May 2, 2005
An explosive situation | Maine Drilling & Blasting grapples with geographic expansion and post-Sept. 11 regulatory challenges
By Sean Donahue
By the end of the year, shoppers will be parking cars on a spot that a team of workers was methodically preparing to blow to bits on a recent April afternoon. As part of an ambitious expansion of the Marketplace at Augusta shopping center, Massachusetts-based developer S.R. Weiner is planning to build more than 200,000 sq. ft. of new stores, including Kohl's and Circuit City. But before the first foundation can be poured, Gardiner-based Maine Drilling & Blasting must take the hilly, 20-acre site and blast it flat.
To accomplish the job, MD&B is attacking in waves: Crews work their way across the hillside, drilling dozens of holes in the rock. Then, they pack those holes with 10,000-12,000 pounds of explosives ˆ enough to hew 8,000-10,000 cubic yards of rock from the hillside each day. The process will continue until the site is cleared from end to end.
Such big blasts have become more common in recent years, as the march of big-box development has spread across the state. Last year, for example, MD&B used more than 120,000 pounds of explosives to help turn an old sand and gravel pit into the 20-acre site for a Wal-Mart distribution center in Lewiston. At the same time, thanks to the strong real estate market, MD&B is still busy with smaller jobs across the state, such as blasting cellar holes for new houses or trenches for utility construction. Not surprisingly, the amount of explosives used in Maine increased 185% between 1994 and 2003, from 518 metric tons to 1,480 metric tons, according to the U.S. Geological Survey.
But even with its high-profile local jobs and the strong demand across the market for blasting, MD&B's work in Maine only accounts for between eight percent and 10% of the company's overall business, according to President Bill Purington. That's because, for all the granite beneath our feet, blasting remains a relatively small niche in the construction market. "Our business is not like Wal-Mart, where you can put one on every corner because you're selling a commodity item," says Purington. "What we're selling is unique."
In order to create a company within that niche big enough to support Purington and his three brothers ˆ Ted Jr., Jim and Tom, all executives in the firm ˆ MD&B decided years ago that it would have to look at the entire northeast region as a potential market. For years, MD&B has been steadily opening offices in New Hampshire, Vermont, Connecticut and Massachusetts. Along the way, it's bought up regional competitors ˆ six companies in all during the last eight years ˆ to create one of the largest drilling and blasting companies in New England. The company now employs 350 people, and though Purington won't disclose financial details, he says the company's revenues have grown 10% a year for the last 15 years.
Though no one could have predicted it during the 80s, that regional business model now has positioned MD&B well to handle the increasingly complicated and costly regulatory environment that's emerged since the Sept. 11 terrorist attacks. Between new rules governing the handling of explosives and stricter enforcement of existing regulation, smaller drilling and blasting companies are finding it harder to keep up. That challenge helped bring about MD&B's latest acquisition: In February, the company acquired Northwood, N.H.-based American Explosives Corp., after owner Stephen Adams found the burden of compliance too much for his nine-year-old, 35-person company.
In particular, blasting companies are dealing with new rules included in the 2003 Safe Explosives Act, which transferred oversight of companies handling explosives to the Bureau of Alcohol, Tobacco, Firearms and Explosives. Now, not only must each company have both federal and state licenses to use explosives, but it must submit every employee to a background check and increased training ˆ all of which comes at the company's expense. "Those types of administrative and permitting requirements alone are enough for someone to look at closing, merging or maybe not starting up a new [blasting] business," says Jeffrey Dean, executive director of the International Society of Explosives Engineers in Cleveland.
As a result, Dean says he's seen the rate of consolidation among drilling and blasting companies accelerate since new regulations came into effect. (Statistics on the size of the drilling and blasting market are hard to come by, but ATF says there are 75 entities licensed to use explosives in Maine. That's down from 142 licensees in 1998) And those mergers come after what Dean says was a decade of consolidation, as blasting companies ˆ like all construction firms ˆ rode the cycles of economic expansion and recession starting in the early 1990s.
Looking ahead, Purington sees MD&B's geographic and technical diversity as the key to continuing to survive in the market ˆ and not just to support him and his brothers. Last year, the company converted to an employee stock ownership plan. "As our employees desire more responsibilities and challenges, we're going to have to provide those opportunities for them," says Purington.
Starting in the cellar
Like the blasting industry itself, Maine Drilling & Blasting today bears little resemblance to the company of its origins. The firm was founded by Purington's father, Ted Purington Sr., in 1966. The elder Purington had worked as an equipment operator for a general contractor during the time when ˆ thanks to looser regulations and more primitive technology ˆ blasting duties typically fell to someone willing to drill a hole, light a fuse and run. "Back then the best blasters were the most fleet of foot," says Bill Purington.
