by Dennis D. Knutz ASA, CMIRF
Improved technologies and changes in environmental regulations are forcing the closure of outdated manufacturing plants and major process lines. Overall, the closure process can be roughly divided into three major categories: Human Relations, Public Relations, and Technical Issues.
This article discusses the technical issues in some detail, examining ‘best practices’ that can help ensure success in a very challenging and complex endeavor that requires careful planning, continual communication and significant coordination of resources.
Any number of reasons can bring about the circumstances leading to a plant or major process line closure. It is important to recognize that the closure of an operating facility is a major project and needs to be planned for and scheduled as such. In many ways, a closure may be viewed as a major construction project in reverse. However, the closure process is actually more difficult because of the unknowns brought about by decades of changing operations.
Often, the absence of accurate drawings and records related to changes in machinery and structures adds to the difficulty. Some closures are further complicated by the proximity of other continuing company operations. After management has made the very difficult decision to close down a plant, a set of complex and interrelated problems emerges.
The closure process can be roughly divided into three major categories: Human Relations, Public Relations, and Technical Issues. This article only focuses on the physical aspects of the closure process, recommending a compilation of the “best practices” that have been developed through a coordinated effort among mill personnel, contractors and consultants during the course of plant closure operations. With three decades of investment recovery experience and the opportunity to learn from the closure of three West Coast pulp mills, it became apparent that there are certain logical and well-defined processes and procedures that can greatly reduce the risk of injury to personnel and prevent both environmental and physical damage to property. I have divided the technical issues involved in plant closures into five arenas:
1. Pre-Shutdown Management
2. Contractor(s) Selection
3. Contractors’ Pre-Work Planning
4. Investment Recovery Management
5. Operations Management
1. PRE -SHUTDOWN MANAGEMENT
Pre-shutdown management may be best described as a closely coordinated effort among the various departments of the closing facility to develop a road map to be used as the plant moves from a production mode to shut down and cleanup modes. During this period, teams are assembled, budgets are developed, scheduling is determined, and a quality control plan for initial and final cleanup is devised. Every phase of the project must be planned carefully to avoid safety, environmental and cost-overrun issues.
The first step is for the unit manager to define in writing the scope of work, timeline and any local issues that will affect the project. The unit manager should enlist the help of the investment recovery department to provide quality processes and best practices during the organization and project development stages. The next step is to appoint a project manager (PM) who will lead the project from start to finish–with responsibility and accountability for all phases of the work. A team must be assembled to provide the PM with the appropriate resources.
The following are some of the key recommended activities to be carried out by the team members: Develop a physical inventory of all assets. This list will be used to initiate an internal and external marketing program. It will also serve as a means of removing all sold, scrapped or demolished assets from the books. Complete an environmental site assessment. This study will be used to identify any hazardous materials. This is required to develop an abatement plan, bid prospectus and budget.
Create a detailed physical description of all buildings and machinery to be included in the demolition. This will be used in the demolition bid prospectus. It is necessary to outline the scope of work in order to get accurate bids.
Prepare a waste disposal plan. This will include the identification of approved hazardous and non-hazardous waste disposal sites.
Other issues that should be managed during this stage are:
A. The use and/or return of chemicals, raw materials.
B. The return of spare parts and materials to vendors.
C. The evaluation of equipment and supplies that may be redeployed to other company facilities.
D. The termination of utility and transportation contracts.
E. The development and implementation of cleanup procedures before operations employees leave.
F. The use of outside contractors for specialty cleanups.
G. A plan for the management of wastewater treatment through closure.
H. A long-term stormwater surface drainage plan.
Each person involved in the project must have a written description of his/her roles, responsibilities and relationships with the PM and other team members. Each person must agree to provide the necessary services and make a commitment of time and resources. Any issues regarding these commitments must be dealt with at the beginning of the project. (NOTE: A complete review of this is detailed in a separate article titled, “The 3 R’s of Plant Closures: Roles, Responsibilities and Relationships,” on page 13 of this issue.)
2. CONTRACTOR(S) SELECTION
Contractor selection should be made as early as possible so that the input of those who will be doing the work can be incorporated into the overall planning. Utilizing specialty contractors to assist in the budget planning process has proved very important for managing the expenses of a closure. Hiring a contractor with experience in dealing with all aspects of a facility closure can greatly reduce both the safety risks and the potential environmental problems inherent in such work.
The major activities that are to be expected from the contractor(s) involved in the closure process are:
A. Safety management
B. Asbestos abatement
C. Other hazardous materials removal
D. Dismantling and salvage of equipment to be sent to other facilities or to be sold
E. Temporary and permanent utility modification and terminations
F. Demolition of above-grade structures and buildings
G. Demolition of foundations, underground structures, and utilities
H. Site grading and drainage
Contractor Prequalification and selection. A strict contractor prequalification program should be in place to ensure that safe and environmentally sound work practices are utilized. The investment recovery department should have a list of pre-qualified demolition contractors. If you do not have this list, a sample “Dismantlement and Abatement Prequalification Form” is posted on the Investment Recovery Association’s website to help in this regard.
