Good morning, everyone, and thanks for joining us toda. As many of you know, I'm Jim Buckley. I'm the head of investor relations here at Clean Harbors, and happy to have everyone here this morning, either here in person or joining us on the web. We're. I'm personally very happy to see such a strong turnout here today. For those of you on the web, there's a good 600 or 700 people here this morning, so sorry you couldn't be with us. We got a great lineup of speakers today. You're gonna see a whole cross-section of the management team and hear all about their businesses and strategies and prospects for growth. And I think we got a real exciting lineup for you. I trust everyone's gonna walk out of here today with time realizing that this is time well spent.
I know this is everyone's favorite slide, but unfortunately, I'm gonna do it once today. So let me start by reminding people that the presentation today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements include predictions, estimates, expectations, and other forward-looking statements generally identifiable by the use of certain words like believes, hopes, expects, anticipates, or similar expressions. These are subject to risks and uncertainties that could cause actual results to differ materially. You guys can probably do this with me. Accordingly, participants here and on the web are cautioned not to place undue reliance on these statements, which reflect management's opinions only as of today, September 19th, 2013. Information on the factors that could affect our results is included in our filings with the SEC, including but not limited to our most recent Form 10-K.
The company undertakes no obligation to revise or publicly release the results of any revision to these statements made at today's events other than through SEC filings. In addition, we're gonna have some non-GAAP measures today, particularly adjusted EBITDA, and that's intended to serve as a complement to our GAAP results. We believe such information is important and consistent with historical comparisons the company has given. A reconciliation of our non-GAAP measures to the most directly comparable GAAP measures is available in our quarterly news releases, which can be found on our website, cleanharbors.com. And with that, just a quick walk through the agenda. Alan McKim, our Chairman and CEO, is gonna kick it off today, talking about giving kind of an overview of the company and setting us up for the day.
He's gonna be followed by Eric Gerstenberg, our President of Environmental Services, who's gonna take you through the Technical Services segment and his outlook for that. Following Eric will be Jerry Correll, who is the head of our Safety-Kleen Environmental Services business. He's the President. He's gonna talk to you about both Safety-Kleen operating segments. And then we're gonna try to stay on time today. Jerry should wrap up around 10:00 A.M., and then we're really gonna hold it to a 15-minute break because we have seven speakers today. So I know it's sometimes hard to get you guys back in the room, but we're gonna kick right off at 10:15 A.M. And that will be David Parry coming back after the break. He's our President of Industrial and Field Services, and he's gonna take you through the components of that business and outlook there.
Dave's gonna be followed by Laura Schwinn, who I know many of you haven't met yet. She joined us earlier this year. She's the President of our Oil and Gas Field Services business. Laura's gonna be followed by Brian Weber, who's gonna talk to you about our mergers and acquisitions, the Safety-Kleen synergies, and I know as many of you saw our Evergreen Oil acquisition that was announced earlier this week. Brian's gonna talk about that. And capping off the day is, some of many of you know, our CFO, Vice Chairman, and President, I should say, Jim Rutledge. And after Jim concludes, we're gonna have a general Q&A session, and then that will be followed by lunch in the Embassy Room back where breakfast was. And I'm hoping many of you can stay for that.
With that, I'd like to introduce our Chairman and CEO, Alan McKim. Alan founded the company more than 30 years ago and has grown it to $3.5 billion in revenue, and we now have over 250,000 customers, so pretty amazing achievement. We're happy to have you here, Alan.
Thanks, Jim. Thanks, Jim. Good morning. Really, again, thank you very much for joining us this morning. We're certainly excited to be here, and look forward to sharing our vision with you today and answering your questions. I've got a brief overview of the company, and but I'm sure you're more interested in meeting the management team and hearing more specifically about the businesses that they operate. After each of the presentations, I'll be facilitating the Q&A of each one of the groups that come up. So I'm happy to help do that, and we'll be introducing each one. We're all about people and technology creating a safer, cleaner environment through maintenance and the treatment, recycling, and disposal of hazardous materials. We are the industry leader. Really want to kind of give you a quick snapshot of our business.
There really is four pillars in our business. And as Jim mentioned, there's 250,000 customers that we service today, and we provide about 55 different lines of businesses or, or services to these customers. And we service those customers through these four pillars. And each one of them will talk to you today. Each one of the, the presidents of these pillars will talk to you today. The Technical Services business under Eric Gerstenberg, which is predominantly our legacy Clean Harbors business, our large quantity generator business. Our Safety-Kleen business under Jerry Correll, which is predominantly the small quantity generator business and the newest acquisition we made at the end of last year. Dave Parry will come up and talk about our industrial business and Field Services business. And up until recently, the field service business was part of Tech Services, but it moved over to Dave.