By the 60s, though, Ted Purington saw creating his own blasting company as a better way to support his family. He launched the company by working on small projects such as cellar holes, but eventually built up the company to tackle larger commercial and municipal projects. By the 70s, MD&B was traveling outside of Maine to work on big jobs such as interstate highway construction in Vermont and New Hampshire. (Ted Purington Sr. retired from the company in 1996.)
Along the way, the company began establishing relationships with local contractors that became long-term partnerships. Westbrook-based general contractor White Bros. Inc. has hired MD&B almost exclusively for blasting work for the past 25 years, teaming up for projects ranging from new construction at the University of New England in Biddeford and Pineland Farms in New Gloucester, to utility work around Portland.
The company has stuck with MD&B, says White Bros. President Mike White, because he knows he can rely on MD&B staff to handle a variety of jobs, as well as the variety of regulations and community outreach tasks that go along with using explosives in populated areas. (The company was put to the test recently, when a blasting project in Raymond, N.H. damaged a nearby house and hair salon. MD&B took resonsibility for the accident and immediately hired contractors to repair the damage.) "With a blaster there's got to be a lot of trust, and trust is an earned thing," says White.
By the 80s, as MD&B began looking seriously at expanding its operations outside of Maine, the company sought a way to develop similar relationships with local contractors across the region. "We realized that if we were going to grow, we couldn't run the whole company from Gardiner," says Purington. "We need to be a local company in every market."
To that end, MD&B began creating new divisions, complete with their own management teams and dedicated crews, in markets it wanted to tap. The first new division opened in Auburn, N.H. in 1983. A Vermont division followed in 1987. Then, MD&B created a permanent presence in southern New England ˆ where it had been working since the late 80s ˆ by opening a Massachusetts office in 2000 and a Connecticut office in 2001.
Still, Purington says the company wanted to make sure that each division followed the processes and standards MD&B had developed over the years in Maine. To that end, the company took a page from the franchising book and developed an operating model for each of its divisions, which covered everything from how to provide estimates and perform jobs to explosives inventory management techniques.
Even operating as local companies, those offices provide MD&B's overall corporate structure with much-needed regional diversification, says Purington. When work is slow in one region, MD&B can send crews to other states where business might be booming. Likewise, operating in southern New England helps the company book revenues when winter still has a grip on Maine. "We spent eight months a year [in Maine] working very hard to generate earnings, then for four months we sat in the cold and tried to hang on," says Purington of the days before the firm pushed south.
The letter of the law
Besides opportunities for more winter work, MD&B's regional expansion gives the company the economies of scale needed to comply with increasingly complicated regulations, says Purington. Take the rules governing a company's explosives storage facilities. For safety reasons, state and federal laws require a good buffer (distances vary) between an explosives storage facility and any neighbors. That means blasting companies have to secure big plots for such facilities, either by purchasing the land or signing long-term leases, to ensure that their storage sites won't become illegal because of encroaching development.
Purington says MD&B owns or leases 75-100 acres of land for its five major storage facilities, plus one or two satellite storage locations, in each state ˆ a cost that must be added to the $100,000-$200,000 it takes to build a secure building. Since those facilities have to be far from populated areas, blasting companies have to absorb the employee time and fuel costs to haul explosives to and from job sites each day. The handling of those explosives also must be carefully tracked and accounted for, adding additional layers of administrative work for staff.
"When you put it all together, [the regulatory burden] takes the cost of explosives and adds 10%-20% on top of it," says Purington. "If I'm dispersing those costs over 20 million pounds of explosives, versus 100,000 pounds for a smaller company, you can see how those costs are more significant for the smaller user."
But being a larger company also means larger equipment costs. MD&B currently owns about 80 drill rigs across New England, which cost between $300,000 and $500,000 apiece. That's why it's important for the company to take on everything from blasting a cellar hole, for which it might charge $5,000-$7,000, to clearing land for large shopping center developments like the Augusta Marketplace, which will cost more than $2 million when its two phases are completed.
Those big-box store developments carry another benefit besides their high price tag: When MD&B sends a large crew to work on a site over a number of weeks, the large job can become a "home base" for smaller, one-off jobs nearby, says Wayne Flagg, MD&B's eastern division manager. For example, while working on the commercial site, the company may have time to send one drill rig to blast a residential cellar nearby. "Those [big-box] sites really give you an opportunity to keep continuity in your work," says Flagg. "That's the name of the game ˆ keeping the drills busy and the crews moving."
