Monday, December 5, 2011

Marcellus and Utica Shale Drilling

It continues to astound me the hypocracy and ignorance in the drama unfolding in the Marcellus and Utica Shale gas plays. The fact of the matter is that the natural gas to be found in the Marcellus and Utica shale formations could make us energy independent for the first time in 50 years. The drama is a direct result of ignorance. Ignorance of the process, ignorance of the history and the mistaken notion that somehow we will be all right if we just converted to renewable energy. While that notion is laudable the reality is ridiculous. Less than 4% of our energy comes from renewables. Even if you add in hydro power you only get to about 11% and there are no more rivers to be dammed. With continued growth in population we will barely meet the increasing demand for computer energy much less displace fossil fuels. With energy efficiency and better technology we may slow the growth in demand but we will not reverse it anytime soon. As oil, natural gas and coal become harder to find and extract, the price will rise and when it does, the alternatives begin to look better. Forcing the issue with government intervention is counter productive. Trying to deny people their private property rights is bad government. As the story unfolds I think we will see the advocates are the people who own the property and the mineral rights and the anti-drilling zealots are the people who don't.

Friday, March 25, 2011

Maintenance 101

Here are some interesting thoughts about how to get your maintenance program to work better.
1) Preventative maintenance-if you wait for something to break you can expect longer downtimes, more expensive repairs and you can't maintain your equipment because you are too busy fixing your equipment.
2) Staffing-when it is time to cut, do you accept cuts in planners, schedulers or maintenance clerks as something you MUST do or do you fight for those people with reliability records and consequences for not doing it.
3) Planning-if you expect your equipment to run properly and continuously you have to plan for maintenance downtime so you can fix something before it breaks and when it is schedukled to be down.
4) Measure your success-"if you don't know where you are going any road will take you there" Whatever you want, equipment operating hours between breakdowns, total hours operating per time period, quarterly "up" time. Measure it.
5) Train your people- Does everyone know how to change that bearing on #2 feedwater pump? cross train and develop an apprenticeship program if you need to. Trained employees can be paid more because they are worth more. What happens when the 60 something mechanic retires and no-one knows what he knows?
6) Teamwork-encourage teamwork both for cross training and to develop crossover skills. A little rivalry can help everyone do the job better. Day shift, night shift, journeyman, apprentice, blue collar, white collar, if everone is hooked to the wagon you can onlu pull it one way.
7) Accountability- try to determine reasons for failure so you can learn for the next time. Was the bearing screaming and no one heard it? By determining root cause you find the process that failed and FIX it. Be it human or process it is about PROGRESS.

Wednesday, March 16, 2011

Nuclear Power and Energy

As we watch the Japanese try to control their damaged reactors we hear lots of noise about doing without nuclear power. "We need clean energy" they cry!. However, I have not seen any alternatives that are even close to supplying the amount of power that nuclear power provides today much less in the future. In the US, nuclear power plants supply about 20% of the total energy. In the world it is only 6%. In the world the projected energy consumption will go from approximately 500 Quadrillion BTU to 722 Quadrillion BTU by 2030. We won't get there with wind and we won't get there without nuclear. All things considered we have to use everything we have and continuously improve what we do to get there. Better efficiency, new fuels, more of what we've got and an understanding that to continue to live the lifestyle we have we must continue to use coal, oil, natural gas, nuclear, wind and solar and continue to look for more and better. There is no alternative. What are we going to give up? Our air conditioning? Our refrigerators? Our computers, cell phones, i-pods, car chargers, lights, TVs and cable boxes? Our manufacturing capabilty, transportation and commercial? Our population continues to grow. World population continues to grow and as the third world counties become more like us with modern conveniences their energy use will grow exponentially. To those bleeding hearts who think we can do without certain energy sources I would say "get off the grid"

Tuesday, March 15, 2011

Planned vs Unplanned Maintenance

In many of our industries, in an effort to continue production and "equipment available" time we develop maintenance schedules for all running equipment. Can we anticipate all breakdowns, probably not. However, we can predict many of them and since unplanned maintenance can cost up to 15 times as much as planned maintenance we need to look at it. What does downtime cost? A coal prep plant I work with costs $52,000/hour. A longwall mining machine can be $600/second to $12,000/hour. A chemical plant as much as $150,000/hour. Continually looking at maintenance schedules with the idea of planning as much as possible and anticipating as much as possible is money well spent. Achieving high productivity numbers is the direct result of planned and predictive maintenance programs designed to keep as much equipment as possible running and elimionate unscheduled down time.

Monday, March 14, 2011

Cutting Maintenance: You Can't Afford It

If your cost cutting in the last two years have focused on maintenance then you have slashed budgets, defer projects and hold back spending. If what you are cutting is waste then great BUT cutting maintenance could be dangerous. When cutting we tend to cut activities not waste. We do fewer PMs, we delay replacing parts we know are worn and we cut back hours and personel. All to cut expenses. However, maintenance is not strictly an expense, it is a contributor to capacity, through put, safety, environmental integrity, quality and scheduling agility, all things a manufacturing facility needs more of not less. Treating maintenance like office supplies is wrong-headed and dangerous. Planning your maintenance with productivity in mind and reducing downtime will do more to enhance the bottom line than cutting a maintenance expense.