And Dave will talk about that. And then certainly, as Jim mentioned, Laura Schwinn joined us and heads up our Oil and Gas Field Service business, really underlining the whole pillar here is tremendous assets we have. Great people. Over 13,000 employees. 3,500 of them have over 20 years of years with the company. So we've got a lot of long-term employees, and you'll meet a number of them today. Over 35,000 assets. And we really have a great asset management system, whether it's facilities, rolling stock, equipment. We do it. We think we do it better than any. Most importantly, we have some really unique assets, the 100 disposal facilities.
I should mention that not only is Eric in charge of that Technical Services pillar, but he also runs all of those disposal facilities, including all the facilities that came over from the Safety-Kleen acquisition. So although Jerry Correll will come up and talk about him running the Safety-Kleen business, all of the waste processing, all of the disposal services, moved under Eric, including the re-refinery operations, as well as the recent acquisition that we made. Really what supports everything is, you know, 25 years of investment in our WIN technology platform. Basically, you know, a Microsoft .NET platform that we've developed over the years that has about 40 different business systems within it. We've put about $125 million of capital into developing our systems and our technology and our business processes.
It really is what I think has allowed us to achieve some really good results, particularly over the last 10 years here. So if you think about our business model, it's all about driving waste into our fixed cost facilities and really leveraging those assets that I just mentioned. So we gather waste and we perform services. And it's really through each of those, again, those four pillars. So as you look on the left-hand side there, Technical Services, Safety-Kleen, the Industrial and Field Services, and the Oil and Gas Field Service business all generate waste as they go out and perform those 55 services or lines of business at their customers. And through transporting those waste, either with our own equipment or rail or barges, however it means we need to, we bring that waste back.
We try to treat and recycle and reuse as much of that material as we can. But ultimately, for those waste that have no recoverable value, we incinerate it, we put it in landfills, we treat it through wastewater treatment plants and dispose of that waste material. So very, very, very solid model, we think, in driving more and more waste volumes into these permitted facilities. There really are five key highlights that I'd like to talk to you about from an investment standpoint. Certainly, probably the most important is there's a lot of barriers to entry in our business. First and foremost is safety.
Our safety-first program really has taken us to the next level in our safety performance, but it is a key differentiator and a very important decision that our customers make and choose in a company like Clean Harbors to get on their sites and perform services. A lot of capital investment in this business. The permits are almost impossible to duplicate. And you'll hear more about how long it's been since any of these new facilities or any new facilities have been permitted. And a lot of switching costs. Customers, as they look at bringing in other suppliers, maybe to have competitive bids, or try to have RFPs to bid out their business, it's very difficult. There's a lot of stickiness in the services that we offer. The second thing is really the assets.
As we mentioned, we've got some real strategically located assets. And, and you'll hear more about, you know, why this is so important, particularly as, as you look at the oil and gas business and some of the, the landfill assets we have up North Dakota and up in Alberta and, and really throughout the U.S. But a lot of very specialized equipment and maintaining, cascading these assets, getting that maximum useful life out of these assets really, really important and, and has been part of our success. Third is really our diversification. Safety-Kleen has certainly added to this diversification with automotive, a lot of that small quantity generator business that we never were able to penetrate through the Safety-Kleen branch business, the 150 branches now that they have.
They're really able to go out and reach and touch a lot of the small quantity customers, particularly in that automotive area. But general manufacturing, chemical, those are really some of the bigger, bigger generators of waste. And, and certainly on the Industrial side, a lot of the refineries and petrochemical plants that use our, our services. Fourth is certainly the safety record. As I mentioned, we continue to strive, to improve safety here. And, you know, ultimately, obviously, our goal is zero incidents. But we, we really are an industry leader, and, we, we believe we've got some great programs to get us to that, that under one level. And, and finally, really, focus on sustainability.
Many of our customers are looking for us to come up with initiatives to lower their carbon footprint, to come up with ways that they can prove to their shareholders and to their stakeholders that they're doing everything they can, whether it's in the oil sands of Canada or it's a manufacturing facility or a pharmaceutical company. They're looking for ways that they can show an improvement in how their products are being reused. And certainly, you'll hear a lot about this today with the Safety-Kleen program. But hundreds of millions of dollars of our revenues today are derived from sustainable programs in the company. When we think about growth strategy, we're really focused on some what I would consider, you know, a 3- to 5-year growth strategy here.
