THE MAGAZINE OF THE MASTER BUILDERS’ ASSOCIATION OF WESTERN PENNSYLVANIA MAY/JUNE 2012 The ENERGY SECTOR SHIFTS GEARS The Cracker, Utica Shale And The Alternative Energy Bust First Quarter Commercial And Residential Results Natural Gas Prices Slow The Marcellus Play Pension Funds And Energy Retrofits CONTENTS 2012 PUBLISHER Tall Timber Group www.talltimbergroup.com EDITOR Jeff Burd 412-366-1857 [email protected] PRODUCTION Carson Publishing, Inc. Kevin J. Gordon ART DIRECTOR/GRAPHIC DESIGN Carson Publishing, Inc. Jaimee D. Greenawalt CONTRIBUTING PHOTOGRAPHY Carson Publishing, Inc. Nello Construction MarkWest Development ADVERTISING SALES W. Carson Gordon 3 PUBLISHER’S NOTE 37 LEGAL PERSPECTIVE 412-548-3823 ext. 201 How safe is being an “additional [email protected] 5 REGIONAL insured”? MARKET UPDATE Karen Kukish First quarter data shows little 40 FINANCIAL 724-837-6971 change in the regional trend. Big PERSPECTIVE [email protected] projects are the big news: UPMC, Managing land groups for leasing. Shell, Tower at PNC and Cardinal MORE INFORMATION: Wuerl High all move ahead. 43 MBE SPOTLIGHT BreakingGround is published by NL Electric Tall Timber Group for the Master 8 NATIONAL Builders’ Association of Western MARKET UPDATE 46 TREND TO WATCH Pennsylvania, 412-922-3912 or A battery of national economists How low will natural gas go? see little to cheer – or bemoan www.mbawpa.org – about the first quarter. Some 48 BEST PRACTICE fundamentals improve but the data Using pension funds to invest in Archive copies of shows only drifting sideways. BreakingGround can be viewed jobs and sustainability. at www.mba.wpa.org/articles 11 WHAT’S IT COST? 51 INDUSTRY & Diesel and gasoline have No part of this magazine may be peaked – probably. COMMUNITY NEWS reproduced without written permission by the Publisher. All rights reserved. 55 AWARDS AND This information is carefully gathered and 12 FEATURE STORY CONTRACTS compiled in such a manner as to ensure The energy sector shifts. maximum accuracy. We cannot, and do 58 FACES AND not, guarantee either the correctness of 26 PROJECT PROFILE NEW PLACES all information furnished nor the complete absence of errors and omissions. Hence, FTS International Washington responsibility for same neither can be, Operations Center. 60 CLOSING OUT nor is, assumed. U. S. Representative 33 FIRM PROFILE Timothy Murphy Keep up with regional construction and Aquion Energy real estate events at www.buildingpittsburgh.com BreakingGround May/June 2012 1 Publisher’s Note nce again good fortune shines on the BreakingGround is a magazine focused on construction Editorial Calendar here at BreakingGround. in southwestern Pennsylvania so there won’t be much in Back in September we wrestled with the following articles about what’s going on in central and the decision to include another energy- northern Pennsylvania but I’ve certainly been giving it some centered edition in the calendar in 2012. thought. Everyone and their brother in media Ohave been rushing to the energy business – not just to Clinton County is where I spent my formative years. Like shill advertising I’m certain – and we wanted to be a little southwestern PA, that neck of the woods saw a dramatic different. I’m glad I listened to my editorial advisors. negative economic shift in the early 1980’s. The leaders in Clinton County have been trying to find a replacement for When we first started writing about natural gas three or the industries that closed or moved out, like Piper Aircraft in four years ago the idea of a booming new heavy industry my hometown of Lock Haven. When the gas industry landed was news in and of itself. Since then, as the industry has in their back yard a few years ago it brought the good fortune developed and Marcellus Shale has been in the press almost that had eluded towns like Lock Haven and Wellsboro and daily, there hasn’t actually been all that many big events take Williamsport and Scranton for many years. Now that it’s not place. This winter has been different in that regard. Two big as profitable to drill for methane alone the gas companies stories have unfolded recently and the timing for revisiting have moved most of their assets out of the northeastern the influence of the energy industry on the business of quadrant of the state in favor of the southwestern quadrant. construction and real estate turned out to be perfect. The industry hasn’t pulled up stakes for good but it must feel like déjà vu for many of the business people there. The first big deal is the slowdown in activity in the Marcellus Shale because of the depressed price of natural gas. As I listened to Dennis Yablonsky talk about all the This trend will have less of an impact on the economy in downstream opportunities that might follow the construction