Drilling Fluids: Tackling HDD Spoil Disposal Issues
Are Low Bids Undercutting the HDD Market?
Sharon M. Bueno — Apr 01, 2008
Figuring out what a project costs is more than just slapping down a number that represents your best guess. It is a much more intricate and precise process that is critical to keeping a business running and, yes, even making a small profit. The factors that need to be considered include everything from labor to equipment to fuel, as well as a host of others.
Are contractors taking into consideration all they should when putting together a bid they hope will be the one chosen by the project owner? Or are many leaving money on the table in order to just get the job? Low prices for the directional drilling market would suggest the latter, especially for the compact and mid-size markets. Important items are being left out, leaving many contractors frustrated and others struggling to pay their bills in this low-price market.
You’d think there was a blueprint that every contractor could follow but there isn’t. You’d be surprised how many different ways of determining the price of a directional drilling project are used — or perhaps you wouldn’t, given the state of pricing in the HDD market these days. Everyone seems to have their own formula — what to consider in their price and what garners more weight than others. Some of these formulas work and some, well, probably speak for themselves. Some contractors bid price per foot, while others give an overall price or daily minimum.
What goes into a project price? What should contractors be including when penciling in the numbers on their bid sheets? What mistakes are being made in the process and what can be done to help them? With a tight economy that has seen fuel prices skyrocket, what has the trickle down effect been on items such as petroleum-based pipe like PVC and HDPE and what effect is this having on the HDD market as a whole?
Trenchless Technology spoke with contractors of varying sizes, in varying parts of the United States with varying degrees of experience for their candid perspective, based on what they are witnessing in the market.
Bidding Mistakes
What factors do contractors miscalculate or eschew when putting a bid together? Most contractors point to the risk factor — as in underestimating it. They also underestimate the wear-and-tear of equipment and some don’t know their true operating costs. All these factors have led to much lower bids in recent years.
“A lot of contractors out there do not have a good handle of what it really costs them to operate every day. We know what it costs us to operate daily,” says Bruce Hubbard, project manager with Enterprise Trenchless Technologies Inc. (ETTI), Lisbon Falls, Maine. “If you don’t keep good track of what that operating cost is, such as what it costs to replace a rack of drill pipe in today’s market, and put money aside to replace equipment, when it happens, you don’t have it because you have cut yourself short in estimating your projects.”
You have to keep in mind that every project is different and they have to be looked at individually. “You have to look at the project in its entirety. Pricing per foot is a cheap way of getting into trouble,” Hubbard says.
For a daily cost, what you have to determine is at what point is it not worth it to roll your rig out to a project. “At some point, it’s really not worth going after that job,” Hubbard says. “The return isn’t high enough to make it worthwhile to take the rig out and risk having that kind of wear and tear.”
But one of the biggest mistakes contractors, particularly smaller ones, are making is that they are reacting to the slowing economy. “The biggest mistake that people are making right now is that they are panicking to keep their crews busy,” says Randy Bratcher, general manager with Trenchless Specialties Inc., based in Orlando, Fla. “We see prices in our market just diving [because of it]… In general, the mistakes I see are underestimating the complexity of a job, not having good information on soil conditions and just being too aggressive and feeling like you have to put that rig to work. We see people pricing difficult bores very, very aggressively where you wouldn’t have seen that before.”
The decision to bid projects aggressively — or in other words bid them low — can be costly to the HDD industry. Not only are the bid prices in a tailspin, but safety becomes an issue. Are these low-bid contractors, sometimes inexperienced, doing everything they are supposed to or are they cutting corners with not so good results?
Utility strikes devastate the reputation of the HDD industry — in pricing and in permitting its use on projects. Some U.S. cities and towns have banned its use, such as in Middleport, Ohio (although this was the result of a crossbore incident when an excavator tapped into a gas line, not a driller). Legislation has been proposed in Ohio that would require verification of utility locations by potholing when crossing or paralleling existing utilities. Pricing was one of the factors that led to the requirements being included in the proposed legislation.
According to the Ohio Utilities Protection Service (O.U.P. S.), contractors factoring adequate safety measures into their bids were being undercut by bidders possibly not adhering to the good practices guidelines — something the Ohio HDD Association concurs with.