Environmental testing and oversight is typically provided by a consulting firm hired by the owner but can also be incorporated as a part of the contractors’ quality control programs. If the owner has existing environmental staff, they should be consulted for their personal knowledge of the potential environmental risks of the facility in question. For the three pulp mills I closed, a single contractor was chosen to fulfill the needs for a turn-key approach. In this manner, the owners eliminated the problems of cross-liability and could coordinate the entire closure program with one responsible party. Certain specialty contractors for tasks such as tank cleaning, oil removal and high-voltage power work were hired separately by the owner. Specialty subcontractors, with owner approval, were hired by the contractor to perform such tasks as asbestos removal and hazardous materials hauling and disposal.
3. CONTRACTOR’S PRE -WORK PLANNING
The Contractor’s Pre-Work Planning process is extremely important to the safe, efficient and environmentally sound disposition of facilities being shuttered. The major elements that need to be addressed prior to the commencement of the contractor’s operations are:
B. Regulatory coordination
C. Safety coordination
D. Work plans
Scheduling should take the form of a detailed, cost-loaded closure schedule and is an important tool toward controlling the work as well as reducing any conflicts as to when payments to the contractor must be made. Careful consideration of time allowances for testing activities should be incorporated into the schedule. Additionally, allowances need to be made for dealing with unknown environmental problems and construction features that may be encountered during the work. Another critical aspect of scheduling involves the coordination of the requirements of various regulatory agencies. An effective way to avoid long delays in commencing the work is to divide the closure project into phases of work so that tasks involving little interaction of regulatory agencies can proceed while testing is underway for higher-risk activities and those activities requiring lengthy permit procedures.
For example, Phase 1 might include the salvaging of equipment that can be reused or sold; Phase 2 could be set up to deal with above-grade hazardous waste abatement and demolition activities while subsurface conditions are being tested; Phase 3 could be scheduled to commence once the environmental testing of subsurface conditions is completed and a plan is developed for dealing with any problems encountered. Of course, it is often possible to proceed with more than one phase of the work at a time depending on the results of testing and the requirements of the project.
Regulatory coordination will involve numerous meetings with the concerned agencies and can greatly affect both the schedule and the methods proposed for accomplishing the work. It is important for the owner, consulting firms and the contractor to work together to avoid mistakes, which could result in long delays. For example, if test drilling is required to establish the possible presence of subsurface soil contamination, then the contractor must plan its activities to allow for such testing. Permits that may be expected to be required for closure and subsequent demolition include demolition, excavation, grading, asbestos abatement, lead abatement, underground tank removal, shorelines, stormwater, wetlands, air quality, sewer and electrical. Some of the permits may require public meetings and a public comment period before being issued.
Safety coordination must be in place prior to commencing any on-site activities. This is best accomplished by the requirement that the contractor prepares and submit to the owner for approval a comprehensive site-specific health and safety plan (SSHASP). Although this document can include the contractor’s standard safety plans, it must be increased in scope to address the many special situations that could be encountered during the progress of the work.
Of critical importance is the establishment of safe work procedures for dealing with residual chemicals, verification of power terminations and fire safety. Of the three mills I closed, all had a number of surprises with regard to chemicals and utility services. The most common was the discovery of significant amounts of chemical residues in vessels and piping that had supposedly been cleaned and flushed. Procedures developed for confirming the status of vessels and piping prevented any risks to personnel or the environment.
Utility services, especially in older plants, are not always shown on drawings, and one can be sure that they will be discovered during the process of demolition. A rigorous and detailed check of electrical services prior to demolition activities is extremely important. Due to extensive use of cutting torches, fire protection and prevention are very important safety considerations during dismantling and demolition activities.
NOTE: A very useful method for documenting that an area is safe before commencing work is to use a pre-demolition/dismantling checklist similar to the example that we have posted on the association’s website. A recent SSHASP submitted for a pulp mill dismantling/demolition project included the following elements:
* List of key personnel
* Hazard assessment
* Emergency response procedures
* Hazard communication plan
* Employee training plan
* Fall protection/prevention plan
* Fire protection/prevention plan
* Confined space entry plan
* Asbestos abatement plan
* Lead exposure/control plan
* Water safety plan
* Material Safety Data Sheet (MSDS)
Weekly safety meetings held on Monday mornings and attended by the owner, consultants, the contractor and subcontractors were found to be very effective in managing the safety risks. At these meetings, each participant explains the anticipated work for the week to come and identifies areas that may be hazardous. Work plans covering all anticipated dismantling, environmental and demolition activities should be submitted by the contractor for the owner’s review and approval prior to commencing work activities. These work plans need to be reviewed periodically and revised if necessary to ensure that they are pertinent to any changes to the work being done.
