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From Site Selection magazine, March 2010

More Where That Came From

Carl Sorrell
Carl Sorrell, vice president of manufacturing for Oxane Materials, likes the logistics, the work force and the industrial services support network for the company’s new plant in Van Buren, Ark.               
Photo courtesy of Oxane Materials

Energy industry expertise reigns supreme in the south central United States.


he job of energy-field roustabout in 2009 was one of the toughest jobs to have in the U.S., according to rankings compiled by the Jobs Rated Almanac. But in the south-central United States, roustabouts are happily being put to work in this tough economy on a new range of oil and gas projects that are causing their territories to gush spinoff business like Spindletop itself.

Take flow control, for instance. That's the métier of Tyco Flow Control, a unit of Tyco International Ltd., which in early February announced a 33,000-sq.-ft. (3,066-sq.-m.), 50-job expansion of its 25-year-old plant in Harlingen, Texas, for the production of valves and controls, services, and other solutions, to customers in more than 60 countries. "The continued positive business climate of Harlingen and work by the Harlingen Economic Development Corporation helped us to decide to expand our Harlingen facility" said Ed Rushing, vice president of operations.

Need something for those liquids and gases to flow through? Stupp Corp., a division of St. Louis-based Stupp Bros., Inc., in July 2009 opened its new spiral weld mill for line pipe manufacturing in East Baton Rouge Parish, La. The US$80-million project enables Stupp to more than double its work force at its 58-year-old site, retaining 193 jobs and creating at least 205 new jobs at an average salary of nearly $63,000, plus benefits. Through the middle of 2010, Stupp plans to hire at least 100 more employees.

Engagement Is the Catalyst

 In West Baton Rouge Parish, Bill Howell, venture manager for Shell Group business CRI/Criterion, Inc., says a new hydroprocessing catalyst plant in the works as a concept since June 2005 is nearly complete on a former sugarcane field.

"We're a global company, so we weren't just looking in the U.S. or North America, but across the globe," he says. Next came months of analysis of growth potential of various regions over the coming decade. Then came data collection in terms of economics, technical availability of resources and customers in the area. One other driving factor was environmental regulations around fuels. In this case, they were a positive.

"Clean fuels had a huge impact," says Howell, explaining that ultra-low-sulphur diesels "require more catalysts to get there."

The Far East and China were looked at closely because of vehicle ownership growth. But in the meantime, there was more immediate growth potential in the Americas, backed by the company's solid and huge customer base there.

"We had about eight or nine sites worldwide we had an interest in," says Howell. Then the decision was made to focus on the Americas, and eliminate candidate sites against the filter of high demand in the Gulf Coast, Mexico and South America. Logistics and handling costs were a factor, as was the ability to find operators and mechanics for such a high-tech manufacturing facility. The Criterion team examined training institutions, state partnership with industry and incentives. Howell says the company hoped to be eligible for Gulf Opportunity Zone incentives, "but we also knew the project had time constrictions. There were deadlines on GO Zone incentives, none of which we were able to meet."

That didn't eliminate the Bayou State, however.

"By the time we're finished, we're down to two sites in the U.S. that were close to each other," he says. "I'd say one of the big factors is the economic development agency within the state — how engaged they are with the business, how much they communicate and work with you. When it all boiled down to it, Louisiana has one of the most active redevelopment agencies that we found, and we have not been disappointed. From the beginning, they worked with us, explained to us the training programs and the technical pool that was here, assigned to us an executive director who would be our focal point and facilitated us working through their process."

That process was all the more remarkable because it bridged the administrations of former Gov. Kathleen Blanco and current Gov. Bobby Jindal.

"It was a very smooth transition to Gov. Jindal, very business proactive," says Howell. "If anything, I saw his people become more engaged on the economic development side. That's one concern you have when you have a change in political establishment — what hiccups it is going to throw into the process. And quite honestly it didn't."

Situation Optimal

A statewide oil and gas directory maintained by the Louisiana’s energy office includes over 650 listings in 37 categories. Dane Revette, director of energy development for Louisiana Economic Development, says that total probably represents only a quarter of the services and energy-related companies in the state.