We think we can get our safety recordable rate under that one, as I mentioned to you. We think we can get our revenues north of $5 billion. And we think with that revenue growth, we can continue to see that leverage in the business. Jim will talk a lot more about this, as he shares some of the financial information. But we can get to that 20+% margin level. And with that would come, you know, north of $300 million of free cash flow and a much better return on invested capital than we've been seeing over the last couple of years. But this is our 3- to 5-year target. And we feel, and I hope you feel after hearing the story today that we can get there. Our strategy and growth has really been around these six key areas.
We're gonna touch on each of them today. But expanding the service offering and expanding our geographic coverage is, is really what we have been doing, particularly with some of our acquisitions. Increasing capacity like adding incineration, adding more cell capacity, adding more resources, building up more larger projects, to try to take advantage of our landfill capacity and our strategic, strategic assets, particularly our rail network. Pursuing acquisitions has certainly been important. You'll hear about that with Brian Weber today. He'll be up and talking to you about, as Jim mentioned, some of the recent acquisitions we've made. But really, how do we do it? You know, what's behind our, our strategy there and what do we see as a pipeline? We have, you know, done over 35 acquisitions in the last 25 years, totaling about $2 billion. We do have a centralized shared services business model.
So we've been leveraging that, having that in place. We've got some great teams on the integration side, some real strong systems, as I mentioned, and really the ability to drive cost out of the combined businesses, get those synergies that we know are there. We believe we are pretty well capitalized to continue on acquisitions. Certainly the biggest, most recent acquisition we made was Safety-Kleen. Jerry will be sharing with you a lot more about Safety-Kleen. But really, Eric, Dave, and Jerry all have a piece now of the success of Safety-Kleen, as well as a lot of the work that Brian is doing on tracking synergies. But this was a $1.2 billion deal that we completed at the end of last year.
Really gives us some real nice growth opportunities, driving more waste into our facilities, like I mentioned earlier during that review of our business model. A lot of cross-selling opportunities with their customer base with the legacy Clean Harbors services. There's a great cultural fit. These two businesses were together 10, 11 years ago. So, you know, we know a lot of the players. Jerry certainly worked there. He knows a lot of the people there, a lot of 20, 25-year people at Safety-Kleen. So a good cultural fit there. It really does combine that small quantity generator market with the large quantity generator market, which is really nice because to us, waste is waste no matter what the source is. But they really have access to that smaller quantity of material.
I mentioned sustainability and certainly just a lot of cost opportunities because of the number of owners and the number of leaders within Safety-Kleen. You know, we really had felt that there was a lot of cost in the business if we really get into the details. And sure enough, we continue to see opportunities on the cost side. And just finally, just to give you a quick snapshot of the network here. We didn't combine these slides because they'll get so busy. You'll be hearing more about our different locations. But just look at Clean Harbors footprint today and all the assets we have. And you look at the Safety-Kleen footprint, you can kinda just visualize the presence we now have in the market. And we're really excited about it. And Safety-Kleen's got a 50-year brand.
We're excited to continue to build off that reputation that they have built. So with that, I'm gonna ask Eric Gerstenberg to come up and talk to you about the Technical and Environmental Services business. Eric is, you know, long-term seasoned executive with Clean Harbors, coming up on 25 years. Eric traveled and moved his family around a number of times, as he progressed through our organization. He runs all of the facilities, oversees all 100-plus facilities. He's an expert in operating those plants. With the Safety-Kleen acquisition, he really has taken on a huge role, particularly with the Oil side of the business and running those big re-refineries and overseeing those safe operations. So we're excited to have Eric here talk to you and share with you what's going on in his business. Eric.
Thank you, Alan. Welcome to our investor day presentation today. As Alan mentioned, I'm the president of the Environmental Services of Clean Harbors. I've been with the company close to 25 years. I've held a variety of different operating positions within the company. I've been the president of the Environmental Services Organization for the past 3 years. Today, reviewing my agenda, I'm gonna first talk to you about the review of the Technical Services value chain within Clean Harbors. I then will give you a business overview by touching on our competitive landscape, our customers and our key verticals, our extensive facilities network, the market trends we are seeing year to date in 2013 as compared to 2012, and also conclude with growth and margin enhancement strategies we have within the Technical Services structure.
