INDUSTRIAL REVOLUTION
Construction in the Trades SectorMakes a Comeback
By Dave Morningstar
Beginning in the late 1960s, the industrialsegment was red hot, as the nationembarked on an infrastructure buildingboom sparked in large part by growing demandfor products of all kinds and a whole series ofregulatory mandates aimed at cleaning up theenvironment. Together, these two forces createdan unprecedented demand for new factories,power plants, and waste treatment facilities,plus an almost equal surge in remedial work forexisting facilities needing to meet the new cleanair and clean water mandates.
In the late 1970s, industrial construction came to a screeching halt, as the nation fell into a deep and prolonged recession. When the economy emerged, the focus of construction activity shifted from the industrial sector to commercial and retail projects, followed later by a residential building boom that is still growing today.
Aging Infrastructure
In a very real sense, the country has lived for almost 30 years off the physical infrastructure put in place during the last industrial construction boom. The fact that the last new refinery built in the United States went into service in the 1970s is an often-repeated example.
It’s equally true that today’s economy is almost three times as large as it was near the peak of the last industrial building boom in 1975. While globalization has certainly played an important part in this growth, basic commodities like water, electricity, and refined fuels are still produced primarily in domestic facilities.
This production is possible because, while it is true that the United States has not built any new refineries since the 1970s, those that are in service are continuously upgraded and improved to increase their capacities and productivities. The same is true of power plants and water and waste treatment facilities.
For many reasons, the Twin Cities area of Minnesota is a natural focal point for all these trends, one that provides valuable insight into what may be in store for the nation in the next few years. What is happening now in the Twin Cities may well be the first phase of a renaissance of industrial construction activity that will propel that segment back into the central role it once occupied for many contractors.
Intense Operations
Obviously, industrial projects did not disappear altogether after the boom years ended, but they played a smaller and smaller role in many contractors’ business plans. As a result, many of the specialized trade and management skills developed to handle industrial projects have disappeared from the construction industry’s repertoire as those people have moved into other fields or simply retired. In a very real sense, the country has also been living off the industrial infrastructure developed during the boom years.
This fact is key because the requirements of industrial projects are quite different from those of the typical commercial building — and altogether unlike those of residential construction. Industrial projects are often complex, tightly scheduled, and “intense,” a phrase used by Mark Smith, a Project Manager for Parsons Electric LLC.
Smith is currently managing Parsons’s part of the expansion of the Pine Bend refinery owned by Koch Industries, Inc.’s subsidiary Flint Hills Resources, LP, Wichita, Kansas. The expansion is part of Flint Hills’s ultra-low-sulfur diesel project, which will produce cleanburning diesel fuels to meet Minnesota environmental requirements scheduled to take effect in mid-2006.
The Pine Bend project is actually a microcosm of today’s reemerging industrial construction business. It has all the complexity of a traditional “heavy industrial” project, plus the extra work required to make everything “explosion proof” in the refinery environment and the added challenge of complying with safety and quality procedures with which “old timers” never had to deal.
“The work site is roughly 600 feet long and 30 to 40 feet wide,” Smith explains. “At times, we will have up to 400 workers in that area, all attempting to be productive without getting in each other’s way. Managing an operation like that can get pretty intense. We had to go from 10 people on site to more than 100 in less than two weeks, and we will probably hit 140 electricians at work simultaneously before we’re finished.”
At peak times, Parsons will use nearly all its shop resources and tools, plus rentals. “We have two people who spend all their time scheduling so the equipment and the workers are in the same place at the same time to keep the job moving,” Smith continues. “Winter is here, too, and most of the jobsite is outdoors.”
Energy-Related Projects
Fortunately, the Pine Bend project is not Parsons’s only recent experience with industrial construction. Although the company did virtually no industrial work during the early and mid- 1980s, that began to change when Jack Claeson came on board as a vice president in 1988 with a mandate to get the company back into the industrial construction business.
“Parsons is now a preferred contractor for 3M, which has many facilities in the Twin Cities area,” Claeson says. “We have a similar relationship with the Ford St. Paul assembly plant. We have also done much of the work at the South Washington County Wastewater Treatment Plant, a 10-million-gallon-per-day facility in Cottage Grove, Minnesota. That was an interesting project because the new facility was built on the same right of way as the existing Cottage Grove WWTP site, which had to stay in operation during the project — a lot like Pine Bend.”
Parsons has also worked on three wind farms in Minnesota. “Power plant upgrades and new peaker plant construction is booming, partially driven by the electric power industry’s switch over to natural gas-fired generators,” Claeson says.
But Parsons’s experience most directly applicable to the Pine Bend project is its relationship with the Marathon-Ashland St. Paul Park refinery, a 70,000-barrels-per-day facility near St. Paul. Parsons has an ongoing maintenance contract with the refinery in addition to participating in every major project on the site since 1989.