The Ohio HDD Association supports the legislation, which had some of its language gleaned from the “Horizontal Directional Drilling Good Practices Guidelines.” Pennsylvania also requires drillers to follow procedures outlined in the “HDD Good Practices Guidelines.” Ohio HDD Association president Valerie Rogers says the association helps Ohio drillers by monitoring the safety issues to ensure that drillers in the state are following the drilling practice guidelines, which in turn it hopes will help ensure fair pricing in the long run.
“Utility hits are certainly driving down our costs because the utility companies are having to cover for those hits and in the long-term, the engineers are not allowing directional drilling to be an option for installation in their contracts,” says Rogers, who with her husband, Mark, own Integrity Boring in Bremen, Ohio.
She says the association also tries to monitor whether companies are paying their workers the prevailing wage that was specified in project bids. “Ohio has more drillers than any other state and the competitiveness is very strict. We are finding that many drillers typically aren’t following the good practice guidelines, are not following Ohio laws by not paying the labor what they need to by law. And there’s no one to hold them accountable.”
The Northeast Trenchless Association (NTA) is also trying to get drillers a better handle on understanding their true costs for a project. ETTI’s Hubbard, who is also NTA president, sees this issue, as well as safety issues, as NTA’s mission.
“We’re trying to keep people informed on how they should be thinking and hopefully they don’t just go out there and bid a bad market just to keep their rigs running,” he says.
But there are contractors willing go that route: They win the bid but at the end of the day, aren’t making any money and are only thinking about keeping their crews busy. There are times when contractors need to know when to walk away from submitting a bid.
“You absolutely have to know when to walk away,” says Mark Rogers. “We’ll walk away and say no thanks because we are not just going to bid a job to bid a job. We’re going to bid a job to make money.”
Integrity Boring works in the compact market and has seen the effect of aggressive, low bidding getting out of control in the public works market. The Rogers have steered clear of those projects in recent years, concentrating on private projects. However, he notes that in a lot of cases, Integrity Boring isn’t the prime contractor and they are subject to the subcontractor rate.
Price Factors
So what are the most important criteria that get factored into a price? Depends on whom you ask. There’s always the cost of labor and the costs associated with the general overhead and insurance/liability. After that, folks put different levels of importance on different areas. Some say the ground conditions are a significant factor, while others say it’s the overall risk involved in the project. Replacement costs and the everyday wear on equipment are also vital.
“It depends on what kind of job it is,” says Mark Rogers. “If it’s a job where the customer is providing the materials, it’s nothing but the labor and the mud. If we’re responsible for traffic control, that would be added in. It also depends where the job is located — can we only work certain hours because it’s along a highway or only at night, which would involve lighting. Then there’s tooling. Is it a job that requires tooling that we already have or do we have to buy? And we have to factor in the wear-and-tear and breakage costs.”
Other numbers that get plugged into the spreadsheet include insurance costs, fuel for the rigs, drilling fluids, cost of vehicles, out-of-town expenses (if needed) and the biggest wildcard of all — risk. Risk is a small word that can encompass a multitude of factors, depending on the job and what the contractor considers to be a risk. Risk can involve many things from existing buried utilities or the possible loss of equipment or tooling. Risk can involve the area where the work is being done, such as under a river or railroad tracks, for example, or in a high-traffic area.
“When I put a proposal together, risk is a big thing I think about,” says Bratcher. “And when I’m talking about risk, I’m referring to damaging utilities. Without X-ray vision and even with incredible utility studies, there’s still that unknown.”
ut can you put a price tag on something that’s unknown? “That’s a great question,” says Bratcher, who’s been in the business since 1995 and mainly handles mid-size market HDD work. “It’s based on our experience on what we feel is the risk. It’s all opinion. But if we’ve drilled there before and we have good locates and we are comfortable, we view the risk may be at one level. If we view it at a different level, we price it accordingly. It’s really a gut thing. We don’t have a set thing that says this is a risk factor 4, so we are going to add 30 percent to the price. We just try to use our best judgment.”
Bill Tippett, president and owner of Networx Cabling Systems Inc., based in Flagstaff, Ariz., talks about risk in similar fashion. “How do you put a number on risk? We really have a difficult time with that. Because then you have to consider where [your bid] lands competitively,” he says. “Risk encompasses the hope you don’t lose tooling, that ground conditions stay consistent — basically anything that might delay a project and/or drive up its cost. You have to weigh those variables against what is going to be an acceptable price for the project.”