As Alan mentioned in his presentation, we have over 55 lines of business as a company. Within the Technical Services organization, we represent 16 of those lines of business. We have 75 Technical Services branches which go out to our customer sites and collect and package hazardous and non-hazardous waste from our customer sites through large projects such as Superfund and remedial projects, as well as a result of ongoing maintenance. In addition to that, we also have substantial volumes of hazardous and non-hazardous waste that is driven into our over 100 facilities from the Safety-Kleen branch business, from the oil and gas segment under Laura Schwinn, and the Industrial and Field Services business under Dave Parry.
Once we go out to the customer sites and collect and package these hazardous and non-hazardous waste, we transport that waste back to our 22 TSDF facilities where we treat, consolidate, and transfer in bulk. In addition to those 22 facilities, we also have added to our network 18 recycling and accumulation centers through the Safety-Kleen acquisition that complement that hub and spoke network of our Technical Services branches. Once we consolidate and transfer and treat, we then ultimately ship that material through our national logistics organization to our end disposal facilities where we continue to recycle, incinerate, wastewater treat, and landfill those residuals. What are the key business drivers? The Environmental Organization, Technical Services Organization is a billion-dollar component of Clean Harbors, broken down into the segments shown on the right-hand side of this slide. What are our key business drivers? First and foremost, regulations.
Regulations drive hazardous waste and non-hazardous waste for disposal into our network for treatment and recycling. We also track GDP and industrial output, a key component for us as well. The captive incineration market, those are incinerators that our customers own and operate on their sites. We track the utilization of those. In addition, we also see substantial opportunities from Superfund sites and cross-selling within the segments that the three presidents after me will talk about. That cross-selling and leveraging their salesforce will continue to drive substantial volumes into our network of 100 disposal facilities. We have a very experienced management team averaging over 28 years of experience. They are the best of the best through all the consolidations that we have done. They provide depth and continuity. They give us a significant competitive advantage over our peers. You can see the laundry list of folks here.
They're broken down into a sales organization, a Technical Services branch organization, a facilities organization, a compliance organization, as well as a national logistics organization. What are our key performance indicators within the Technical Services organization? First and foremost, as Alan mentioned in his presentation, health and safety. We manage. We train our employees to be the best at what they can be. First and foremost, health and safety. Regulatory compliance standards. What's changing in the industry? How do we track? What is that going to generate into our network of disposal facilities? How is our revenue and EBITDA tracking against our goal, our goals and our budgets? Utilization. Utilization of our employees on our customer sites from our branches, utilization of our equipment, utilization of our incinerators and our landfills.
We also have a number of, of customer service metrics that we track on a daily basis against how we're performing against those. We are always focused on waste internalization, leveraging our assets. We focus on pricing management within our 16 lines of business. And finally, return on capital. It's critical that every time that I'm looking to expand and build out our facilities, that we do a tight return on capital. And I can justify that to Alan and Jim as we move forward with growing the organization. We are the leading provider of hazardous waste treatment and disposal for services, as you can see here. We represent over 66% of the hazardous waste incineration capacity throughout North America. Our landfill market share is over 24% of all the hazardous waste volumes throughout North America into our landfill footprint.
We control over 35% of the TSDF transfer storage and disposal facilities within North America. Additionally, with the Safety-Kleen facilities, we also control over 32% of the recycling facility capacity throughout North America. We have a significant leadership position, and the barriers to our entry are significant. There's limited new entrants. There has not been a new hazardous waste landfill permitted and constructed within the last 18 years. There has not been a new incinerator of hazardous waste constructed and built and permitted within the last 16 years. Because of that, there is substantial compliance and regulatory hurdles for anybody who wants to expand their network into the space that we provide for our customers. Our large clients require comprehensive Environmental Services in managing their hazardous and non-hazardous waste.
There are significant customer switching costs for any of our customers to be able to switch or any of our competitors to take any of the volumes that we manage. And as you will see in the upcoming slides, our collection network cannot be replicated. We have extremely large and loyal customers. As you can see here, we have multiple customers that represent the 18 different verticals that we service across this chart. Many of these customers, Clean Harbors has been servicing for decades. Our Technical Services organization has significant market diversification. There's over 11 verticals that we supply our services to, the 16 lines of business, ranging from engineering and consulting firms all the way through to brokers, to general manufacturers, to chemical facilities as well. What are the trends of the Technical Services business year-over-year versus 2012?
