As 2011 draws to a close, and energy professionals map out 2012 execution plans for projects conceived in 2010 and 2011, upstream and midstream planners are taking a hard look at the industry's opportunities and the potential pitfalls along the way.

Ending the year with a bang are the October-announced "deals of the decade" between Kinder Morgan Inc. and El Paso Corp. (EP), and the attempted hostile takeover of SemGroup Inc. by Plains All American Pipeline LP.

Kinder Morgan and El Paso announced a definitive agreement whereby Kinder Morgan will acquire all of the outstanding shares of EP in a transaction that will create the largest midstream and the fourth largest energy company in North America with an enterprise value of some $94 billion and 80,000 miles of pipe. The total purchase price stands at $38 billion.

The combination is a good fit because the midstream systems of the two companies complement each other without redundancy, except in the Rocky Mountains. Cleverly, Kinder Morgan used its financial muscle to raise debt to buy all of El Paso, despite Kinder's desire for only the midstream assets. Few other companies could have done so.

Had Kinder Morgan waited for the midstream assets to be sold separately, the company would have found itself in competition with other suitors. No doubt it would have paid much more for what it truly wanted. Now, Kinder Morgan need only find suitable buyers for those upstream assets it does not require, and can probably sell each bundle at a premium.

As opposed to an initial public offering of the upstream assets as a whole, Kinder Morgan is expected to market the assets and, according to the agreement, El Paso will assist in the endeavor, even to the point of entering into sales agreements for the upstream assets before the merger is completed. In other words, by the time the merger closes, the E&P assets might already be sold.

Meanwhile, Plains All American Pipeline LP (PAA) submitted a proposal to SemGroup Corp. offering to acquire all of the outstanding shares of SemGroup for $24 per share in cash. Under its terms, the proposal represents a 16% premium to SemGroup's 10-day average closing price through October 5, 2011 (the day immediately prior to PAA's proposal), and a premium of 20% over the 10-day average closing price immediately prior to SemGroup's August 31, 2011, announcement of its pending asset sale to NGL Energy Partners LP.

According to PAA, "Following SemGroup's rejection of and refusal to engage in constructive discussions regarding the October 6th proposal, PAA today sent a letter to SemGroup expressing its continued interest in pursuing the acquisition. PAA is making the letter public in order to inform SemGroup's stockholders and other stakeholders of the proposal and PAA's commitment to completing a transaction on the proposed terms. We are disappointed that SemGroup's board of directors has refused to engage in constructive discussions with us regarding a possible transaction." For SemGroup, "high pressure" has become more than an operating metric.

Also during 2011, new midstream funds continued to pop up. For example, the new Tortoise Pipeline & Energy Fund Inc., born in October, raised some $250 million, to trade as TTP on the big board.

Yet, despite all the deals and dollars, more North American midstream investment is needed. According to a new report by Purvin & Gertz Inc., more pipeline capacity will be needed by 2014 to 2016. A similar report by Bentek Energy agrees, stating that 2012 will see transportation constraints continue to put downward pressure on West Texas Intermediate crude prices, Rocky Mountain crude markets and Midcontinent natural gas liquids.

While demand for infrastructure is expected to increase in 2012, oil and gas prices are expected to fall or remain near the current level, which is somewhat low due to the global economy. Most analysts agree that natural gas supply will continue to outpace demand and keep prices low for the foreseeable future. For example, recently Wells Fargo Securities LLC lowered its oil and natural gas price decks.

Yet, despite low prices, exploration and production companies will continue to produce gas even as they seek more profitable oil and natural gas liquids (NGLs) developments—whether that is because gas plays represent the bulk of their assets or because they must drill to hold acreage.

Gas Markets

But it is possible that the old adage, "the cure for low prices is low prices" will come to fruition in 2012. To date, consistently low natural gas prices have begun changing strategies outside the energy industry and inside the demand markets, such as electric companies' fuel-switching from coal to gas for power generation and residential consumers' for home heating.