Despite that ongoing challenge, and the company's history of expansion, Purington says MD&B has no immediate plans to seek out other acquisition candidates or move into new markets. Instead, MD&B is concentrating on growing its operations within markets that Purington says aren't quite as "mature" as its Maine or New Hampshire operations, such as southern New England and southern New York state. "We're looking to create a certain presence in various markets," says Purington, "so we're going to continue to stay aggressive and move in that direction."
To accomplish the job, MD&B is attacking in waves: Crews work their way across the hillside, drilling dozens of holes in the rock. Then, they pack those holes with 10,000-12,000 pounds of explosives ˆ enough to hew 8,000-10,000 cubic yards of rock from the hillside each day. The process will continue until the site is cleared from end to end.
Such big blasts have become more common in recent years, as the march of big-box development has spread across the state. Last year, for example, MD&B used more than 120,000 pounds of explosives to help turn an old sand and gravel pit into the 20-acre site for a Wal-Mart distribution center in Lewiston. At the same time, thanks to the strong real estate market, MD&B is still busy with smaller jobs across the state, such as blasting cellar holes for new houses or trenches for utility construction. Not surprisingly, the amount of explosives used in Maine increased 185% between 1994 and 2003, from 518 metric tons to 1,480 metric tons, according to the U.S. Geological Survey.
But even with its high-profile local jobs and the strong demand across the market for blasting, MD&B's work in Maine only accounts for between eight percent and 10% of the company's overall business, according to President Bill Purington. That's because, for all the granite beneath our feet, blasting remains a relatively small niche in the construction market. "Our business is not like Wal-Mart, where you can put one on every corner because you're selling a commodity item," says Purington. "What we're selling is unique."
In order to create a company within that niche big enough to support Purington and his three brothers ˆ Ted Jr., Jim and Tom, all executives in the firm ˆ MD&B decided years ago that it would have to look at the entire northeast region as a potential market. For years, MD&B has been steadily opening offices in New Hampshire, Vermont, Connecticut and Massachusetts. Along the way, it's bought up regional competitors ˆ six companies in all during the last eight years ˆ to create one of the largest drilling and blasting companies in New England. The company now employs 350 people, and though Purington won't disclose financial details, he says the company's revenues have grown 10% a year for the last 15 years.
Though no one could have predicted it during the 80s, that regional business model now has positioned MD&B well to handle the increasingly complicated and costly regulatory environment that's emerged since the Sept. 11 terrorist attacks. Between new rules governing the handling of explosives and stricter enforcement of existing regulation, smaller drilling and blasting companies are finding it harder to keep up. That challenge helped bring about MD&B's latest acquisition: In February, the company acquired Northwood, N.H.-based American Explosives Corp., after owner Stephen Adams found the burden of compliance too much for his nine-year-old, 35-person company.
In particular, blasting companies are dealing with new rules included in the 2003 Safe Explosives Act, which transferred oversight of companies handling explosives to the Bureau of Alcohol, Tobacco, Firearms and Explosives. Now, not only must each company have both federal and state licenses to use explosives, but it must submit every employee to a background check and increased training ˆ all of which comes at the company's expense. "Those types of administrative and permitting requirements alone are enough for someone to look at closing, merging or maybe not starting up a new [blasting] business," says Jeffrey Dean, executive director of the International Society of Explosives Engineers in Cleveland.
As a result, Dean says he's seen the rate of consolidation among drilling and blasting companies accelerate since new regulations came into effect. (Statistics on the size of the drilling and blasting market are hard to come by, but ATF says there are 75 entities licensed to use explosives in Maine. That's down from 142 licensees in 1998) And those mergers come after what Dean says was a decade of consolidation, as blasting companies ˆ like all construction firms ˆ rode the cycles of economic expansion and recession starting in the early 1990s.
Looking ahead, Purington sees MD&B's geographic and technical diversity as the key to continuing to survive in the market ˆ and not just to support him and his brothers. Last year, the company converted to an employee stock ownership plan. "As our employees desire more responsibilities and challenges, we're going to have to provide those opportunities for them," says Purington.
Starting in the cellar
Like the blasting industry itself, Maine Drilling & Blasting today bears little resemblance to the company of its origins. The firm was founded by Purington's father, Ted Purington Sr., in 1966. The elder Purington had worked as an equipment operator for a general contractor during the time when ˆ thanks to looser regulations and more primitive technology ˆ blasting duties typically fell to someone willing to drill a hole, light a fuse and run. "Back then the best blasters were the most fleet of foot," says Bill Purington.
By the 60s, though, Ted Purington saw creating his own blasting company as a better way to support his family. He launched the company by working on small projects such as cellar holes, but eventually built up the company to tackle larger commercial and municipal projects. By the 70s, MD&B was traveling outside of Maine to work on big jobs such as interstate highway construction in Vermont and New Hampshire. (Ted Purington Sr. retired from the company in 1996.)
