Each year the Valve Manufacturers Association hosts a meeting specifically for member companies’ top executives. This year’s Valve Industry Leadership Forum, held Jan. 17-18 at The Adolphus Hotel in Dallas, covered numerous issues of importance to industry leaders. Among the subjects addressed: the latest on fugitive emissions, updates on new API standards, results of a major valve reliability study, an overview midstream business, trends in asbestos legislation and a Wall Street perspective.
Testing and Fugitive Emissions
Steve Butler, PE, senior mechanical engineer for piping & valves, Shell, explained that testing at his company differs a lot from API requirements. “They are more like ISO standards,” he said, very stringent and tested to advertised limits. Shell’s stance is that industry standards don’t really do justice. Out in the field, they’re going to be subjected to more than a “quick 90-second test,” so Shell is trying to bring the U.S. up to their standards.
Butler revealed this interesting and somewhat dismaying statistic: On the first round of testing, nearly 70% of the valves did not pass the company’s tests. Often, if a valve fails, he said, operators “will just pull it out and replace it.” Rather, they “need to do a root analysis to determine why the valve failed—not just accept it.”
Butler also covered the new API 622 and 624 standards. He stated that API 622 (Type Testing of Process Valve Packing for Fugitive Emissions) is not a pass/fail test; it is just a report. “I think of API 624 as an extension of 622.” As a member of the committee developing API 624 (Type Testing of Rising Stem Valves Equipped with Flexible Graphite Packing for Fugitive Emissions), Butler provided insight into the standard’s development, now in its third year, and approaching the fourth ballot. “It’s a lot more watered down than I would have liked,” he said.
Greg Johnson, president of United Valve, who is also involved on the API 624 committee, added: “The standard has really ramped up in the last couple of years because EPA has gotten involved.” The agency has been talking about issuing “consent decrees” to plants with fugitive emissions that are too high. In order to continue operating, EPA would require the plant to meet a certain level. “You don’t want EPA saying: ‘You must guarantee this valve will not leak for 5 years.’ Who would want to sign this? The alternative is to have your valve meet the API 624 standard,” Greg explained. Asked when he thought the standard would be published, he declared: “This year.”
Valve Reliability: Room for Improvement
Rajan Hingoraney, valve specialist, Aramco Services Company, revealed the results of a recently completed valve reliability study. His company tested nearly 78,000 valves and tracked the number of valve failures. In some cases the results were “horrendous,” Hingoraney told attendees; the overall defect rate was 3.6%, much higher than the company had expected (about 1-2%). As a result, Saudi Aramco made a number of changes, including reassessing certain valve manufacturers, updating packing and storage, and increasing casting quality requirements and pressure testing requirements.
Editor Paul Hart of Midstream Business asserted that “there has never been a better time to be in business than there is today… I see more opportunities now than I ever have.” If you’re in the midstream business, Hart said, “you’ll be busy, you’ll have orders, and it will improve.”
The technological advances that have made possible the extraction of oil and gas from formerly inaccessible shale formations play a large part in the increased opportunities. “While the number of active drilling rigs may decline, the trend to liquefaction and export of LNG has created huge opportunities midstream,” said Hart. “The need for crude, gas and gas liquids pipelines, modifications to refineries and a revitalized petrochemical industry are all contributing to the potential for growth in this sector.”
The Asbestos Issue Goes On… and On
On hand to address asbestos litigation was Rick Faulk, chair of the Litigation Department for Gardere Wynne Sewell LLP. He quoted the infamous Mississippi asbestos lawyer Dickie Scruggs who said: “Asbestos litigation is the ‘endless search for the next solvent bystander.’ Twenty-five years ago that was you—the valve manufacturer!” Faulk declared. He discussed a number of national trends, and noted that because of tort reform in Texas, “You can’t make money suing in Texas.” So the plaintiff’s lawyers are going somewhere else… to California, New Jersey, New York, West Virginia, Delaware -- they’re “forum shopping” for the place of least resistance.
He offered this advice to industry manufacturers: Don’t let the insurance companies talk you into settling a case if you think you have a chance of winning it. One positive trend he cited: There has been “major progress in defeating liability for manufacturers in cases where they did not supply or manufacture replacement parts.”
A Wall Street Perspective
Uncertainly over a deal to avoid the fiscal cliff caused companies to keep a lid on spending, a trend which likely contributed to a slowdown in GDP growth in the fourth quarter of 2012, said John R. Moore, senior vice president & senior research analyst at CL King Associates. “GDP growth should accelerate in the first quarter of 2013, but only near 2% as fiscal policy tightens,” he continued. “It could reach levels of 3% or more by year-end as business investment, the housing market and state and local budgets all improve following the fiscal cliff resolution.”
In more good news for the economy, Moore reported that the U.S. housing market actually made a positive contribution to GDP growth in 2012 for the first time since 2005. This is a critical factor that has been missing in the recovery thus far. And while other issues from 2012 including slower economic activity in emerging markets such as China appear to be resolved, Moore concluded, “The greatest risk in 2013 remains Europe, but the moderate economic recovery should strengthen now that housing is contributing and tax revenues are rising while interest rates remain at historical low levels.”