First, our customer container volumes into our disposal facilities have increased by 6% through over 2012 run rates. Significant leverage of our facilities continuing to grow those volumes into each of our sites. Our large waste projects, remedial, Superfund projects are ahead of our 2012 run rates. That supplies volume into our landfills as well as our incinerators. The chemical market, our leading vertical, has grown over 8% revenues year-over-year. We continue to see an increased demand for recycling, sustainability, as Alan touched on in his presentation. And this year, we anticipate record incineration utilization in tons processed through each of our facilities. Talk a little bit about our Technical Services organization and how that complements and feeds down into our comprehensive disposal network. We start with 75 branches, as I mentioned earlier, that collect and package hazardous waste.
That's overlaid with our 22 TSDF operations that package, consolidate hazardous waste. You'll see from these pictures of what those TSDFs look like. They're large footprint facilities. They have tank farms. They have rail access. They allow us to consolidate for long-haul transportation to our ultimate disposal facilities. It's a key part of our hub and spoke strategy. Overlay onto those 22 facilities, the 18 recycling centers and accumulation centers that we acquired through the Safety-Kleen acquisition. That's represented here by the red squares. Those sites are very similar to what our legacy TSDF sites are. They have large tank farms, large footprint. They allow us to consolidate bulk. And additionally, they allow us to do additional recycling of hazardous and non-hazardous waste streams for our customers.
When you overlay those 22 TSDFs and those 18 recycling centers and accumulation centers onto our legacy facility per footprint, as shown here, you get an extremely comprehensive network of disposal facilities. On this chart, you'll see all of the areas of our PCB processing and transformer sites, our legacy wastewater treatment sites, as well as our landfills and our incinerators. Our incineration facilities are large industrial-grade facilities. At the top of the slide, you'll see our Aragonite and Kimball, Nebraska sites. They process and manage and handle over 50,000 tons a year of hazardous and non-hazardous waste. Our El Dorado, Arkansas incinerator manages over 90,000 tons a year of hazardous and non-hazardous waste.
At that site, we're currently permitting an expansion which will add another 70,000 tons of hazardous waste at that site, which will allow it to process and manage over 160,000 tons annually of hazardous and non-hazardous residuals. The Deer Park, Texas facility currently manages 160,000 tons. That site is the largest commercial incinerator in the world. Moving on to our landfill sites, we own and operate over 10,000 acres of landfill sites, capacities, and cells throughout North America. Our Buttonwillow, California, which is captive to the California market, manages over 360,000 tons a year of California-regulated and hazardous waste. Our largest landfill is our Lone Mountain, Oklahoma facility, which manages over 600,000 tons of hazardous and non-hazardous waste. They are complemented by a number of strategically located landfill assets that tie in very closely to the oil and gas network that Laura Schwinn will talk about during her presentation.
We have landfill sites strategically located in those shale plays, such as the Sawyer, North Dakota landfill that you see here, which takes a substantial amount of drill cuttings in from the Bakken region. We can also leverage our other landfill facilities in Colorado and Utah and in Texas to complement the oil and gas network. Add to the complement of those facilities the Safety-Kleen oil terminals and the re-refineries. Here you'll see 18 oil terminals that collect used oil serviced by Jerry Correll's 155 Safety-Kleen branches. Those branches collect the used oil. They route it into our used oil terminals for collection and processing and also directly to the 3 re-refineries that are shown on this chart. The newer facility in California is our newest addition from the Evergreen acquisition. These re-refineries manage close to 200 million gallons annually of used oil.
The East Chicago, Indiana facility manages close to 120 million and is the largest re-refinery in the world with significant capabilities for rail as well as barge. Overlaying all these facilities, you will see the breadth of our Technical Services branches as well as our disposal, recycling, and treatment facilities, which cannot be replicated and is second to none. Over 100 facilities throughout North America. Talk a little bit about our incineration performance. Our incineration performance this year for our U.S. incinerators is tracking close to 360,000 tons cumulative. Throughout since 2007, we have improved our utilization by over 150 basis points per year. We continue to optimize the utilization of these incinerators by becoming more efficient and adding capacity. And I, as I mentioned earlier, we're adding an additional 70,000 tons of capacity to our El Dorado incinerator. The captive incinerators.
These, again, are the incinerators that our customers own and operate on their sites. Why is that important to us? To track these and watch what other additional residuals of hazardous and non-hazardous waste may come into our commercial hazardous waste incinerators. There's 44 locations today operating over 62 units. In the past year, over five sites have been closed or idled. We're tracking 10 sites that have low utilization that may supply into our network additional hazardous and non-hazardous waste. There are 19 units of those incinerators that are operated in Texas, Arkansas, and Louisiana, right where we have our incinerators in Deer Park, Texas, and El Dorado , Arkansas. The chemical sites substantially produce a substantial amount of unique waste streams that our incinerators can handle. Our re-refineries, as I mentioned earlier, our re-refineries handle close to 200 million gallons a year annually.