In fact, the latter switch may become one of the big new trends for 2012. According to the U.S. Energy Information Administration (EIA), the average price paid by households in the Northeast for heating oil more than doubled during the last seven winters, rising from an average of $10.48 per million Btu (or $1.45 per gallon) during the winter of 2003 and spring of 2004 to an average of $24.39 per million Btu (or $3.38 per gallon) during the winter of 2010 and spring of 2011.

By contrast, the average household price of natural gas to households in the Northeast increased by only 7% over the same period, from $11.49 per million Btu to $12.35 per million Btu.

The EIA further projects that the average price paid by households in the Northeast this winter (October through March) for heating oil may be the highest ever, almost $27 per million Btu ($3.71 per gallon) or more than double the projected average cost of natural gas ($12.93 per million Btu) delivered to households in the Northeast. The residential natural gas price of $12.93 per million Btu represents a 5% increase, year-on-year, and is still well below the peak $15.96 per million Btu during the winter of 2005 and spring of 2006.

Heating oil prices largely reflect crude oil prices. The average cost of crude oil to U.S. refiners increased from an average of $24 per barrel in 2003 to an average of $99 per barrel in 2011. Natural gas wellhead prices, which rose between 2003 and 2008, have fallen due to the dramatic growth in natural gas production from unconventional shale-gas resources, until the estimated average natural gas wellhead price in 2011 of $3.85 per million Btu was 19% lower than the $4.75 per million Btu average in 2003.

As a result, the number of Northeast households relying mainly on natural gas heating between the winters of 2003 and '04, and 2010 and '11, increased by 651,000 (from 10.14 million to 10.80 million), while the number of households using heating oil fell by 1,197,000 (from 6.88 million to 5.68 million). Another harsh, cold winter will only serve to encourage the trend, thus increasing gas demand from that market.

Oil Markets

So, what about oil prices? For now, the oil industry in North America is anticipating a potential supply glut in the Midcontinent and Cushing, stemming from the ramp up in Canadian oil-sands production and significant volumes of crude oil coming out of Bakken unconventional oil play of North Dakota.

However, according to Conrad Barnes, manager of petroleum research for Hart Energy, no one expects that to influence or push the crude oil price differentials of West Texas Intermediate and West Canadian Select, relative to similar light or sweet crudes being sold in the U.S. Gulf Coast, to record highs. These resources are expected to continue to grow even as additional crude oil supply comes from the Permian Basin, Eagle Ford and Niobrara. According to Hart Energy research, these five resources will be adding as much as 1.5 million barrels per day to the U.S. and Canadian markets by 2015.

"While 2011 saw major expansions of the crude infrastructure, 2012 will be even more exciting, with major midstream projects, including major rail projects and terminals, coming online to serve all of the plays," says Barnes. "While there are still some concerns about the global economy and the potential for another recession, which would have an impact on oil prices and the economics for these new midstream projects, that is somewhat of a low probability case."

Of greater concern is the time and cost at which these projects will be brought online, he says. Similar to the increase in costs that was seen in the upstream from 2002 to 2008, where both materials and labor were pushing up project costs and causing delays and cancellations, the industry could see a similar case in the midstream.

"Perhaps the recent announcement of the Wrangler Pipeline project is a sign of things to come, where midstream companies look for strategic opportunities to team up as opposed to going at it alone." Recently, Hart Energy Research released a study addressing the impact of these new sources of liquids in the North American markets, and how they will impact infrastructure and refining in the U.S.

So what do the top energy leaders think? Midstream Business interviewed a sample of industry-savvy executives for a review of 2011, a look forward into 2012 and the continued or new risks to development, and asked for their opinions on the long-term and global outlooks for the energy industry. Here are the insiders' comments that represent upstream, midstream, construction, investments and private-equity providers.

