There will be one less Canadian pipeline construction contractor when the next wave of projects emerges, and the sudden death of Marine Pipeline Construction Co. that caused the gap is being seen as a lesson in hazards of trying to operate in the field on a continental scale.

Leo Ziehr, the last president of the Canadian company, called it a low blow when auctioneers kicked off a three-day liquidation sale July 13-15 to break up his former industry landmark. “It was kind of sickening,” Ziehr said as he described the sudden end to the 50-year-old firm as all its assets including its head office in the Edmonton industrial satellite of Nisku went on the block to bail out troubled owners in the United States.

“Everybody was in shock,” said Ziehr, a veteran of 47 years in pipeline construction who rose through industry ranks after starting as a laborer off an Alberta farm in the early stages of the modern Canadian oil and gas industry’s development. “We weren’t in trouble here. Our U.S. partners put us under.”

The liquidation sale caught widespread attention as an industrial counterpart to foreclosure sales of farms portrayed in novels and movies. In Marine’s case it was the final stage of a collapse that began with a surprise spring visit to Ziehr’s office from representatives of banks owed about US$120 million by Marine’s Illinois parent firm, Murphy Bros. Inc.

Murphy, a private firm, bought Marine in 1993 from a Canadian counterpart based in Manitoba, James Richardson & Sons. Murphy had the biggest fleet of pipeline construction equipment in North America when it ran into trouble in mid-2003 over about US$120 million in debts. The principal lender in the case, Harris Bank, is a Chicago affiliate of Canada’s Bank of Montreal.

The liquidation sale was an international event conducted live and on the Internet by Montreal auctioneer CIACPCC Inc., asset management and liquidation specialist Great American Group from the Los Angeles suburb of Woodland Hills, and San Francisco-based Internet auctioneer Rabin Worldwide.

Ziehr said he was abruptly notified in the spring that Marine’s 30-acre site and all the contents — the biggest pipeline construction equipment fleet in Canada — had been seized for sale to repay loans taken out in the U.S. by Murphy. That was all Ziehr was ever told. His telephone calls to the Illinois headquarters of Murphy Bros. in Moline were not returned, he said. The U.S. firm could not be reached for comment during the sale or the months leading up to it.

Court filings in separate cases involving the Murphy clan’s personal affairs indicated their firm was in a private “work-out,” or under the control of bankers trying to retrieve their capital with a combination of asset liquidations and possibly attempts to salvage a profitable remnant of the operation. The mood among the former employees at the Marine liquidation could be summed up by the title of the classic American novel about dispossessed westerners, John Steinbeck’s Grapes of Wrath.

Ziehr did not mince words about the affair: “We made damn good money for these Americans and then they s___ on us. That’s what happens when you’re owned by Americans.” The Canadian, who is 65 and retiring after the bitter ending of his firm, voiced a view which is common but rarely expressed openly or bluntly among entrepreneurs north of the border: “When Americans own you and they need money down there, you’re the first to go up here.”

All but four Marine employees were dismissed by the time the liquidation sale opened. The skeleton crew, kept to protect the Nisku site and distribute auction catalogues, was let go after the sale.

“We were the biggest and the best,” said Ziehr. Born as a specialist in underwater pipeline installations beneath streams, rivers and lakes, Marine grew up into a general contractor for large-diameter projects. The firm had a hand in virtually every major Canadian and international pipeline project for decades. “We had good people. We respected one another. We got a lot of work. We made a lot of money. Everybody knows that,” Ziehr said.

Marine’s payroll peaked in 1999 when it fielded 2,300 workers to build long stretches of two natural gas projects simultaneously, Alliance Pipeline from northern British Columbia to Chicago and Maritimes & Northeast Pipeline between Nova Scotia and Massachusetts. The firm stayed busy and debt-free despite a drought of big long-distance pipeline projects since 2000 by landing multiple contracts on shorter projects in Alberta and British Columbia, Ziehr said. “It’ll be feast again,” he predicted. “The famine’s on. But the feast is coming.”

The next turn up on the pipeline construction cycle is visible on the horizon, said Jerry Lozynsky, a former project administrator for Marine who has set up his own pipeline maintenance firm. “The next big job is coming in 2007,” agreed Joe Phillips, a pipeline construction superintendent. The Canadian contractor community expects the next big project to be construction of the C$3-billion (US$2.25-billion), 760-mile Mackenzie Valley Pipeline currently advancing through planning and regulatory approval stages.

But there is also a chance the large-scale construction revival could begin in 2006 if oil producers and consumers support the proposed C$2.5-billion (US$2-billion) Gateway Pipeline from the northern Alberta oilsands to a new tanker export terminal on the west coast of B.C., Phillips said.

Marine will be missed by project owners as well as workers when the pipeline construction cycle turns up again, Lozynsky predicted. Just as wage-earners stand to gain when numerous employers are active, pipeline companies naturally favour having a healthy population of construction contractors, he said. “It keeps us honest in the bidding.”

About 1,000 buyers turned out in person for the live auction, and bidding was lively over the Internet with all transactions being done in U.S. currency. The auctioneers expected Marine’s thousands of pieces, ranging from fireproof welders’ hoods through SUVs to mammoth Caterpillar diesel workhorses, to fetch more than US$30 million when all the sales were added up.

While the competitive field is narrowing, the capacity of the pipeline construction contracting sector is not yet believed to be realizing the worst fears of gas transporters such as TransCanada PipeLines by shrinking below the level needed to advance major developments such as the Mackenzie and Alaska projects. The Canadian pipeline construction sector is still capable of handling big projects even though the skilled labor force is going through lean times, said Doug Anguish of Northern Pipeline Contractors, a labor and management coalition of four international unions and the Pipeline Contractors Association of Canada.

Labor and management collaborate closely on organizational aspects of the industry in Canada. Contractors are typically light on permanent personnel and heavy on equipment assets.

Marine’s permanent staff was held down to about 30. But Marine was also an exclusively union shop from its birth in 1954. The armies of specialized construction workers needed for pipeline projects are assembled by their unions in many Canadian cases. Training is also a collaborative exercise when projects are built in new areas to the industry, such as Atlantic Canada. “There is versatility among the workers,” Anguish said. Heavy equipment operators, for instance, can change fields. Others turn to short contracts in pipeline maintenance and integrity management.

“There are a fair number who are under-employed right now and there is some unemployment,” Anguish said. Maintenance work is considered a thin diet by the standards of specialized skills and high pay on the moving assembly lines involved in laying big new pipelines. But the workers, who are spread across Canada, remain in touch with their unions and awaiting developments. “If a fraction of the [northern] work being talked about now comes about, the top of the cycle will last for a while,” Anguish said.

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