Honeywell International $500M | 80 jobs CALCASIEU

57 2 6 12 13 52 10 23 33 17

4 CAMERON

3 1

9 8

7 20

RED = PROJECT KILLED BLUE = NEW PROJECT ADDED SINCE LAST EDITION

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UNION

MOREHOUSE

WEST CARROLL EAST CARROLL

LINCOLN