2011 Review

Lemmons: 2011 was a great year for midstream investments. We saw continuing activity in the upstream sector and the resource plays, which is the first place we always look to be successful in midstream. When we break that down into areas with good things happening, we look at the high prices of natural gas liquids, crude oil and condensate. A lot of investment will be required to support ongoing development in these areas. We also saw a stabilization of activity in the lean-gas areas but, until gas prices improve, we don't expect to see an increase.

The A&D side of the business was interesting in 2011 because, for the first time in many years, we saw a number of megadeals. We watched the Energy Transfer-Southern Union-Williams Cos. deal evolve and, more recently, the Kinder Morgan-El Paso announcement. That points to a continued belief in the value of opportunities in unconventional resource plays across the country.

The punchline, as we move from 2011 into 2012, is loud and clear. We are in the first 10 years of a multi-decade buildout of midstream infrastructure needed to serve the vast unconventional oil and gas resources in this country. The scale of the development investments might cycle up and down, but we are entering a new chapter in the oil and gas business that is going to spread around the world.

The private-equity opportunities to back great management teams are particularly strong in greenfield areas in the early stages of development, as first movers season those areas and make them more attractive to the bigger players. The debt markets have been good to our companies as well. Favorable terms are coming from a great group of energy banks that understand and focus on the midstream business.

The initial public offering (IPO) market is less certain. We've seen some deals that were slated to come out that haven't. We could see those deals come about in 2012, when the world economy stabilizes. In fact, recent announcements coming out of Europe have sent the markets up already, but how it all plays out is yet to be determined.

“The punchline, as we move from 2011 into 2012, is loud and clear. We are in the first 10 years of a multi-decade buildout of midstream infrastructure needed to serve the vast unconventional oil and gas resources in this country.” — Billy Lemmons, managing partner, EnCap Flatrock Midstream

Waller: Range Resource's primary focus is on the Marcellus shale. The biggest Marcellus midstream story in 2011 is the stranded gas in parts of the play. Many times the industry views the Marcellus shale as being one big homogenous play as if it is all the same. That view dramatically ended when producers along the Tennessee 300 Pipeline found that they could not move all of their gas, although Tennessee expanded that route tremendously during the past two years from 750 million cubic feet (MMcf) per day to 1.7 billion cubic feet (Bcf) per day.

We saw a number of producers heavily discounting their gas in third-quarter 2011. Dominion-indexed price less $2.20 was commonly talked about as the price many producers were having to take to move their gas. Producers like Range, which foresaw the tightening in the movement and planned for it, didn't experience that discounting of gas. We were able to flow our gas in the southwest area of the basin and along the Transco-Leidy pipeline without discounting the price.

But in many respects, that was a huge surprise to the market. In the southwest region of the play, we have the luxury of every large diameter transmission pipeline in Appalachia running through the region except for the Transco system that moves up the Atlantic coast. However, our Texas Eastern firm transportation from the southwest gives Range access to the Transco system.

The top tiered counties in Pennsylvania where the industry has so much concentrated activity (Tioga, Bradford and Susquehanna) is served solely by the Tennessee 300 pipeline. Unfortunately for some producers, "TN-300" has the smallest capacity in the state.

Many of the pipeline projects that fell behind were designed to relieve the congestion on TN-300. Every producer has to build midstream gathering in the Marcellus to tie into the transmission pipelines, but companies are finding that is taking longer than expected. At one point, Williams Cos. reported in a press release that the buildout was harder work than it expected.

This is a multifaceted process with its built-in problems along the way. Many producers, which had the luxury of being in southwest Pennsylvania, were able to move their gas because they were fairly close to an existing pipeline. But forward planning is needed to get gas to market—right of ways, gathering systems, compression, stream-crossing permits, pipeline receipt points, among others. All are necessary before you even start looking for a reliable gas market. The Marcellus wells are turning out to be bigger than anyone expected, which just compounds the midstream bottlenecks. Most of the infrastructure built two years ago is too small.

