Whitepaper: 04.24.2013

Building the Boom

— Mike Bolen, Chairman & Chief Executive Officer

How fracking will unleash a new American revolution in construction
By: Mike Bolen, McCarthy Chairman & CEO, and Tom Felton, MC Industrial President

Deep beneath the prairie of western North Dakota is a new kind of gold mine. “New” because it holds a natural resource far more precious to our nation’s economy than the yellow metal. It’s energy — more specifically, natural gas. Until now, it has been locked inside the Bakken Shale Formation. But with the advent of new technologies such as fracking and oil prices rising to around $100 a barrel, unlocking this natural gas is not only a good idea — it’s one whose time has come. As the new energy boom lifts the economy, commercial and industrial builders everywhere are fueling the revolution.

Deep beneath the prairie of western North Dakota is a new kind of gold mine. “New” because it holds a natural resource far more precious to our nation’s economy than the yellow metal. It’s energy — more specifically, natural gas. Until now, it has been locked inside the Bakken Shale Formation. But with the advent of new technologies such as fracking and oil prices rising to around $100 a barrel, unlocking this natural gas is not only a good idea — it’s one whose time has come. As the new energy boom lifts the economy, commercial and industrial builders everywhere are fueling the revolution.

Eureka!
A virtually endless supply of cleaner, low cost energy right here in America: Imagine the impact on our economy. With less reliance on foreign oil and all its political turmoil, the engines of industry can gear up again to fuel our growth far into the future. It’s an energy revolution. It’s not only revitalizing American industry, but also attracting attention from companies overseas looking to locate facilities close to a plentiful supply of affordable power.

What is Fracking?
Hydraulic fracturing, or “fracking,” pumps fluids at extreme pressure into rock underground. The resulting cracks release trapped natural gas and oil, making both easier to extract affordably.

Think of Pittsburgh as the new energy capital of America (like North Dakota, there’s an abundance of natural gas accessible via fracking). From there, extend an imaginary line west to Chicago, then straight down to the Gulf of Mexico and back to Pittsburgh. This triangle could be the core of our country’s new energy independence. It’s driving a high-speed renaissance in manufacturing at a pace this nation hasn’t enjoyed in generations. Make no mistake: American industry is coming back strong. It’s even opening an entirely new global market like never before: America as an exporter of natural gas.

New Challenges for a Changing World
Suddenly, the cost of energy is no longer a barrier to growth of the economy or construction. Now, it’s the shortage of qualified labor and expertise to build commercial and industrial facilities. Due to the ravaging effects of the recent recession, the nation’s entire construction capacity is overtaxed. At the same time, building expertise is needed right now where the new energy is, and whole populations are shifting.

Once starved for jobs, these towns now have more work than workers. They need not only qualified labor to build new factories and refineries, but also new hospitals, schools and other services. Who will build it all? Just as important, how can an owner – commercial or industrial – find a builder who is passionate about following exacting construction processes that have been proven to return value for years to come?

The Building Boom will be Everywhere
The energy revolution is igniting the entire construction industry in America, as lower energy prices spark growth in every market sector. Manufacturing, healthcare, education, transportation, infrastructure – the list goes on. Lower energy prices are lifting the entire economy, and America’s builders will help drive the growth. Here are just four market sectors that are benefiting from this boom right now:

  1. Energy extraction and processing: New facilities are springing up to handle shale natural gas from North Dakota to the Ohio Valley as well as tar sands from Canada. Similar to the wildcat days of another era, the rush is on.
  2. Manufacturing: Since around 1960, manufacturing in America has been on the decline – with factories and jobs being shipped overseas for lower labor costs, favorable tax treatment and more. But the trend is shifting due to new low cost of natural gas motivating American industry to build within our borders again.
  3. Electricity generation: Cleaner than coal, natural gas is the emerging fuel to power homes and businesses across our country. The recent recession lowered electricity demand substantially, and some 50 gigawatts of coal-fired energy have been powered off (perhaps for good). As demand returns, gas-fired turbines will light our economic recovery.
  4. Supporting infrastructure: Where the new source of energy is booming, so is the population. That means more schools and hospitals, more roads and bridges – more of the foundation that makes the local economy work. This story may begin with energy extraction in North Dakota and the Ohio Valley, but it ends with the revitalization of communities across our country.

Building Best Practices
Industrial and commercial building may differ in fundamental ways (for example, the sheer magnitude of many industrial projects sets them apart), but they both have one very important thing in common. To succeed today, both commercial and industrial construction requires a true builder who is passionate about following proven processes and knows how to work safely on schedule – a builder who can manage the delicate balance of quality and cost. To identify a true builder, focus on these core competencies:

  • Safety: Commercial or industrial, safety should be the #1 priority. For example, imagine the enormously high internal pressures of the pipelines used in fracking. Every jobsite is dangerous, and the safety protocols are very strict.
  • Quality: A project may need as many quality controls as safety experts. Multiple quality checks, redundancies and sign-offs help ensure the facility will perform as planned when the owner takes delivery – and long after.
  • Project Controls: True builders rely on today’s virtual design and construction tools, together with hands-on experience to orchestrate scheduling, cost, productivity, commodity installation and more.
  • Safety Performance: True builders also self-perform to have more control and deliver more assurance to owners. These builders are expert at critical processes and tasks such as concrete, steel, piping and heavy equipment set-up.
  • Turnover of Systems: Given the tremendously large scale of a typical industrial project, it’s vital to build from day one with the end in mind. At all times, you have to know where you are in a project and where you’re going next. Missteps that cause delays in bringing a new facility online can cost astronomical sums of money. So the turnover of the systems to the owner must be intricately detailed.

Fueling the Energy Revolution
The tipping point is here: Old refineries are being refurbished to process tar sands from the far corners of Canada. New manufacturing facilities and industrial plants are rising again in towns once thought lost in the disappearing Rust Belt. New hospitals and schools are staking their ground in communities that are coming back to life. At the center of it all are America’s true builders, doing our part to help ensure our industry can meet the demands of today and tomorrow. We’re proud to play a role in the new American revolution.

About the Authors
Mike Bolen is Chairman and Chief Executive Officer of McCarthy. With over 30 years of experience in the construction industry, Mike joined McCarthy in 1978 as a carpenter, moving his way up through the company to assume the role as CEO in 1999. He earned a bachelor of science in general engineering from the United States Air Force Academy in Colorado Springs, Colo., and completed his graduate degree in guidance and counseling at the University of Northern Colorado in Greeley, while on active duty.

Tom Felton is President of MC Industrial, Inc. With more than 25 years of construction experience, Tom began with his career with McCarthy Building Companies, moving up to become Vice President, Industrial Services prior to being selected as President of MC Industrial, Inc., a newly formed independent McCarthy company in 2005. He holds both a bachelor of science in construction management and a master of business administration from Louisiana State University.

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