Tuesday, March 1, 2011

Left Right Politics

I am amazed today by the extremes on both sides of the political debate. Rants by the liberals on the left about shipping jobs overseas, busting unions, the rich getting richer and trying to eliminate the middle class, tax breaks for the rich, America doesn't produce anything anymore and on and on. Rants by the right that unions are bankrupting the country, (FYI unions represent only 11.9% of the workforce in 2010. 36.2 % of the public sector and 6.9% of the private sector.) that we are spiraling out of control, that our debt is unmanageable etc etc.
Granted, unemployment is too high, our debt is too high, our deficit is too high and much of the debt and deficit problem is unsustainable. We need to make changes. We spend too much. BUT, the demise of the US of A is greatly exaggerated.
The real truth is in the middle. There are 90% of the population working (for brevity I rounded the unemployment to 10%) That means there are lots of people making things, doing things, paying their mortgage, buying things and YES starting businesses. That is where the employment will come from not from the big businesses. There are fewer auto workers at the big three than before the bailout. Private businesses will be the answer to growing our way out of this mess. They will hire people, their payrolls will multiply in the economy and tax revenues will increase. Taxing the rich only encourages them to move assets to tax shelters. When John D Rockefeller died his family had more money in tax shelters than their Standard Oil stock was worth primarily because of high taxes. Taxes on the rich become "voluntary" taxes because they have the resources to move assets to shelters to offset the tax.
We live in a 14.6 Trillion Dollar economy, the largest in the world by a factor of 3 unless you count the European Union which approximates our economy if you lump all 27 countries together. We continue to be the largest manufacturer in the world, students from every country come here to be educated. Immigrants from every nation want to come here because of the opportunity, the freedoms both personal and market and our type of government.
As Mark Twain said " The report of my death has been greatly exaggerated."

Monday, February 21, 2011

Economy and Capitalism

"Liberty is a necessary ingredient of prosperity." these words from Walter Williams in a recent editorial ring true as we watch many of the Middle Eastern countries unravel. Having a large market sector and private property rights are what allow people (entrepreneurs) to translate their skills into money. Without private property rights they have no way to leverage their property as collateral, to obtain investment capital or secure long term contractual deals. Thus any business without these rights remains small. Contrast that with the US and our free society, private property rights and free markets. Many of the more Socialistic Middle Eastern countries with state intervention, planning and weak or no private property rights wonder why their citizens aren't more entrepreneurial and why they can't build a more robust economy. The answer is freedom and liberty. People will generally pursue a better life, produce something of value or work for someone who does and lift themselves out of poverty if they are allowed to. Many citizens from these countries have come to the US with little or nothing and have been very successful. Something to think about.

Friday, February 11, 2011

The Good Idea and Good Resources Business Plan Workbook

I just saw this book by Richard E Hall "The Good Idea and Good Resources Business Plan Workbook". In a weak economy many unemployed decide to tackle their own business and the tools and skills needed are laid out in this book. Simply stated, a good business consists of a good idea and good resources. There are six elements of the Good Idea 1) Products or Services 2) Customer Profiles 3) Competition 4) Differentiation 5) Advertising and 6) Sales. There are 6 elements of Good Resources 1) Ownership 2) Financial Model 3) Staffing 4) Funding 5) Facilities and 6) Balance Sheet. Together these 12 elements create the business model and by thinking through each of them you can develop a comprehensive business plan.
The author does this with worksheets for each of the twelve steps and as you follow each you develop a business model and each worksheet can be transferred directly to the Business Plan as appropriate. This is a "Learn and Apply" book. As you learn each step you apply the information to your specific business in the worksheet and untimately produce the desired end product, the business concept and the business plan.
The author is an entrepreneur, has written books and given seminars on business planning as well as how to write a business plan. This process is simple but comprehensive and is a great exercise for the budding entrepreneur as well as the small businessman who wants to look at his business objectively with the purpose of growing and expanding.
BTW the local Score Chapter in conjuction with the WVSBDC will be doing a seminar on this book in Parkersburg, WV in May and in Glenville, WV in June.