Another problem is the slowing down of the economy and the inflation of costs such as fuel, labor and insurance — project bids haven’t caught up. “The pipe we are using is a petroleum-based HDPE. The cost for that has gone through the roof the last few years and has really driven costs up on the materials side. Unfortunately, I don’t see the prices coming up quick enough to offset those additional costs — at least not in central Ohio,” Rogers says.
In today’s market, which has seen HDD prices anywhere from 15 to 30 percent lower than several years ago, contractors are seeing more and more money left on the table by those winning the bids — and that’s bad for the market in general and in the long run bad for the contractor who accepts those bids. Why? Because they are not factoring in items that will in the end cost them their business: wear-and-tear of equipment, replacement cost for lost tooling and not appropriately weighing risk.
“What’s really disconcerting to us is to see [contractors] leaving so much on the table between our bid and their bid,” Tippett says. “They have a right to do that certainly. It’s a free market and they are winning the projects for themselves in the short run, but I think they are hurting the industry in the long run and hurting guys who are going to be in it for the long run.
“When all is said and done, when you factor in your costs, then you go to the market and see what the market can bear,” Tippett continues “Nobody is out to gouge anyone but certainly we look to see if there is an opportunity to realize economic profit… It’s just like any other business. You want to be profitable as much as you possibly can but don’t want to do it at the risk of creating a problem in the market and/or losing the bid. So after we figure our costs to operate, then we ask ourselves, ‘What’s it worth to us to get this project? What’s the appropriate reward for the risk we are taking?’”
Sharon M. Bueno is managing editor of Trenchless Technology.
George M. Dugan — Apr 01, 2008
The disposal of drill spoils is becoming increasingly difficult for drilling contractors today. It is not uncommon to hear stories about contractors who have found themselves at odds with local authorities after being accused of illegally dumping used drilling fluid into fields and ditches.
One of the biggest problems in disposing of used drilling fluid is that landfills automatically refuse anything containing free-liquids that can bog down trucks entering and leaving landfill facilities. It can wreck havoc on a landfill’s leachate collection system — which gathers rainwater and liquid residue from the decomposition of the waste for removal from the landfill. The only practical alternative to dumping liquid drill spoils is to turn the material into a solid waste, which is easier to dispose.
The standard test that landfills use for determining free-liquids is called a paint-filter test. A paint filter (such as one you would find in any hardware store) filled with the material to be disposed, is mounted over a graduated cylinder and timed for five minutes. If no liquid is present in the graduated cylinder after five minutes, the material is considered to have no free-liquids.
Paint-Filter Test
Dewatering of drill spoils has been an option used primarily in oilfield drilling and occasionally on large maxi rig river crossing projects due to high cost. Dewatering often requires the use of a coagulant or acid to lower the pH of the drilling fluid in order to destabilize (coagulate) the stable suspension of bentonite and drill solids. During the coagulation process, you can immediately see the release of some clear water in a sample of the material.
After a coagulant is added, the correct flocculent (of the proper ionic charge and molecular weight) is blended with water in a pre-mix tank to the required concentration, and is then mixed into the drilling fluid at the precise dosage (overdosing or under dosing will not achieve the desired results). The flocculated material is then introduced into a mechanical means of liquid/solids separation such as a horizontal decanting centrifuge where centrifugal force of around 3,000 times the force of gravity is applied in order to split the material into a clean liquid phase and a separate dry solids phase.
Simply dumping a flocculent into a tank of drilling fluid will not yield the desired results and often creates more problems than it solves. Dewatering drill spoils is a complicated procedure best left to those not only familiar with operating horizontal decanting centrifuges, but with a good background in the use of flocculents and dewatering equipment. This is because dosages and types of flocculents required may change from project to project and may even do so through the course of a project. Horizontal decanting centrifuges are expensive and require an additional generator to power them.
Centrifuge Dewatering of Drill Spoils
Solidification is a process where a bulking agent or absorbent is added to soak up free-liquids in order for the material to pass the paint-filter test required by landfills. In the past, materials such as cement, cement kiln dust, fly-ash and even sawdust has been used as solidification agents. These materials greatly increase the volume of the material being disposed, which increases trucking and handling costs, as well as tipping fees charged by landfills. These solidification/bulking agents tend to be labor intensive in their application and require a lot of time and machinery (such as backhoes or excavators) to mix the material.