You can see from the East Chicago facility that they track towards maximum utilization, which is approximately 120,000 gallons a year with a yield of used oil base lube created of about 75%. Our Breslau re-refinery had additional capacity added of over 10 million gallons annually, which came online. This year, you can see the capacity ramp up towards 50 million gallons. Again, this site has a yield of approximately 25% of base lube produced. What are the key growth strategies within the Technical Services organization? First and foremost, we are going to maximize cross-selling through our combined organization.
We are going to leverage the substantial volumes that are generated through not only the Technical Services customers that I showed you earlier, but the customers that Jerry Correll will talk about under the Safety-Kleen branches that Laura Schwinn will talk about under Oil and Gas Field Services into our landfills, as well as the Industrial and Field Services operations that Dave Parry will talk about in his presentation. We are going to grow our InSite Services. What are InSite Services? They are our employees working at our customer sites directly. We get our employees to manage the compliance standards at our customer sites, manage health and safety. We overlay our platforms into those customer sites, and we manage for our customers their hazardous waste and non-hazardous waste into our network.
We have over 500 people from the Technical Services organization that work directly on our customer sites day to day. We're going to continue to grow in that area. We will continue to expand our capacity within our existing facilities that I, as I mentioned earlier. We're going to leverage our solvent recycling capabilities that we have as a combined company. What are our margin enhancement strategies? We're going to focus, continually focus on optimizing our network. How do we do that? We're going to do that by the most efficient management of the collection and packaging of hazardous and non-hazardous waste from our customer sites to our ultimate disposal sites by improving on our headcount ratios, maximizing and improving on our national logistics network, improving on our hub and spoke strategy, and have the most efficient transportation in the industry.
We're going to continue to focus on capitalizing on the combined company procurement and also internalizing our comprehensive turnaround services that we have through our large facilities. Thank you very much.
So, I'm happy to, at this point, take a break and questions. Yes.
On this sort of captive incinerator update, for monitoring that, that's just for marketing purposes. We want to know if, like, chemical companies run it and those in-house incinerators that you can go in and grab the business.
So yeah, let me just redo the question over again for the web. So your question is really on the customer captives, and is it more from a marketing standpoint why we're focusing on that area? Is that the question?
To answer your question, no. It's not just from a marketing perspective. We like to track the waste streams that those captive incinerators, our customers, handle and manage through their incinerators. If they're getting to low utilization and their cost structure doesn't allow them to continue to operate those incinerators efficiently, that's going to lend itself to opportunities of those waste streams that they're operating into, that they're managing into their incinerators, into our incinerator market. So that's how we leverage our incinerators by giving them capacity to manage their waste streams if they have an incinerator that's not managed to optimal utilization.
So basically our customers who at one time had over 100 incinerators running, and they've whittled those down to about 60 now, and as their process changed, they don't need those. Their incinerators only can handle their own waste. They can't bring waste in from anybody else. And so you've got these big chemical plants, for example, that have a captive incinerator for their own material right there. And as their processes have changed over the years, the utilization of those facilities has really shrunk, and they can't bring other people's waste in there to compete with us. So really what it is is a great opportunity to see growth of waste coming into our market.
Those facilities just get closed down.
They get closed down, and they really can't become commercial because they haven't gone through the regulatory permitting to be a commercial. Nor are they; they're typically sort of in the pipeline kind of plants. They're not a commercial plant that can handle drums of waste and solids and sludges and tank farms and all that kind of stuff. So as much waste is burned today by our customers as we burn it in the commercial industry. So it's a good opportunity. Mike, did you have a question?
I'll say this as a follow-up. So it's a ton that's about 350,000 tons worth of chemistry that's in Canada.
Well, that 360 is just U.S. So it's really north of 500,000 tons that we handle between U.S. and Canada. And so we're thinking that it's a little bit more than that right now. It used to be 750,000 tons, but with all of the shutdown of those captives, we're down to about 500,000 tons now.
Then, Eric, what's your margins are around? I think I just see about mid-20s today. Given the big goal that Alan said earlier of getting to 20, how much, what does your margin have to do to help get to the 20?
So the question is really from Eric's business. How do we drive margins north of the 20% or higher that they're operating at today?
