Insights from the 55th Annual South Dakota Asphalt Conference

The 55th Annual South Dakota Asphalt Conference held in Pierre, SD in April 2016 brought together agencies, industry, and academia to discuss the future outlook of crude oil prices and the trajectory of asphalt pavement in South Dakota post-2000. Key topics included investment in crude oil, market balance, and production freeze initiatives. The event also recognized the contributions of the SD Asphalt Conference Planning Committee members.

• South Dakota
• Asphalt Conference
• Future Outlook
• Crude Oil Prices
• Pavement Trajectory

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1. 55th Annual South Dakota Asphalt Conference April 6 April 7, 2016 Pierre, SD SD Highway 50 Vermillion-Yankton SDDOT Yankton Area-Duininck Inc.

2. A G E N C Y , I N D U S T R Y & A C A D E M I A A G E N C Y , I N D U S T R Y & A C A D E M I A W O R K I N G T O G E T H E R W O R K I N G T O G E T H E R WELCOME ON BEHALF OF THE SD ASPHALT CONFERENCE PLANNING COMMITTEE

3. RECOGNITION SD Asphalt Conference Planning Committee SD Asphalt Conference Planning Committee Mark Blow, P.E., Sr. Regional Engineer, The Asphalt Institute, Harrisburg, SD Ted Eggebraaten, Technical Assistance Provider, SDLTAP, Brookings, SD Tom Grannes, P.E., Materials Engineer, SDDOT, Pierre, SD Gill Hedman, Pavement Design Engineer, SDDOT, Pierre, SD Mark Hoffman, Sales Engineer, L.G. Everist, Inc., Sioux Falls, SD Ryan Johnson, Specifications Engineer, SDDOT, Pierre, SD Doug Kinniburgh, LGA Office, SDDOT, Pierre, SD Rich Reid, Ph.D., P.E., Associate Dean of Academics & Extension, College of Engineering, SDSU, Brookings, SD Dirk Rogers, Highway Superintendent, Brown County, Aberdeen, SD Rick Rowen, Bituminous Engineer, SDDOT, Pierre, SD Ken Skorseth, Program Manager-Retired, SDLTAP, Brookings, SD Dave Sorenson, Highway Superintendent, Kingsbury County, DeSmet, SD Ken Swedeen, P.E., Executive Director, DAPA, Pierre, SD Greg Vavra, Field Services Manager, SDLTAP, Brookings, SD Larry Weiss, P.E., Technical Assistance Provider, SDLTAP, Pierre, SD Tom Wilsey, Highway Superintendent, Pennington County, Rapid City, SD Stu Zick, Sales Manager, Jebro, Inc., Sioux City, IA

4. THE FUTURE OUTLOOK??? We continue to believe that crude oil prices are well below the levels required to crude oil prices are well below the levels required to encourage sufficient investment to meet demand beyond 2017 encourage sufficient investment to meet demand beyond 2017, and our midcycle per-barrel price outlook remains at $70 Brent and $64 West Texas Intermediate. But near-term prices could remain ugly or deteriorate further. Back in February a handful of producer countries, including Saudi Arabia and Russia, agreed to freeze output at January 2016 levels to help realign supply and demand. Markets rebounded as a result, but much uncertainty remains, most notably about whether Iran's likely refusal to follow suit will derail the pact or whether actual production in these countries will match agreed-upon levels. Upstream capital budgets in the United States have fallen sharply again this year as producers struggle to align budgets with cash flows. Reduced investment will translate to stronger output declines. This should help bring global markets back into balance as well but how quickly depends on the success of the production freeze initiative described above. Either way, it won't happen overnight. Morningstar Value Line 4/2016 Morningstar Value Line 4/2016

5. +4.5 YEARS TRAJECTORY OF ASPHALT PAVEMENT POST 2000 D AK O T A AS P H ALT P AV E M E N T AS S O CI AT I O N

6. PAVEMENT MANAGEMENT STAFF Blair Lunde, PE Blair Lunde, PE Pavement Management Engineer Blair.lunde@state.sd.us (605) 773-3119 Analysis Phil Clements, PE Assistant Pavement Management Engineer Phil.clements@state.sd.us (605) 773-5385 Data Base Management