What many of Parsons’s energy-related projects have in common — and what makes Minnesota a leading indicator of trends in the energy industry — is its proximity to Canadian oil and natural- gas resources. Many coal- and oil-fired power plants are now changing to natural gas for environmental reasons, and the proximity of the Canadian production areas makes this option especially attractive for Minnesota generation facilities.
Canada is also a major source of crude oil for Minnesota refineries, which supply gasoline and diesel throughout the upper Midwest. Of particular note is the fact that Canadian crude tends to be “sour,” which means it has a high sulfur content that makes it difficult to refine into the clean, low-sulfur fuels needed to meet existing and upcoming environmental rules, especially those that apply to diesel fuels. As a result, refineries like the St. Paul Park facility and Pine Bend are at the forefront of technologies that will eventually become de facto standards in the industry. As global supplies of so-called “sweet” crude continue to decline, the ability to process the “sour” crudes into environmentally friendly fuels will become increasingly important to the nation’s — and the world’s — energy economy.
The Flint Hills project is not adding any significant capacity to the Pine Bend refinery; it is only intended to produce low-sulfur diesel fuel from “sour” crude as part of Koch Industries, Inc.’s company-wide commitment to cleaner fuels.
According to Claeson, Koch Industries, Inc., in Wichita, Kansas, is the second-largest, privately owned company in the United States and a major player in the energy industry. This project is part of its ultra-low-sulfur diesel initiative.
“I believe it’s the single most expensive project ever done at Pine Bend,” says Don Allen of Jacobs Engineering Group, Inc., Pasadena, California, the project’s Construction Manager. “It’s entirely driven by the need for cleaner diesel fuels. It’s one of several desulfurization projects Jacobs is managing at the moment.”
Subcontracting Challenges
Parsons is installing all the instrumentation on the project, as well as the main control room, which is a prefabricated building nearly 160 feet long mounted on top of 20-foot-high concrete columns on the site. Under the terms of the contract, Parsons was responsible for both assembling the control room structure and then wiring all the electrical equipment in it.
“That means we have a lot of subcontractors working for us doing things that we are not typically responsible for on a less intense job,” explains Smith. “In fact, one of the major challenges we’ve faced here is finding enough competent welders to get the work done on time, and we’re the electrical contractor.”
Parsons has had to locate a number of unusual subcontractors for the Pine Bend job, including a painting contractor to spray special fireproof coatings on cable trays. Two different mechanical contractors are on site, one to perform “heavy” construction and the other to install ductwork and other sheet metal in the control room. Parsons has also used a scaffolding contractor to support “high work” on towers up to 100 feet tall that require instrumentation to be installed to the top.
“Everything on this job is industrial on steroids,” says Smith. “It’s all explosion-proof, rigid conduit, totally enclosed motors, and heavy-duty wiring work, and that introduces a whole set of challenges that no one who has not done this kind of work will understand.”
It’s also an owner-controlled insurance program (OCIP) jobsite, which adds another layer of planning, monitoring, and reporting to the project management team’s responsibilities, according to Smith.
OCIP is an arrangement under which the owner of a project supplies part or all of the insurance coverage to the contractors and subcontractors working on the job. Any costs the contractors may have built into their bids to cover insurance are deducted from the award under an OCIP arrangement.
“In practical terms, the owner is on the hook for any insurance claims generated on the job, so they tend to be more sensitive than normal to safety and quality issues,” Smith explains. “That means, here at Pine Bend, we have a meeting every morning to discuss our site-specific action plan for the day’s work.”
For that plan, Parsons must identify every safety risk the workers will face and explain how the company is going to mitigate it. “Multiple people have to observe the work and record exactly how the plan was complied with while the work was accomplished,” says Smith.
When it’s finished, Parsons writes a report on the completed task for review. “Don’t misunderstand,” Smith continues. “Safety is extremely important to us at Parsons, but the record-keeping aspects of the OCIP approach can get in the way of getting the job done expeditiously at times. It’s one of the things the ‘old timers’ didn’t have to contend with that is becoming more and more common today.”
Winter Weather
Parsons began work on the Pine Bend project in July 2005 and will finish by March 2006. Of course, that schedule means working through a Minnesota winter on an exposed, outdoor jobsite.
Smith and his team are doing everything possible to get the “heavy lift” portions of the project finished before the depths of winter set in, but the reality is that much of the work will have to be done in the cold.
“If what I’ve been reading in the Farmer’s Almanac is true, this winter is going to be colder than normal,” Smith says. “It won’t be easy, but we’ll get the job done. After all, we know what industrial construction is all about; and while this one may be a little tougher than normal, so are we.”