We're going to continue and drive margin enhancement by leveraging those facilities. Those facilities, our incinerators, our landfills, our recycling plants, is how we can continue to get more efficient to drive that EBITDA margin within the technical service business. Our delivery platform is what we can continue to optimize to get it to those ultimate destination sites to then be able to leverage that capacity. The more capacity we put through them, the better leverage we're going to have on our fixed costs. That's really what we're focused on.
Yeah. And again, all that, but if the 5-year goal is to be 20 overall corporate and you're 25 today, what does your number have to be in 5 years then as part of that public?
Yeah, it's probably high 20s, I would think.
Yeah, high 20s.
High 20s, Michael, huh? You got to remember now, you know, at the level of utilization that we're operating at, we have been moving pricing up every year really, except for the great recession year. And, you know, we believe because of the amount of capital that we continue to invest in these businesses that our customers have really been, you know, receptive to that. Now, we have to be careful because we're not just providing one thing to our customers. We're doing a lot of things for them. So, you know, we're trying to be a balance in our approach to pricing. But when we first took over many of these incinerators back in 2002, pricing was in the high teens, and today it's in the mid-30s, you know.
We believe that it really should be in the high, you know, high 30s, low 40s. So yes.
So you actually talked a little bit about the Environmental Services, the large switching costs for customers. I just wanted to see if you could maybe elaborate on that a little bit more. And it's a, it's a pretty important point. I think it's obvious.
Sure. So the question really is what are the large switching costs that customers have?
Well, the key areas that our significant customers look for is, again, comes around that regulatory driver. So our customers are really looking for good customer service, top-notch customer service that limit their liabilities. So when they ship their hazardous and non-hazardous waste into our sites, they're really looking on minimizing their exposure. So they're looking for manifest returns, which is a requirement within the United States to be able to provide back to them that we've received their hazardous waste. They're looking for certificates of disposal or destruction, again, to confirm limiting their liability. They audit our sites. They come onto our sites once a year, once every couple of years, audit them, making sure that we have the top safety standards that we talked about, the top regulatory standards.
So any large customer that generates significant volumes is going to have a very difficult time to try to switch that to other sites or concerns that are going to arise from it and making sure that the other place that they might switch to has the same standards that we operate under to limit their liability.
Possibly maybe one other point too. Every single waste stream that comes into our facility has to be profiled, and there are costs of analytical, and we have, you know, almost 1 million profiles in our database. So to have the customer come out and approve the use of that facility certainly is one thing, but then to go and reprofile all those waste streams and go through all that cost is pretty significant. So it is one of the barriers to entry there. Probably one other point to mention here, and Jim will talk about this. The company took on a significant amount of environmental liabilities from the Chemical Services Division acquisition we did from Safety-Kleen back in 2002.
And we really have, over the last 11 years, stepped up to the plate and handled those environmental liabilities that really were, in the end, our customer's responsibility because under government regulations, those liabilities never go away. Even under our ownership, they never go away from the customer. So we've got today not only our arms around all those environmental liabilities and we're managing our way through them, but we also provide a $250+ million financial assurance program that really makes sure that that customer feels confident from an insurance policy that if anything ever happened, that their liabilities are covered. And that's probably the most significant legal issue that they struggle with, in making a decision on who to handle their waste with. Yes, Jamie?
The question is how much of business that Eric's getting from the other three, you know, pillars of the business here?
Yeah. So on the Safety-Kleen branch network, they produce and from their customers, approximately $150 million-$200 million of disposal into our network, cumulative from the oil and gas network, for our landfills, our recycling sites, I would say around the $50 million range. And for the Industrial and Field Services business, close to probably about $80 million-$100 million. Yes, Mark?
Can you help me understand what's the maintenance CapEx on some of these facilities? Because some of these facilities are 25, 30, 35 years old. Then how much growth capital are you going to put in this business? Secondly, 25% margin with a 94% utilization rate just in the incineration business, don't you expect that margin to be much greater than that given the asset density of the business?
Sure. So the question is about maintenance CapEx, overall capital spending for Eric's business and margins. Just maybe I'll touch on the margin point. Eric's incinerators have a much higher margin than that. I mean, that's his overall business. I mean, his incineration margins are significantly higher than that. But Eric, on the maintenance.
Yeah. As far as the capital, the maintenance capital of our legacy incineration network runs up to $5-$6 million, complemented by the re-refinery network. We're in the $8-$10 million maintenance capital range.
But is that a gross capital you're going to put? You've got some big expansion coming on here.