Along the way, the company began establishing relationships with local contractors that became long-term partnerships. Westbrook-based general contractor White Bros. Inc. has hired MD&B almost exclusively for blasting work for the past 25 years, teaming up for projects ranging from new construction at the University of New England in Biddeford and Pineland Farms in New Gloucester, to utility work around Portland.
The company has stuck with MD&B, says White Bros. President Mike White, because he knows he can rely on MD&B staff to handle a variety of jobs, as well as the variety of regulations and community outreach tasks that go along with using explosives in populated areas. (The company was put to the test recently, when a blasting project in Raymond, N.H. damaged a nearby house and hair salon. MD&B took resonsibility for the accident and immediately hired contractors to repair the damage.) "With a blaster there's got to be a lot of trust, and trust is an earned thing," says White.
By the 80s, as MD&B began looking seriously at expanding its operations outside of Maine, the company sought a way to develop similar relationships with local contractors across the region. "We realized that if we were going to grow, we couldn't run the whole company from Gardiner," says Purington. "We need to be a local company in every market."
To that end, MD&B began creating new divisions, complete with their own management teams and dedicated crews, in markets it wanted to tap. The first new division opened in Auburn, N.H. in 1983. A Vermont division followed in 1987. Then, MD&B created a permanent presence in southern New England ˆ where it had been working since the late 80s ˆ by opening a Massachusetts office in 2000 and a Connecticut office in 2001.
Still, Purington says the company wanted to make sure that each division followed the processes and standards MD&B had developed over the years in Maine. To that end, the company took a page from the franchising book and developed an operating model for each of its divisions, which covered everything from how to provide estimates and perform jobs to explosives inventory management techniques.
Even operating as local companies, those offices provide MD&B's overall corporate structure with much-needed regional diversification, says Purington. When work is slow in one region, MD&B can send crews to other states where business might be booming. Likewise, operating in southern New England helps the company book revenues when winter still has a grip on Maine. "We spent eight months a year [in Maine] working very hard to generate earnings, then for four months we sat in the cold and tried to hang on," says Purington of the days before the firm pushed south.
The letter of the law
Besides opportunities for more winter work, MD&B's regional expansion gives the company the economies of scale needed to comply with increasingly complicated regulations, says Purington. Take the rules governing a company's explosives storage facilities. For safety reasons, state and federal laws require a good buffer (distances vary) between an explosives storage facility and any neighbors. That means blasting companies have to secure big plots for such facilities, either by purchasing the land or signing long-term leases, to ensure that their storage sites won't become illegal because of encroaching development.
Purington says MD&B owns or leases 75-100 acres of land for its five major storage facilities, plus one or two satellite storage locations, in each state ˆ a cost that must be added to the $100,000-$200,000 it takes to build a secure building. Since those facilities have to be far from populated areas, blasting companies have to absorb the employee time and fuel costs to haul explosives to and from job sites each day. The handling of those explosives also must be carefully tracked and accounted for, adding additional layers of administrative work for staff.
"When you put it all together, [the regulatory burden] takes the cost of explosives and adds 10%-20% on top of it," says Purington. "If I'm dispersing those costs over 20 million pounds of explosives, versus 100,000 pounds for a smaller company, you can see how those costs are more significant for the smaller user."
But being a larger company also means larger equipment costs. MD&B currently owns about 80 drill rigs across New England, which cost between $300,000 and $500,000 apiece. That's why it's important for the company to take on everything from blasting a cellar hole, for which it might charge $5,000-$7,000, to clearing land for large shopping center developments like the Augusta Marketplace, which will cost more than $2 million when its two phases are completed.
Those big-box store developments carry another benefit besides their high price tag: When MD&B sends a large crew to work on a site over a number of weeks, the large job can become a "home base" for smaller, one-off jobs nearby, says Wayne Flagg, MD&B's eastern division manager. For example, while working on the commercial site, the company may have time to send one drill rig to blast a residential cellar nearby. "Those [big-box] sites really give you an opportunity to keep continuity in your work," says Flagg. "That's the name of the game ˆ keeping the drills busy and the crews moving."
Despite that ongoing challenge, and the company's history of expansion, Purington says MD&B has no immediate plans to seek out other acquisition candidates or move into new markets. Instead, MD&B is concentrating on growing its operations within markets that Purington says aren't quite as "mature" as its Maine or New Hampshire operations, such as southern New England and southern New York state. "We're looking to create a certain presence in various markets," says Purington, "so we're going to continue to stay aggressive and move in that direction."
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