Howell says proximity to ports in New Orleans and Houston was a big plus for the former Alcoa site, as is proximity to the Mississippi River and the Port of Baton Rouge, which happened to own some railroad trackage property just in back of the Criterion site that it's leased to the company, creating a win-win scenario.

"The port had track they had not used for several years," he says. "We were able to come in and renovate the track. It creates revenue for the port, and gives us a benefit a lot of other manufacturing sites do not have — the ability to store railcars, and move them in and out.

"We also looked for natural gas availability," he says. Asked if the heavy shale gas exploration and production activity in the region is a positive site selection factor, he says, "Any facility that depends on gas-fired equipment has a strong desire to have low-cost, readily available gas supply. It so happens this facility has access to two pipelines, and we can switch back and forth easily."

Howell says the facility, due to be completely commercialized by mid-summer 2010 and employ approximately 90, could be the most integrated site of its kind, and unique in the world: "We manufacture the raw material on this site and pump it to an alumina facility on site, which makes the raw material for the catalyst. Then we transport it a few thousand feet to a warehouse, and ship it to our customers, all self-contained within 70 acres [28.3 hectares]."

Dane Revette, director of energy development for Louisiana Economic Development, says he's been working with a diverse array of potential projects, including a tank terminal, wind farms, algae gasification, turbines generating power from the Mississippi River and even more traditional fare, such as salt-dome natural gas storage, carbon sequestration and pipelines, including one that might carry carbon dioxide for injection into enhanced oil recovery projects.

In the meantime, energy-field services companies are going gangbusters as exploration defining the Haynesville Shale seems to be expanding into much of northern Louisiana: Schlumberger (pronounced "shlum-bear-zhay") and Baker Hughes hiring hundreds each near Shreveport; helicopters diversifying from ferrying roustabouts to medical patients; even a heavy industrial rope company that is growing beyond the state's borders and locating a plant in Brazil.

"More and more around here," says Revette, "we're developing diversified portfolios of companies doing business overseas."

Integra Finds What It Needs in Oklahoma

Oklahoma Commerce Secretary Natalie Shirley says that while traditional energy jobs will remain steady, " the trend toward clean energy will create new jobs that rely on similar foundational skill sets with enhanced high-tech applications. We're already seeing this with the wind industry. We have projected more than 15,000 jobs will be created in Oklahoma to serve the growing wind energy industry. For example, wind technician training programs are cropping up all over the state in higher ed and career tech to ensure a trained work force for this market."

People like Integra Wind Services President Rick Avey are glad to hear that kind of talk. Integra plans to hire as many as 205 people in Greater Oklahoma City over the next five years, at an average salary of $50,000. Once those jobs are filled, the firm stands to receive $820,000 courtesy of the city's Strategic Investment Program, passed by voters in 2007.

Integra provides such services as site planning, environmental assessments, wind tower erection and turbine commissioning. Avey says Integra is bidding on wind farm projects between 75 and 125 MW across America. But its choice of Oklahoma City also came down to where the wind blows.

"As with any new company, logistical location to our work and our customers in general is a critical issue," says Avey in an e-mail. "Oklahoma is located close to the center of the wind belt in America. Oklahoma has Interstates that run east, west, north and south from Oklahoma City. Oklahoma has a well-established energy sector with great support for employee education through the Career Tech Centers. Will Rogers World Airport provides us with excellent access to all the major corporate centers in America and the world as needed. Public, private and political support for the wind industry are excellent in Oklahoma and Oklahoma City."

How is the firm balancing its frenetic bidding activity with growth and hiring needs? A good internal philosophy and solid infrastructure, policies and procedures help, says Avey. So does the state.

"The Career Tech system has worked directly with Integra to create the training we need to be safe, efficient and insurable for all our new hires regardless of prior training and experience," he says. "This system gives Integra a great advantage over our competitors in terms of deliverable quality each and every time we provide service or construction."