2011 showed that a lot of projects had to be built, and a lot of gathering infrastructure throughout Pennsylvania and West Virginia still needs to be built in 2012 and 2013. Now, the Utica shale in Ohio enters the picture. The question is: What impact will the Utica have on the existing Marcellus congestion?

With more gas being sourced from the Marcellus, the long-haul transportation pipelines are evaluating their systems to see how many pipes they have in the ditch and how many of those can reverse their flow. Instead of taking gas to the northeast, now they might be able to take gas from the northeast to other markets to keep the pipes full and keep their fee income up.

For example, Kinder Morgan has been talking about reversing the flow of the Rocky Mountain Express pipeline from Clarington, Ohio, back to the Chicago market. Tennessee Gas Pipeline might take gas from the northeast and backhaul or reverse flow gas back down to the Gulf Coast. All the major transmission lines are looking to find ways to accommodate the shale developments and seeing where these reverse flows might be needed. It's an exciting and strange time to see what is going on in both the gathering and the long-haul transmission sectors.

Swank: Year-to-date, through today, our Cushing 30 MLP Index is down 5%, and the Alerian Index is down 3.2%, because the pipeline master limited partnerships (MLPs) got caught up in the market volatility that we've had since August. All asset classes have turned to correlations of 1, or for MLPs it is .93 or .87. We've gone from being up fairly decent in July to down, marginally, in October, although we have outperformed Standard & Poor's Index and almost every other asset class this year against a backdrop of very positive fundamentals.

“We believe 2012 will be a continuance of activity demonstrated in 2011 in all aspects of the midstream industry, especially in those areas where the abundance of oil and gas, coupled with the rate of production, is creating a shortage in take-away capacity.” — Dave Lutz, vice president, HDR Constructors Inc.

We began the year thinking we would make mid-teens in the current yield in the portfolio, which is 6% or 7% plus a dividend growth of about 4.5%. It looks like dividend growth will end the year higher than that, close to 6%. Even though the stocks are basically flat, or down a little, the valuations have gotten more attractive, because the underlying distributions earnings have grown probably better than we would have thought. As it turns out, the MLP business environment is as strong as I have ever seen.

Terranova: Producers in the northern tier of Pennsylvania, from the center of the state and across to the New Jersey border, have continued to drill at a significant pace, despite low gas prices, and that has influenced our business the most. This drilling has occurred mainly along the corridor of Tennessee Gas Pipeline's 300 leg, which has caused the pipeline to be overwhelmed with Marcellus supplies.

The price difference between Tennessee Gas and other pipes that are relatively close, such as the Transco pipeline 35 miles to the south, has become significant. So there is a tremendous amount of interest on the part of many producers to find high value markets for their gas through pipes other than Tennessee. Our focus is to help producers avoid costly bottlenecks.

Outlook For 2012

Lemmons: Going into 2012, we are very bullish around gas gathering and processing in rich-gas areas and in crude and condensate windows. For example, in the Marcellus shale Caiman Energy will bring its second big cryogenic processing plant online in early 2012, and in the Bakken, Rangeland Energy's COLT project is a crude-oil logistics platform, with rail, onsite storage and inbound and take-away pipeline capabilities that will be up and running in the second quarter.

Also, our Cardinal Energy team is working in the rich-gas part of the Woodford shale and will have its third cryogenic processing plant online at nearly full capacity in 2012. These projects are representative of the good things we see happening in the industry, as well as the larger projects by Enterprise Products, Kinder Morgan and others.

Lutz: We believe 2012 will be a continuance of activity demonstrated in 2011 in all aspects of the midstream industry, especially in those areas where the abundance of oil and gas, coupled with the rate of production, is creating a shortage in take-away capacity. Generally speaking, the construction boom should continue. Some areas might mature more rapidly, such as those areas where the infrastructure is more developed or where synergies brought about by partnerships result in greater capabilities, or other areas, where the infrastructure is underdeveloped, would obviously mature in response to other factors.

