The New Way to Make Money in Energy: DemolitionBy
430 U.S. generators have been shuttered in last two years
Demolition companies clear sites, sell scrap, mitigate hazards
When business is bad for the coal industry, it’s good for Mark Loizeaux.
Loizeaux took over his father’s demolition company 40 years ago and he’s never seen boom times like today, knocking down so many power plants.
“Fully 70 percent of the projects we have under contract, pending or are bidding, are power plants,” he said. “It’s unheard of.”
Cheap natural gas from shale has put a mountain-size dent in coal-power generation, and many nuclear stations are coming to the end of their lives. More than 430 U.S. plants, 160 of them coal-burners, have been retired over the past two years, and at least two dozen more are slated for closing through 2018, according to data from the Energy Information Administration.
While there’s buzz that the coal industry can rebound with the help of the new Trump administration, these plants were closed, or tagged for retirement, long ago. Annual U.S. coal production is at its lowest since at least 1986, and that means more work for companies that remove the generators, sell the scrap, and make it possible that a new plant, new industry or new park can be built in their places. The work is mostly done by small, closely held companies that have been doing it for years.
“We’re moving into the decade of coal-fired powerhouse demolitions,” said Patrick Wurtzel, vice president of operations for Bierlein Cos., based in Midland, Michigan. Power plants account for half the company’s knockdown projects, up from about five percent a decade ago, he said.
Demolitions are going on across the U.S., and can run from a few hundred thousand dollars into tens of millions, according to regulatory filings. Removal of Xcel Energy Inc.’s 1,067-megawatt Tolk coal-burning plant in Texas will cost about $35.8 million, according to an estimate provided to Texas regulators in a 2014 rate case.
Nuclear power plants, too, provide opportunities for demolition companies. Five U.S. nuclear stations have shuttered in the past five years with three more slated to close by 2019.
Radioactivity makes decommissioning of nuclear plants more expensive. Duke Energy Corp. in 2013 estimated a cost of $1.18 billion to remove its Crystal River Nuclear Plant in Florida. Decommissioning CMS Energy Corp.’s smaller Big Rock Point nuclear plant in Michigan cost about $390 million, according to the American Nuclear Society.
Demolishing one large power plant can take three years, said Ron Froh, chief executive officer of Commercial Liability Partners LLC, which buys plants and hires contractors to clear the site for resale.
“They’re good for redevelopment,” Froh said. Cleared sites often have a high-voltage grid, are close to water, and may have rail or barge access, he said.
Knockdown companies frequently have colorful origin stories. Loizeaux’s Phoenix, Maryland-based Controlled Demolition Inc. started when his father, a forester, was awarded contracts to remove shade trees in the city of Baltimore infected by Dutch Elm disease. Blasting the stumps expanded into blasting rock. In 1947, he was asked to take down a chimney.
Like a Tree
“He thought, ‘Well, it’s not much different than a tree. If I could make a notch in the bottom, I could make it fall that way,’” said Loizeaux, who started working summers and weekends in the business when he was six.
David Griffin Jr., president of Greensboro, North Carolina-based D.H. Griffin Cos., says his firm started when his parents tore down a church, salvaging the lumber to build their first home in 1959. The company now employs more than 1,000 people.
Like other demolition companies, Griffin bases his bids, to a degree, on the price of scrap.
“If you look at a 15-year snapshot: In 2000, scrap was $75 a ton,” he said. “In 2008, scrap was $525 a ton and today, scrap’s $225 a ton. That’s a pretty wild 15-year ride.”
Loizeaux used to scour sites for Admiralty brass, which is mostly copper and zinc and cupronickel, a silvery corrosion-resistant alloy used in coins, boats and older power plants.
“Those are the goodies you want to see,” Loizeaux said.
The discards are often hazardous materials: asbestos, PCBs in transformers, lead paint and spilled chemicals. When Bierlein tore apart the Big Rock Point nuclear power plant near Charlevoix, Michigan, everything went to a radioactive disposal site, Wurtzel said.
“The biggest challenge is always going to be environmental remediation,” Loizeaux said.
The iconic wrecking ball, celebrated by singers from Bruce Springsteen to Miley Cyrus, is obsolete, Griffin said. Engineers now use excavators that can reach 130 feet (40 meters) to pull down tons of steel or concrete with a swipe, or they employ carefully orchestrated explosions.
Nuclear plants, with their special dangers, are always more complicated. Although federal rules allow empty reactors to sit half a century while radioactivity ebbs, Entergy Corp. in November proposed handing over its Vermont Yankee reactor, along with its decommissioning fund of about $600 million, to New York-based NorthStar Group Services Inc. The company plans to begin dismantling the plant in 2021 and market the site for redevelopment.
French reactor maker Areva SA will dismantle the reactor first, reducing radioactivity in the plant by 90 percent, said Scott State, NorthStar’s CEO. The plan is subject to state and federal approval.
“There are cool technical challenges in each of these projects,” says Mark Fallon, CEO of Envirocon Inc., a Missoula, Montana-based general contractor that’s decommissioned chemical weapons sites and uranium plants. “You’re working with a capable and intrepid group of people.”
Fallon prepares a bid by estimating the cost of the task and adjusting for “stuff you throw away and stuff you might be able to sell.” A bid on a big coal-burning plant can take a half dozen people two weeks to a month, he said.
For Loizeaux’s Controlled Demolition, which had several chimneys to take down this month, the payoff is swift.
“My brother before he retired used to say, ‘You know very quickly if you’ve done a good job,’” he said. “‘In a matter of seconds.’”