Asked for his perspective on the general pace of both oil and gas and renewables industrial project activity in the greater region, he says, "We are starting to see a much smarter and more diversified view on energy. Renewable energy is starting to have a true place in the energy mix. Oil and gas are the leaders in energy and will actually pave the way for other sources of energy to play a role in our future energy mix."

Could the pace of wind farm installation mean Integra might grow beyond Oklahoma City?

"We're already there," he says.

Arkansas Has It Both Ways

Renewable or traditional, northwest Arkansas has its energy mojo workin'. In October 2009, Mitsubishi Power Systems Americas, Inc. (MPSA) followed up its recent energy turbine manufacturing plant location in Pooler, Ga., near Savannah by announcing a $100-million, 400-job wind turbine manufacturing plant at Fort Chaffee, near Fort Smith. The decision came after a 15-month site selection process, and will mean the construction of a new 200,000-sq.-ft. (18,580-sq.-m.) facility on 90 acres (36.4 hectares). And the spinoff could be immediate in the region and beyond: "With the establishment of this Wind Turbine manufacturing plant, we are also planning to expand our component sourcing in the U.S. so as to shorten our supply chain," said Koji Hasegawa, President and CEO of MPSA.

Hasegawa saluted Maria Haley and her Arkansas Economic Development Commission staff, and the state's commitment to the renewable energy sector.

But it's just as committed to traditional energy and the technologies it spawns.

That's what's landing in Van Buren, just a short drive across town from Fort Chaffee, where Houston-based Oxane Materials in late December 2009 chose to locate a manufacturing plant for highly conductive, ultralight ceramic proppants, used in hydraulic fracture recovery of gas and oil in tight formations. Starting with $15 million and 50 employees by mid-summer 2010, the venture plans to expand through 2014, with expected total capital investment of $32 million and additional employment of up to 300 total employees. Company officials thanked Haley's team and the Fort Smith Regional Chamber for their support.

Proppants are used by well service companies when they force a frac fluid under high pressure into underground formations around a well bore. Suspended in the fluid, proppants are forced into the underground fractures and "prop" them open after the fluid is removed. By virtue of their weight-to-strength ratio, Oxane's products could increase initial oil and gas production while also easing production decline.

Idea Extraction

The Texas petroleum refining and chemical products cluster is responsible for more than $82 billion in gross state product, almost 870,000 total jobs, and $3.6 billion in annual state revenues. Houston is home to more than 3,000 energy-related companies, including 15 of the nation's top 20 oil pipelines.

Oxane President Coker and Rice University Prof. Andrew Barron co-founded the company, which received its major backing in December 2009 from Energy Ventures, a venture capital firm specializing in upstream oil and gas technology that is co-headquartered in Houston and in Stavanger, Norway. Jim Sledzik, Energy Ventures partner and president of the Houston Office, says the firm, which created its first energy technology fund in 2002 and now has $420 million under management, is "based on the premise that oil and gas would be the key energy driver going forward, and it would be decades before anything out there came close to delivering half of the energy requirements of the globe. Technology was going to play a more important role around extracting oil and gas. That was our premise, and our focus has remained as such."

Incredibly, of the $29 billion in venture capital investments in 2008, says Sledzik, maybe $150 million was spent on oil and gas. He says the Rice Alliance spun out Oxane, introductions were made, and "we loved the value proposition," given the amazing growth of activity across the Barnett, Fayetteville and Haynesville shale formations. He says handling of intellectual property is a critical piece in this arena.

"Our investments are time limited," he says. "When we sell the company on, most of the time we're involved in strategic premiums or future earnings potential, and that only happens when you have tight control on IP. It's such a valuable piece of moving on the company to the next owner. So we have to be very careful with whom we partner, and have rights to IP firmly defined from the beginning. Stanford and Rice do quite a good job on that." The company also has worked with the University of Edinburgh in Scotland.

Sledzik says Houston is thus not only the heartbeat of oil and gas, but also serves as the basis to link in to universities, where next-generation technologies are being hatched. And the local Houston Tech Center manages the Texas Emerging Technology Fund (ETF) in Houston.

