Can I request the slide with the map up? There’s a slide that actually shows where everybody’s located today so you can see we have a pretty good cross-section across United States. It’s always kind of fun to see who else is online with us today so we have a pretty good stretch going.
And the other announcement I wanted to make before we get started is I think it was listed originally as the two-hour webinar. We’re planning on having the webinar be about 90 minutes today.
So that’s our goal – is to maybe have a discussion for 90 minutes. Unless we’re really getting lots and lots of questions maybe we’ll extend a little bit but our intent is to have about a 90-minute webinar.
So with that, why don’t we put the first slide up? And actually Ross gets to show you the view from where he is in New Zealand.
It’s winter here still too – just the end of it. So there’s still a little bit of snow up the hills and that is pretty much what I can look at out of the office window. So it’s very pleasant.
So if anybody out there is warm, you can sort of think about the snow and get a little bit better. Okay so–
Very nearly zero degrees centigrade this morning so not quite. I think about two or three so a nice brisk start to the day, Heather.
Exactly. Alright. So, clicking on to the next one.
What we’ll probably do is talk a little bit about a recent event that you may have heard about, particularly if you’re in the field of water resources, water distribution, water treatment.
You might have heard about the LA water main break that occurred a couple of weeks ago. This was a thirty-inch, 93-year-old pipe. And it broke – flooded the streets, flooded some parking garages, caused a lot of havoc, and it also damaged a basketball stadium that they had just renovated on the UCLA campus.
So it caused some major, major damage. What was really interesting about this particular event is that afterwards it came out in the media that Los Angeles was on a 300-year replacement cycle. And what that means is that they intended to replace pipe 300 years after it was put in place.
So their intent was that this piece of pipe, that was 93 years old would have had to remain in the ground for another 200 years. And that’s a pretty optimistic scenario that you could get 300 years out of a steel pipe. And clearly they did not get the 300 years that they were hoping for.
So what that means is that they have had a lot of damage that they’re now going to have to pay for, rather than to pay for the actual pipe replacement. So if you can compare the pipe replacement cost to the damage cost, it would be much more beneficial to them to have replaced it beforehand in a more planned manner, rather than waiting till this pipeline broke.
So Ross I know you did a blog post on the Inframanage.com website. Do you want to tell them a little bit about what you were talking about in terms of their replacement cycle and how that’s had impact to Los Angeles?
Heather, first let’s just do a little Q & A with you on this incident. So, with 30-inch steel pipe and just the ballpark, if you were going to replace maybe a hundred feet of that, what sort of numbers would be we talking about in that sort of buildup environment?
Well, you know we see, Ross anywhere from about a hundred dollars lineal foot to a couple hundred dollars lineal foot. And I’m guessing in LA with their environment they’d be up the higher end.
Generally ballpark used about 500 thousand dollars a mile to replace in moderate communities so I’m guessing they’re on the higher side of that maybe more like requires a million dollars to do a mile of pipes. Somewhere in that a neck of the wood.
Okay so if we were to say just like random figures, worst case for them for a planned replacement is a million dollars. The thought I had and you started listing all the damage that was done there.
But I’ve been involved an instance – not flooding a university basketball stadium or anything like that, but certain incidents when I was back in operational engineering.
We would have breaks that have been– just caused a whole heap of problems and had emergency response. And they can be really expensive to get under control and then to deal with the cleanup of the mess.
So I looked at this one, this LA one and then I say some million dollars to do a planned replacement. What did that incident cost them and have still got to do planned replacement.
So first up they’ve got the million dollars still to just fix a pipe that’s obviously not in very good condition. But what would be all the add-on costs?
You mean besides the pipeline itself as well–
Yeah. You know, like you’ve got the emergency response cost obviously. You’re going to have litigation around the cars that were damaged, and the housing that was damaged.
I would have thought you’ve got insurance claim to litigation from UCLA regarding the damage to their stadium and loss of use and all those sorts of the things. See, to me that’s got to add several million dollars more to that equation. Is that about right?
Yeah, I think so. And so I think you know the main point we want to make with this one, or one thing that sort of came to my mind is a lot of people are on maybe even a longer than 300-year replacement cycle because they don’t really want to invest in the infrastructure.
So they have chosen to assume that the infrastructure will last as long as possible, or actually longer than it realistically will last. And they’ve stretched out the replacement cycles maybe 300, 400 years.
And you know that saying, “Wishing don’t make it so” is really appropriate here. You can wish that your pipelines will last 300 years but that won’t make them last 300 years.
So then you’ll have to pay for replacements under these types of conditions where the pipeline is a major problem – maybe it creates a sinkhole, maybe it shuts down a street, maybe it closes off businesses. You know, any of those kinds of things could happen and/or can cause a lot of problems with maybe a hospital or school or whatever.
And it would be so much better to be on a planned mode, even though we don’t like to think about raising rates and putting money aside for capital replacement. We’re so much better off if we look on the planned side because if we don’t pay now, we will pay later and we will pay more later.
So it’s one of the reasons that we really want asset management to be practiced is because ultimately it’s much, much cheaper to put a city on say, maybe 125-year replacement cycle or worse, maybe 150-year replacement cycle so that they’re getting the pipes replaced in a much more planned, proactive manner.
NOTE: The transcription here could be located at 5:23 – 13:19 of the “Ask the Expert Asset Management Webinar” recording.