Southwestern PA than it is having in the northeastern corner of a cracking plant, I was struck by recollections of what of the state but lower prices have cooled the ardor of the Pittsburgh was like when I started working here in 1979. I companies who explore and sell the commodity. It’s a wet could picture plants along the Ohio and Mon Rivers and gas versus dry gas issue – about which you’ll read more in towns like Midland or Monaca or Monongahela bustling the feature – and it is our region’s good fortune to be sitting again. We Pittsburghers have grown accustomed to hearing atop the wet variety. Those changing gas dynamics have also about the next big thing that doesn’t pan out (remember meant good fortune for our neighbors to the west in Ohio. Maglev? the vaccine factory?) but this one sounds like it may There the gas found in the Utica Shale contains oil as well so just be that big of a deal. the energy companies are stepping up their exploration of that formation. I was also struck by the thought that the communities in central PA probably felt the same way about the Marcellus The second big deal was the cracker plant. Of course, Shale exploration when it first became attractive to the gas what happened in mid-March was technically only the companies. After a couple of years of prosperity it took only announcement that Shell had selected a preferred site slumping gas prices to cool off the economy of that part of in Beaver County should they decide to build an ethane the state. cracker. It seems like the odds are very good that Shell will build their I was by chance moderating a panel discussion for NAIOP’s cracker plant (if I was Ali I might refer to it as the crack-ah in Developing Leaders with Allegheny Conference CEO Monaca) and then a lot of plants will build here to be near Dennis Yablonsky on the evening that the announcement that source of raw materials. The region may indeed look like was made. Dennis arrived at Point Park for the panel a miniature version of Houston by 2020, but there are still having come directly from the press conference with Shell’s plenty of variables that could leave us in the same situation leaders. He was quick to point out the subtle but significant that Lock Haven or Williamsport are in now. We found out difference between the announcement of a preferred site thirty years ago that prosperity is not eternal or guaranteed. and an actual site selection, and took pains to tell the group Pittsburgh will probably be one of the energy centers of the that the Conference and PRA still viewed the cracker as an world soon but let’s enjoy the good fortune we’ve got right opportunity they were working to make a win in the future. now. After that disclaimer, Dennis went on to talk about some of the economic activity that would follow the construction of a facility that makes ethylene and polyethylene from ethane. It didn’t sound too terrible. Jeff Burd BreakingGround May/June 2012 3 4 www.mbawpa.org housing market in Pittsburgh, but larger trends of tighter REGIONAL UPDATE mortgage conditions, declining lot development and lingering uncertainty are still holding back a resurgence of Construction activity got off to an unusual start in the first new construction. During the January through March period, quarter of 2012. Like many parts of the country, Western PA 408 permits were issued for single-family detached units, experienced a warmer winter than normal and contractors down 17.6 percent from the same period last year. Permits for were able to take advantage of the better conditions – the attached units and apartments more than doubled however, better soil conditions in particular – to gain on progress with 396 units started compared to 178 during the first quarter schedules. At the same time, heightened activity in the fourth of 2010. The overall housing construction volume was 804 quarter of 2011 may have created an abnormal lull in January units, an increase in total permits of 19.5 percent. as architects and engineers who were busy in November needed time to complete documents for the next round of Permits for single-family detached homes spiked steeply projects. A third significant difference in winter 2012 was also during January of 2011 in metropolitan Pittsburgh because the dramatic slowdown in publicly-funded projects, especially of a carryover from the short-lived sprinkler mandate and K-12 and higher education projects that normally bid to the artificial increase is one of the reasons for a decline in prepare for construction start at the end of school year. single-family permits in 2012. The overall housing numbers are indicating that the housing market, while slow, is getting On balance however, the results from the first quarter were a firmer footing in the first quarter of 2012.