Waller: Next year will be interesting because the generalizations that we've used for the past 30 years are being re-thought and challenged due to low gas prices. Companies cannot necessarily afford to build brand-new construction, although the debt markets can see the long-term view and understand the collateral value of the assets behind those build-outs. Capital providers are very comfortable knowing there is a lot of gas that needs to flow on a fee basis.

But, at the same time, the traditional reserves behind much of the pipes are changing. Therefore, some of the future fee-based income that many of the pipeline companies were expecting might not materialize because of the reverse flow of the gas. Midstream operators are becoming very creative in how they keep their pipelines full, even to the extent of reversing the flow. The older pipes have a competitive advantage because the pipes are already there, and the retrofit to reverse the flow is much cheaper than building new systems.

Elsewhere, for 2012, the Utica and Eagle Ford shales are clearly two hot plays. Each is competing to show which has the superior economics. Because they are in two very different geographical areas, that could ultimately determine which has the highest rates of return.

Although a lot of the economics are based on the rock characteristics, the beauty of the Utica is that it can leverage off the Marcellus infrastructure that has been built, and it is in much closer proximity to established infrastructure than are some of the Eagle Ford systems. Producers can test the Utica and use some of the new Marcellus infrastructure along with some existing older infrastructure to determine the size and quality of the Utica before investing in new infrastructure. That reduces some risk for the Utica.

While there will always be another new hot play—some come, and some go—the challenge is to find superior economics to be able to deliver on that strategy time after time. It's a matter of doing the homework and then hoping for the best.

For Range Resources, our Utica plans are confined to our Marcellus acreage right now where we have a stacked pay in Southwest Pennsylvania with the Upper Devonian shale and the Marcellus on top of the Utica. Although we drilled the first horizontal Utica well that kicked off the play, we have such superior rates of return in the Marcellus with less risk, we have opted not to move into Ohio and instead focus on capturing the resource potential already identified.

We have about 100,000 net legacy acres in Northwest Pennsylvania that might be prospective in the shallower Utica. That acreage is held by production, so there is no need to hurry to test the acreage. The industry will use its test dollars, and we will benefit from their activity. Ohio is a full-disclosure state on well results, unlike Pennsylvania, so the test data will become publically available. For now, between the Upper Devonian and the Marcellus, we more than have our hands full.

Swank: We still see an incredible demand for infrastructure in the U.S. in 2012. You've heard the story, but it is a result of these emerging shale plays. And not only for natural gas. The big development is the demand for oil NGLs infrastructure.

“With more gas being sourced from the Marcellus, the long-haul transportation pipelines are evaluating their systems to see how many pipes they have in the ditch and how many of those can reverse their flow.” — Rodney Waller, senior vice president, Range Resources Corp.

For now, the MLPs can't quite keep up with the exploration and production companies phenomenal technologies and production techniques. In the oil business, it is the Bakken, where there is not enough take-away capacity for oil and hardly any for natural gas. They have to railroad the oil from the Bakken to Stroud, Oklahoma, and to St. James, Louisiana, where there are major terminals. It's also happening in the Permian Basin, where we are seeing pipeline flows reversed.

Also, we are seeing multiple NGL lines announced, but they won't be onstream until 2013 or 2014. About three of those have been announced, some coming from Colorado and some coming down through the Permian Basin and the Eagle Ford, so the Eagle Ford is the last of that troika of oil and NGL plays. This buildout is estimated to last. According to current data, an estimated $250 billion will be spent over the next 10 years. And on top of the oil, we still have the ongoing buildout of gas infrastructure for the Marcellus. It's an incredible demand for MLP midstream services, including gathering, processing, storage and transmission of oil and NGLs.