Monday, February 7, 2011

Gas Drilling and Jobs

Marcellus Shale Gas Drilling is in the news every day. The Marcellus Shale runs through West Virginia, Pennsylvania, New York and parts of Ohio and Maryland. The latest rants in the press have been about out of towners taking "our" jobs since many of the oil field workers come from TX and OK. Should we fault an out of work oil worker for coming to where the jobs are? Should we expect the drilling rig owners to turn over a $3M piece of equipment to someone who doesn't have the training or skill to operate it. On any given drill site there are about 150 different people who have been involved. From the gas company geologist, to the landman and attorney who negotiated the lease to the site preparation crews cutting trees and laying in roads and the truckers who haul in the heavy equipment, the stone for the road, the office trailers, port-a-potties, drill pipe, lights and generators and finally the drilling rig. Then there are the roustabouts, the laborers that set it all up. Once they are ready to drill there is a steady stream of people coming and going. There are the crews that build the water pit for the eventual fracking. There is the mud guy who delivers and mixes the drilling mud. Crews line the site with 24 mil plastic sheeting so any spill does not leak into the environment. There are bolting crews who build and test the BOP stack (Blow Out Preventer), valves delivered and set up to contain the drilling and eventually the gas. Finally the drillers start drilling.
About half of the jobs require little training or experience. Many of the downstream contractors hire and train their own people for the specialized work that they do. There are companies that build and repair valves and other pressure control equipment. Companies that specialize in hauling all manner of equipment and supplies, fuel companies who fuel all these trucks. Even bulldozer driver who pull many of these trucks onto the site. Then there are the cement crews who cement in the casing before fracking and all the fracking crews.
All in all there are hundreds of jobs and most of the people I talk to want people who will show up on time, work hard and learn and get dirty. After that the gas companies, the drilling companies, the fracking companies will train you. Yeh, there are some specialized skills needed like welding or heavy equipment operator but by and large anyone with a high school diploma and the ability to work hard can get a job that pays $50k per year easily.
Let's stop with the noise about out of state workers and concentrate on how we can find these companies the employees they need.

Marcellus Shale and NIMBY

Since much of my income last year was derived from the Marcellus Shale and the companies who are working it I have found some interesting commentary and would like to share. First, to understand the issues I educated myself on the drilling and the follow up procedures to actually producing the gas. Second, as a vendor I talk with many of the players and visit the drill sites and third I read the news reports and commentary.
Many of the news articles are reiterations of other articles and talking points from the people who are against drilling of any kind and they use the same terms and the same disputed information and the same scare tactics about contaminated water wells, inflammable water, damaged roads etc. To be clear, there is some potential for water contamination in the water table during drilling. However, drillers are very aware of that and as soon as they drill below the water table, they stop, case the well in steel pipe and cement this pipe to the formation previously drilled through. This is done so that subsequent drilling CANNOT expose the groundwater to drilling chemicals or fracking fluids. Watch the video here http://www.api.org/policy/exploration/hydraulicfracturing/hydraulicfracturing.cfm
Since many of the news articles give the same information, it is apparent to me that they haven't taken the time to understand the process and the people who are the most vocal are NOT the people who own the mineral rights to the gas. As for the road damage these guys don't want to pay for a $150,000 truck over the hill or the wrecker to pull it out. Most of the roads they travel on end up being better when they are done because they up grade the road as the go. Nothing is without risk and if we ever want to see independence from foreign oil we have to exploit this resource. We can and will do it safely and provide energy to many future generations.

Tuesday, February 1, 2011

Winter Storm

As I sit here watching the weather channel and the big winter storm coming across the midwest I am reminded that Spring is coming and my bike tires are probably flat. In addition, my knee still hurts from a twist I got at the beach and I am really in sad shape. However, my biking goal this year is 1000 miles give or take. My legs need it, my heart needs it, my peace of mind needs it. Riding a bicycle gives me a chance to slow down even while my heart speeds up. I can see the birds and appreciate the quiet and simplicity of nature. I tend to ride alone and out in the country so I can hear the quiet and not the 18 wheelers trying to blow me off the road and see the birds and not the glass and trash I have to watch out for on the highway. Last year's road rash scars have faded, I have a new riding shirt I need to get into. I guess the exercise bike will have to do for now so I can do the long ride when the sun comes out. Until Spring...

Sunday, January 30, 2011

Fast paced world

We live in a fast-paced interconnected world very different from the world we grew up in. We reflect back on the days of our youth and realize that though much has changed, much remains the same. We spend more but we have less. We have bigger houses but smaller families. We have more conveniences but less time. More acquaintances but fewer friends; more knowledge but less judgement; more medicine but less wellness; smarter computers and phones but less communication. We learned how to make a living but not a life; plan more but accomplish less. We've learned to rush but not to wait. We've been to the moon but we have trouble crossing the street to meet our neighbors. We spend too recklessly, laugh too little, drive too fast, get angry too quickly, get up too tired, watch too much TV, feel too pressured and pray too little. Let us all look at our lives and do better.

Monday, January 24, 2011

Economy

As we begin this year the West Virginia economy continues to improve. The coal industry is increasing as coal prices and production get back to their former levels. Investment in the gas development areas especially in the Marcellus Shale continues to grow. All the ancillary businesses to the natural gas business are improving including gas pipelines, gas compressor stations and fractionating plants for the "wet" gas, water haulers and processors, the fracking companies, BOP and wellhead pressure control companies, bolting and hydrostatic testing companies, the cementing companies, wireline companies, pipe and well casing suppliers, drilling mud suppliers, site preparation and reclaim companies and trucking of all sorts. The associated businesses are growing including hotels, motels, restaurants and caterers, industrial parks, car and truck dealers, mechanics, employment agencies, building contractors, property owners and last but not least the government tax collectors. The bright spot here is employment. Whether you are a laborer or a welder, a truck driver or a roustabout on a drilling rig there are jobs and they pay well. Don't have the skills, then get some. Don't have the experience, then get some. Start at the bottom, build a career.