At the National Groundwater Show in December 2023, and then again at NY-Geo in April 2024, and countless times by way of engineers, regulators, and virtually all stakeholders, drillers have repeatedly been told: “Buy more rigs! Scale up! The wave of work is here!”

Large public and semi-private projects – some institutional, some non-institutional – have been put on hold repeatedly. First three months. Then three more. Then six.

The private market is otherwise booming. Luxury real estate is being inundated with ground source heat pumps and ground source heat exchangers. I am not complaining, because this work is helping to fuel growth. But is it sustainable growth?

When we are making plans for capital expenditures, which we’re seemingly having to revise at least every other week, we are studying the whole market. That can be private, institutional, commercial, environmental, geotechnical, construction, exploration, and more. Each of these markets has its own challenges and leading indicators. Typically, government spend and regulatory chatter means that business is coming. So, as drillers, we most commonly view that combination of activities, along with interest rates, to make an informed decision about whether to scale up or scale down.

Fortunately, housing starts in the upper 25% of the housing market have remained steady, while others have fallen. This has helped some companies put the equipment they thought was going to be used on a flood of large-scale commercial, institutional, and public projects to use. But what happens if the prime rate increases 1% after the election? What happens if those housing starts slow down, and we still cannot get out of our own way on the large projects we were promised?

These are questions which many drillers, business owners, and managers are asking themselves today.

It is unfortunate that if an onslaught of large projects were to hit the market place today, it would likely be Q1/Q2 2025 before these projects could realistically begin as capacity has shifted to other business. This ship takes significant effort to turn. It is unfortunate because we have so many great achievements simply waiting to be realized. We have so many in the industry who are excited to see progress. Utility companies are in dire need of grid relief. And the public as a whole need to see some return on investment and reduction of operational expenditures at the municipal scale.

How did this happen? 

1. Drilling companies backed by large funds have been buying drilling projects.
   It is an unfortunate reality that when a “fully integrated vertical organization” steps in to take on a project under the guise of “reducing drilling costs” and in the process buy drilling projects, they reset the Owners’ and Engineers’ expectations on cost of completion. These understandings are carried into Engineers’ estimates on more projects, then bids are “over budget.” It is also true that on those same projects, when hazards to completion are not realized, then change orders are filed (ad nauseum). In an attempt to at least cover cost, Owners and Engineers become wary of being sold a “bill of goods” which leads to a nearly adversarial bidding process in which neither party really trusts the other. Ultimately, all parties lose as it drives oversight expense up, risk pricing methodologies employed by drilling contractors increase their markup, and promises are made that could never feasibly be kept, on both sides.
    
2. Regulations in many places have been unclear, so these large projects have been passed from agency to agency like a hot potato.
   I can understand why this particular problem is occurring. We as an industry have largely failed to engage regulatory agencies at the local and state levels. As a result, a city is seeing plans for a large scale Thermal Energy Network and frankly has no idea what to make of it. We are failing in education of some of our most important stakeholders. HEET recently made a push to educate localities in Massachusetts through a grant program. When I spoke to individuals with those municipalities, it seems to me that they are not very well educated on the opportunities which Ground Source Heat Pumps can provide. I have similar conversations with similar local leaders throughout the Midwest, and most don’t even know what a Ground Source Heat Pump is, let alone how it works, or how it can benefit their constituents.
   
   
3. Owners, in their interest to push projects along, have unreasonably pushed risk too far down the subcontractor chain (without even realizing it).
   Did anyone log water production on that test boring? Did anyone grab some analytical to ensure there was no risk in disposal of the produced fluids? It may surprise you to know that under CERCLA (the act which governs the EPA Superfund), the owner of any produced waste is the owner forever. Even when it is sitting in a waste facility. You may recall that the DoD was the owner of some improperly disposed of radioactive impacted waste that made its way into some facilities which it was not supposed to due to fraudulent sampling methodologies. The control and disposal of waste is critical to understanding the lifecycle cost on the drilling side of a Ground Source Heat Exchanger installation program. When these costs are push down to the driller under a fixed firm price bid, it is understandable why a Driller is forced to add a significant risk multiplier on waste management. This is further exacerbated because there was only 1 Thermal Conductivity (TC) test hole completed on the 400 borehole project, and there is pretty much no information contained in the TC test report about groundwater flowrate, quantity, or quality. Further, the RFP prescribes drilling method based on an arbitrary assumption that the prescribed drilling method is the most appropriate for the project. (see my recent article Don’t Tell me How to Do My Job)
    
4. Projects are trying to achieve too many goals all at once, providing stakeholder conflict.
   There are so many of us who understand the overarching community good which can be achieved by, through, and with all of these stakeholders at the table. The issue is, by trying to achieve 95%, of the potential goals, we are delayed in achieving the 80% today, and the balance over the next 5 years. Ultimately the Community will be the most significantly impacted by this delay. As we continue to see power generation and power distribution failures in the form of blackouts, brownouts, transformer overload, switchgear failures, and more, we need to continue to take as many efforts as possible to reduce peak grid load. This is most readily achieved through community access, Thermal Energy Network projects, thermal energy recycle and reuse projects, and other creative solutions which we are all striving so hard to achieve.

Together, we will all achieve more. Collaborative project and RFP processes will allow for reduction of expenses, realization of creative time-oriented solutions, stakeholder engagement and trust, and ultimate successful project delivery. I encourage all to “break some eggs” as we continue through this very exciting energy chapter in the United States.