And the abundance of natural gas has created cheap ethane, the primary feedstock for chemicals. We've seen U.S.-based chemical companies announce major long-term expansion projects to take advantage of the low-cost ethane to become the low-cost producers. That demand for ethane and the accompanying infrastructure is the biggest I've ever seen.

It's also interesting to see this happening even as the rest of the economy is struggling. Every day, in our meetings, we are looking at the frac spread at $1.08. But in 2008 it was negative 30 cents. The spread of NGLs to crude is 73 cents. These are crazy numbers against a backdrop of no jobs and of Europe imploding. Today, people with a high-school education, who are drug-free and have a commercial driver's license can make $80,000 per year driving a truck in the Eagle Ford. Also, welders are hard to find. It's a time of tremendous growth.

Because of these factors, we think the industry distributions will rise 6% to 8% in 2012 amid continued investments in organic projects, which are being built at very attractive costs. And with interest rates so low, the cost of funds are low, so this is a very profitable operating environment.

Terranova: Going forward, UGI will remain focused on its core areas because there is so much activity. We have 15 Bcf of underground storage in Tioga County, Pennsylvania, in the heart of the Marcellus. Expanding that storage and interconnecting it with additional interstate pipelines will be high on our list. We plan to continue to interconnect locally produced gas with high-value markets in Central and Southeast Pennsylvania. We will be focused on the big picture and the value that UGI Energy Services and UGI Utilities bring with market access.

We are confident about building new storage because the location of our storage assets has worked in our favor. Increasingly, the basis differential between pipes is driving the value of our storage. The storage is a link between Tennessee Gas and Dominion, and eventually between the Empire and Millennium pipelines. And it is a place to park gas and provide no-notice and balancing services and operational flexibility behind pipelines, which are becoming increasingly valued by producers and marketers.

“We’ve seen U.S.-based chemical companies announce major long-term expansion projects to take advantage of the low-cost ethane to become the low-cost producers. That demand for ethane and the accompanying infrastructure is the biggest I’ve ever seen.” — Jerry Swank, founder and managing partner, Swank Capital LLC

2012 Risks

Lemmons: The potential challenges of 2012 can be broken down into three areas. The first could be supply. We don't expect it, but should we see further declines in gas prices, we might see a corresponding slowdown in the rig counts in the lean gas areas.

Secondly, we see moderate escalation in the prices of construction and equipment. For example, the rising cost of rights-of-way and the tight availability of certain processing equipment are examples of things which could create constraints for some players in the business. Increasing carbon footprint regulation is also affecting costs and timelines.

The third challenge could be capital availability. The global economy can create some anxiety for some players in the business, but hopefully we will see some stabilization around that.

Lutz: At this point in time, we see no reason to expect that costs will fall. If you look at the oil and gas-rich areas where work is booming, they share not only the level of activity but also the impacts on labor, housing and transportation, among others. They are all being stretched to their maximum capacities. These limitations will most probably serve to keep resource costs high.

Labor is already short in crude plays like the Bakken. That demand will most likely mimic upstream and midstream activity.

Also, the amount of regulation over the past few years is a difficult question to address. Generally speaking, increased regulations stem from issues not previously encountered, or those thought not already addressed appropriately. The industry is undoubtedly hoping that regulations don't become any more stringent. Whether we have or will see any type of trend over the course of the next year is an interesting question. There are a lot of factors in play. Interest in growing state and local economies may provide some interesting matchups between state and federal regulators, not to mention that 2012 will be an election year.

Waller: In 2012, because the Marcellus has one of the highest rates of return in the U.S., the play has attracted more than its fair share of attracting new drilling rigs and frac crews. The challenge continues to be the midstream and take-away capacity.

Every producer will be in a different circumstance with having to move their gas. All that activity will have to move in tandem to get optimal prices for the gas. I believe that some of the best Marcellus wells have yet to be drilled, so the play will continue to evolve.