7. PAVEMENT CONDITION AND AGE Excellent Chip Seals, Crack Seals Very Good Overlay Good Mill & Overlay Fair Rebuild Poor 0 5 10 15 20 25 Years

8. Surface Condition Index (SCI) Funding Category Minimum Condition Goal 2014 Condition Interstate 3.90 4.20 4.28 Major Arterial 3.70 4.00 4.22 Minor Arterial 3.40 3.80 4.26 State Secondary 3.00 3.60 3.81 State Urban 3.60 4.00 3.83 State Municipal 3.60 3.90 3.75 Network 3.55 3.90 4.18

9. CENTRAL SOUTH DAKOTA AC PROJECT COMPARISON 1996 VS. 2000 1996 1996 166 miles 166 miles 2000 2000 306 miles 306 miles 1996 1996 32 % Resurfaced by year 14 32 % Resurfaced by year 14 2000 2000 7 % Resurfaced by year 14 7 % Resurfaced by year 14

10. SCI Comparison Central SD Projects 1996 Vs. 2000 5 4.5 4 3.5 Surface Condition Index 3 2.5 2 1.5 1 0.5 0 1 3 5 7 9 11 13 Year after Construction 1996 2000

11. AC PROJECT COMPARISON An increase in average surface condition An increase in average surface condition of 0.9 at year 13 of 0.9 at year 13 1996 in Fair Condition, 2000 in Very Good 1996 in Fair Condition, 2000 in Very Good Condition at year 13 Condition at year 13 4.5 years extended life by using QC/QA 4.5 years extended life by using QC/QA

12. HOW, WHY????? Late 1990 s Late 1990 s Superpave Mixture Design & Specifications PG Binder Implementation QC/QA Field Control (Air Voids & Density) Ride Quality (Surface Tolerance) Specifications

13. FAST FORWARD TO 2016 2015 SDDOT Standard Specifications 2015 SDDOT Standard Specifications Section 321.3 Mix Design Parameter Mix Design Parameter Class D Class D Class E Class E Class G Class G % Air Voids % Air Voids 4.0 Min. 4.0 Min. 4.0 Min. % VMA* inch NMAS % VMA* inch NMAS 13.5 Min. 13.5 Min. 13.5 Min. inch NMAS inch NMAS 14.0 Min. 14.0 Min. 14.0 Min. Gyration Level (Ndes) Gyration Level (Ndes) 40 50 60 Dust/Binder Ratio Dust/Binder Ratio 0.6-1.4 0.6-1.4 0.6-1.4 Moisture Sensitivity* Moisture Sensitivity* NA NA NA

14. D AK O T A AS P H ALT P AV E M E N T AS S O CI AT I O N

15. HOW DO WE LEVERAGE THE 4.5 YEARS TO LOCAL/CITY/COUNTY PAVEMENTS? Questions Questions PG Binder Selection Testing Requirements Pseudo QC/QA System Utilize Local Producer QC QA for County/City (1/5000 tons or 1/project) Mix: Pb/Gmb/Gmm~Va, Pavement Density Aggregate: Gradation, CA CF, FAA Marshall Cross-over Requirements/Refresh Mix Designs? New Marshall/Gyratory Class for Bikeway/Pathways?

16. HOW DO WE LEVERAGE THE 4.5 YEARS TO LOCAL/CITY/COUNTY PAVEMENTS? Questions Questions New Marshall/Gyratory Class for Bikeway/Pathways? Are the new SDDOT Gyratory Controls appropriate for Cities/Counties? Costs Mix Designs ~ $3000 to $3600 SGC ~ $26k-$30 k Reference to new SDDOT D/E/G/HR Mixes End Result: You get what you measure End Result: You get what you measure

17. ENJOY THE CONFERENCE!