Work plans submitted for previous pulp mill dismantling/demolition projects included procedures for machinery salvage; demolition of concrete structures, timber structures and steel structures; piling removal; foundation demolition and site grading; and, over-water demolition. The work plans covering environmental work were usually prepared for the owner by environmental consultants with input from the contractor and incorporated into the overall SSHASP and work plans. Environmental work plans for the mills under discussion included asbestos abatement, lead abatement, removal of litharge containing mortars (in digesters), PCB cleanup and petroleum cleanup. It is important to remember that the methods set forth in the work plans should be followed closely so that everyone involved with the project knows what to expect. Any agreed-upon changes can be incorporated into the work plan as an amendment.
4. INVESTMENT RECOVERY MANAGEMENT
IR practitioners are well aware that there are several choices available for managing the investment recovery process. It can be achieved through any of the following processes:
Re-deployment is the process of reutilization of the idle assets at other company locations. Sometimes this proves to be impractical due to costs involved with removal and transportation, coupled with the potential loss of credit for value received from the contractor or third-party sales.
Auctions were not used for asset recovery in any of the three mill projects being discussed. The two main reasons were the requirements for multiple phases of work over a one- to two-year period and the safety/security risk of having numerous contractors and auction sale customers on site–each removing their own purchases. Auctions would likely be a good disposition method for many plant closures.
Sales to dealers specializing in equipment for a particular industry provide an important source of asset recovery income. This is an expedient way to sell some items, but the prices are often at low wholesale levels to cover the reseller’s cost, overhead and profit margins. Sales to end-users can produce the highest returns for used equipment, but the time required to advertise and market the items makes this approach impractical without an active investment recovery department.
Contractor purchase was the primary method chosen for asset recovery at each of the three mills being discussed. This allowed the contractor to control the removal schedule, and since the majority of the mill equipment was included, it justified major marketing efforts by the contractor. This method also allowed the contractor to offer enough credit to substantially offset the cost of all aspects of the mill dismantling and demolition work and, in some cases, offset a considerable portion of the environmental work.
Contractor–owner partnering is a variation of contractor purchasing that allows the owner to participate in the sale of certain potentially high-value items that have a low probability of sale. This method allows the owner to realize a substantial gain from the sale of a major piece of equipment if it can be sold in a reasonable amount of time. At the same time, the risk to the contractor is reduced by lowering the amount he would have to offer for a piece of equipment that has a low probability of a sale. In the event the item is not sold by the deadline, then it becomes the contractor’s responsibility to scrap the item.
5. OPERATIONS MANAGEMENT
The final step is the very important task of operations management. Once all of the various plans for investment recovery, safety, environmental cleanup, and demolition have been approved, it is time to do the work and keep everything moving forward according to the schedule and in compliance with the approved plans.
The key to maintaining an efficient and safe operation is communication. All concerned parties, including the owner, contractors, consultants and various public agencies, need to meet regularly to review the progress of work and to identify upcoming areas of potential conflict. Regular weekly meetings are a useful method for maintaining good communications and planning around potential conflicts. Other, less formal meetings should be scheduled as needed between the contractor, affected subcontractors and various departments to continually review work needed for such things as utility termination and re-routing, verification of cleaning and testing activities and any one of a hundred other details that need resolution. Accurate minutes of these meetings should be maintained as a quality-control measure.
If the project has been planned as a series of phases, it is important to bring closure to these phases as they are completed. The closure process should allow for partial closure if the completion of the entire project is prevented for some reason. New plans and timelines should be jointly developed for these partially completed phases.
Key Learnings. A highly valuable activity toward the end of the project is to capture key learnings. A debriefing meeting should be set up while the key team members are still on the project to a) capture those things that went wrong in order to modify the process in the future and b) celebrate those things that went well to incorporate them in the next closure plan. In some cases, it can be beneficial to develop and use a contractor performance scorecard. This can be shared with other parts of the organization and can be a valuable tool for future closure projects.
The closure of a major facility can be accomplished in a safe and environmentally responsible manner while maintaining cost control and maximizing investment recovery. The end result should be a piece of real estate clean and ready for future use or sale. I have been involved in over 140 plant and production line closures, each with its own unique challenges. Some of the methods used for the closing of the three pulp mills discussed in this article–particularly the use of a single contractor–may not be appropriate for your project. But regardless of the number of contractors involved, the overall success of such an operation is dependent upon the following ‘best practices’ for technical issues:
1. Detailed pre-shutdown planning and management.
2. Quality Contractor(s) Selection.
3. Credible and reliable contractor’s pre-work Planning.
4. Organized and strategic investment recovery activities.
5. All work closely coordinated with ongoing operations management.