The challenge will be finding where the core of the Marcellus exists. With low gas prices, the challenge is balancing how to plan for future production growth with how much can you afford to pay in the short term.

Swank: We learned, in 2008, that the two major risks for midstream are the possible collapse of the price of commodities and the collapse of the economy. That hurts energy companies, as a whole, and the general availability of capital markets. Although we are starting to see cracks in financial credit-default swaps, and some widening in the high-yield market, MLPs raised more than $1 billion in debt and almost $700 million in equity in September 2011.

Those are the macro risks. Other risks, long-term, include possibly overbuilding in some of these areas. Have we overbuilt in the Haynesville? Will we overbuild storage at Cushing? Will we build too much NGL capacity? We don't know those answers, but those are issues that must be monitored.

Terranova: Clearly, finding contractors and an experienced workforce is becoming a challenge due to the significant ramp up of Marcellus work in a short period of time. That can be overcome as more people are trained.

We feel confident that we are going to be able to manage our way through that, because UGI has always been focused on making UGI a great place to work. Our high priority on that is serving us well now. We own and operate 12,000 miles of pipe in Pennsylvania and we've had an outstanding and trusting relationship with most of the contractors and environmental regulators in this area for more than 100 years.

Winning Strategies

Lemmons: The winners in 2012, whether they are small and private-equity backed or larger public companies, will be those that meet the needs of the active producers in the most economic plays. Right now, those are the plays with a liquids component.

Gas gatherers, processors and CO2-treaters that are meeting the existing and growing need for infrastructure will find even more opportunities. The bigger players will find that even more will be required for large-scale take-away.

But I think there will continue to be lots of opportunity for the upstream and midstream players. The price of natural gas today, about $3.50 per thousand cubic feet (Mcf), is probably a little low. The marginal cost of production in this country is probably in the range of $3.75 to $4.25 per Mcf. That sets an intermediate- to long-term floor under prices, and we can drill lots of wells in these shale plays at that price level. On the oil side, and NGLs, it's an even better story

“Producers in the northern tier of Pennsylvania, from the center of the state and across to the New Jersey border, have continued to drill at a significant pace, despite low gas prices, and that has influenced our business the most.” — Peter Terranova, vice president of midstream assets, UGI Energy Services

Lutz: In the midstream marketplace, one might be inclined to say "speed." However, while speed is an important trait, the profile of successful construction companies will be those that have the ability to manage risk. In my experience, you begin with strong leadership that sets and holds a deliberate course. Inconsistent, meandering, or untimely direction leads to inefficient use of resources, and increases the potential "to drop the ball." Plan the work, and work the plan—it applies at the project level as well as the corporate level.

Next, surround yourself with good resources. Your staff should complement each other and make you stronger. A wise man once told me to "hire people that are smarter than you are—then trust them to do the right thing." Rely on your external resources too. Keep your surety, your insurance carrier, your banker and other external advisors in the loop. Let them assist you in making good decisions.

Do what you do best. If you move dirt then move dirt. If you lay pipe then lay pipe. Be the safest and the best at whatever you do. Your expertise, efficiency and ability to get the job done safely and quickly will make you competitive and create opportunities for growth.

Okay, now let's talk a little more about speed, planning the work, doing what you do best and managing risk. Time to production and time to market is when you start making money, so it goes without saying that we need to design and construct as quickly as possible. Everyone's heard the old adage "haste makes waste." How many times have we heard about work starting prior to receipt of environmental or construction permits, or cut-and-fill operations starting before geotechnical information is in hand? Simply put, running the risk of permit delays or revocation, or removing and replacing work already in place, defeats the end-goal of completing, as quickly as possible, a project that will operate without failure or breaks in service.

Be careful not to confuse work-in-place with progress. Rather, begin with the end in mind. Progress, and successful project completion, will come with planning the work.

The greatest success on projects is where the time is invested to identify all those tasks, such as permitting, design