New high-tech solidification reagents emerging into the drilling industry today are making solidification a more viable cost-effective option. One example is PitDry, a reagent made by CETCO Drilling Products that requires a maximum dosage of 2 percent by weight for clear water and dosages can be as low as 0.5 percent for drill spoils containing high solids content.
This type of reagent requires the use of a specialized pumping/mixing unit, which can pump drill spoils from a pit or tank, inject the reagent at the exact required dosage, discharge it into a pit, dump truck or roll-off box where it will completely solidify in approximately 10 minutes. It can be hauled to a landfill for disposal or mixed one-to-one with native soil and backfilled onto the jobsite. This self-contained compact portable solidification system is capable of processing 80 gpm and yet is small enough to fit into the back of a pickup or utility trailer. This solidification reagent is also available in variations designed to handle (and encapsulate) material containing contaminants such as hydrocarbons and chlorides. Processed material continues to dry and shrink long after solidifying, which further reduces the overall volume of material to be disposed.
A Case Study
A Canadian company has been producing oil and gas in British Columbia’s Southern Foothills since it was formed in 1992. The operator has continuously invested in the area and recently opened new gas producing wells northwest of Fort St. John, the largest city in the northeast region of British Columbia.
The new wells are situated 4,600 ft above sea level in a rigid mountain terrain. The viable way to connect the wells and make production practical was to put a pipeline through the mountains; the landscape and environmental issues meant that going over or around the mountains simply wasn’t an option. The only solution was to take the pipeline through the mountains.
An Alberta-based horizontal drilling project management company, specializing in laying pipelines across demanding natural terrain was contracted to oversee the construction of the pipeline. A drilling services company was contracted to perform the drilling portion of the project.
The project had the challenge of what to do with the vast amounts of drill cuttings that would be generated. Shipping the cuttings and spent drilling fluids out of the area by truck was not financially viable so processing the cuttings on site was the only option.
In addition to being financially viable, processing onsite also offered environmental benefits in terms of less vehicle movements.
The goal was to treat the spent drilling fluids and cuttings to a level that met the Canadian company’s high environmental standard, then dry what was left to a solid state for burial onsite. The process recommended to the operator to achieve this was the PitDry slurry solidification product.
PitDry is the only product available that quickly converts spent liquid drilling fluids into disposable solids suitable for burial, even in environmentally sensitive areas like British Columbia’s Southern Foothills. It is a unique process, which allows the operator to simply pump the spent fluid through a PDA-300 mixing machine while adding PitDry reagent. The resultant outflow dries to a solid in minutes and can then be mixed with soil for burial onsite.
Although PitDry offered an ideal solution in terms of solidifying the cuttings and fluids, the project still faced further environmental challenges — challenges of nature.
A total of seven hills had to be accessed with equipment. With slopes of up to 28 degrees, simply getting the solidification processing system onsite was a challenge in its own right. Furthermore, the pipeline crosses a Caribou migration path, which meant that all of the cleanup work had to be completed and the contractors off location before the animals arrived in the area during October.
To compound the challenges of nature even more, a month of rain at the outset of the project made physical conditions difficult and delayed initial deployment. This combined with the need to move winch equipment and manpower up and down the mountains, resulted in mobilization taking three times longer than initially anticipated, thus adding further pressure to what was from the outset a limited time frame for the project.
Despite these challenges, the project was completed successfully and on time.
At the peak of the project, the CETCO equipment was processing more than 20 cubic meters of waste per hour. In total, 700 cubic meters of fluid was processed onsite, the equivalent of 184,800 gals, and 795 tons of solidified material was generated as a result of the PitDry process.
Despite the poor mixing and covering properties of the local natural soils, PitDry proved very successful, surpassing all the parameters that apply to a 3:1 mix, bury and cover process, including all microtox, SAR, EC and leachate tests.
All of the equipment utilized performed as planned without any unscheduled downtime and the project was completed as planned before the Caribou arrived. The project was both cost-effective and environmentally sensitive. It made development of the Canadian company’s new gas wells a more viable option and met with the operator’s goal, of being as environmentally friendly as possible.
The resulting gas production through the new pipeline will generate revenue for British Columbia’s government, which is committed to investing oil and gas revenues to protect and preserve its natural heritage.
George Dugan is southeast regional manager for CETCO Drilling Products, which is headquartered in Arlington Heights, Ill.