"Houston is second to none in getting incubators and an angel network going," says Sledzik. "The ETF can invest in the early stage technologies, before we come in. The programs that are here are quite good. There's an international perspective, with the offices of all the major oil companies around the globe. There's a huge client network. It's a very good place for us to do business."

Plenty To Choose From

On the ground at the new project site in Arkansas, Carl Sorrell, Oxane's vice president of manufacturing, talks as he watches about 30 construction workers erecting four raw material silos: "We're wide open sideways, as they say."

Sorrell and Bryan Geary, Oxane's director of manufacturing, visited about 80 sites in nine states: Texas, Oklahoma, Arkansas, Louisiana, Georgia, Tennessee, Mississippi, Nebraska and Iowa. All had existing buildings, which was Oxane's first requirement.

"Unfortunately, there are a lot of abandoned factories and warehouses across the country, so we had plenty to choose from," says Sorrell, "everything from your average barebones warehouse operation to completely finished and just closed plastics manufacturing facilities. We looked at some buildings so nice you would probably raise your family in them, and some you wouldn't put your dog in."

Sorrell and Geary found a building that Sorrell had been in charge of for another firm in the 1980s, but they couldn't reach a price agreement. Oxane needed an adequate eave height, room for expansion and low power costs — Sorrell says he was surprised at the wide range of variance in power costs among the states.

Above all, Oxane wanted a community with a history of industrial production. "We wanted attitude and availability more than a skill set," says Sorrell.

The whole process took about a year. Even after Oxane's initial property pick in Fort Smith-Van Buren did not pan out, "we kept coming back because over 50 percent of the people here earn their living in manufacturing," says Sorrell. "The logistics for incoming raw materials and outgoing finished product are super, with rail, barge and truck. And there are very low energy costs here in Arkansas. We also feel very strongly it is a good place to live."

It's also a good place to do business.

"People here make their living working in factories, so you have a great support group," says Sorrell, citing a situation familiar to plant managers: "I'm in the middle of nowhere, and I need somebody to cast me a bearing," he says. "Where do I get that done? We don't have that issue. Anything we need we're going to find right here. The machine shops and fabrication shops have been here for a long time, some for 50 or 60 years and on their fourth generation of owners."

Good To Be Back

In 2005 the total number of natural gas wells in Arkansas had declined to just under 3,000. But as of February 15, 2010, says Jeremy Ramsey, GIS analyst at the Arkansas Oil and Gas Commission, there were 6,426 active wells, 392 spud wells (in the process of being drilled) and 190 wells that have been permitted but are yet to be drilled, for a grand total of 7,008, approaching the previous high of 7,500 hit in 2003.

Arkansas Valley Electric Cooperative is the plant's main power provider, with Arkansas Oklahoma Gas the natural gas supplier. And yes, as with CRI/Criterion in Louisiana, "a very significant amount [of power] comes from natural gas," says Sorrell, equating the facility's needs to that of a brick plant. "We will use about 50 million btus per hour of operation, roughly 52 mcf per hour, in the beginning stages. As we expand, it will grow."

Incentives include CDBG funds and training assistance from the state and the University of Arkansas. But Sorrell says for an emerging company like Oxane, "statutory incentives are less important than the ability to operate efficiently."

Sorrell says there's a strong recognition among government officials today that manufacturing provides stable work for the community as well as a tax base. While the jury's still out on attracting more young people, "those who have had factory jobs in the past and watched it go overseas very much want to get back into it." Sorrell himself does too, after 30 years in the ceramic industry.

"I had been with the largest ceramic tile manufacturing company in North America for quite some time," he says. "When we parted ways, I said I really want to do something I had not been able to do for some time, and that's build something. I had one goal with Oxane — hire as many people as I laid off in the last 10 years.

"That is my personal goal," he says. "I'm excited about building something rather than shutting something down and sending it overseas."

Story in Pictures

Oxane Materials new plant in Van Buren, Ark.
Photo courtesy of Oxane Materials
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