The incinerator in addition is approximately $85 million of capital to build out over the next 3 years that we'll be tracking against. We continue to have other projects that we've talked about in past investor relations meetings. We've grown our incineration capacity, as you saw, approximately 50,000 tons since 2007. Each of those projects have ranged in size from $1 million to $5 million in size as we've looked at those. We have a few other key strategic projects that we're looking at as well under justification on return on our capital against those that we're looking at to complement not only the El Dorado site, but there are other sites as well. We'll continue to do that as we see those opportunities. We see some of those opportunities, quite frankly, in the re-refineries as well to expand capacity.
So, I think, Eric, out of the $280 million capital this year, Eric, I think you have about $80 million?
80 million.
About $28 million or $30 million of that is for the landfills.
Correct.
And that's significantly higher than normal. And I think one of the reasons that we're typically depleting about $10 million-$12 million worth of cell capacity a year. So the above that is really more long-term investment, you know, more than one-year investment. So that, that's more of an anomaly. And it's one of the reasons why we had mentioned, you know, earlier that we really think next year CapEx is probably more in that $200 million-$210 million level because we had this year, we had a big bubble. You'll hear some of it with Dave's business, and certainly with Eric had a lot more. But, you know, these are well-maintained facilities, and we expense that maintenance, obviously. So these are very well-maintained facilities.
Although some of them, as you know, Mark, have been in place for a long, long time, you know, if you walk through one of our plants, I mean, these have to meet a standard of the biggest chemical companies in the world. So they're well-maintained plants. Al?
Just on the volume and price story, are you suggesting that the majority of your growth is coming from price or anticipated price? And then secondly, with your existing customer base, how much of the volume that you expect to see is either their growth or you're getting incremental new customers?
So, question first is, I guess, is most of Eric's growth due to price?
Price. Yeah. What's the niche? You know, breakdown being 75/25. And then secondly, on the volume side, is it you're anticipating are you growing with your customers or are you looking at new, new volumes from?
So it is more volume. So are we getting new volumes as well?
Yeah. I would say it's a 50/50 distribution, I would say, between price and growth of volumes into our sites. On, we are continuing to grow in certain market segments, certainly chemical, as I showed earlier. The volumes into our sites from the chemical industry is not only 8% revenue, but it's also substantial volume growth. And you see that in different areas. Our landfills, for example, we've continued to grow substantial volumes into our landfill sites.
So the landfill asset, the TSDFs, not so much incineration as landfill, actually expansion?
No. We've seen some good continued incineration growth as you saw of volumes into our incinerators as we saw on the earlier chart. We're tracking towards 360,000 tons processed this year. It's been up every year. That's direct volumes from all of our customers that we service, increase in volumes into our plants. And as well as in Canada, our incinerator in Canada, substantial volume growth there as well.
So I think when we think about volume in general, I think the theme would be outside of, you know, the 2008, 2009 timeframe, we've seen a nice continuing improvement there. And I think the price of natural gas, the low price of natural gas has certainly made, you know, more projects economical here in the U.S. And we're seeing more investment being made, and we expect to see more volume coming out of these new chemical plants that are being built. So that should drive more waste volume to us. But a lot of growth opportunity, particularly in the oil and gas area. And because, as you know, I mean, there's been explosive growth in the U.S., and you've seen a lot of our competitors picking up a lot of volume.
That's a big, big area of growth for, for Eric, particularly in that new segment. Yeah. Yes.
Eric mentioned earlier that container run rates are up about 6% year to date. Trying to put that in the context of adding Safety-Kleen volumes, shouldn't that number be higher? If you're getting $100-$200 million from Safety-Kleen, then it would seem like your container volume should be up a lot higher than that. Is it more downtime, or are we talking about the same-store kind of concept here?
So the question is, Eric, in his slides talked about a 6% growth in container volumes. And with Safety-Kleen, does that mean that overall is our base business down, or is that same store sales is really the question, right?
The 6% is our legacy business growth. It does not include the growth that we've seen of leveraging the Safety-Kleen customer business into our sites. It's a 6% comparison year-over-year of our legacy Clean Harbors customers.
In terms of Safety-Kleen, you can address the average dollar amount per container of Safety-Kleen versus the legacy business. We're talking about profitability of the smaller quantity to higher profitability for this one drum rather than 20.
So the question really is, pricing on our legacy container business versus pricing on the legacy Safety-Kleen small quantity generator business. How does the pricing compare on those containers? And Jerry might need to help us on that, but.
Yeah. The small quantity generator business is definitely priced at a higher rate because obviously you have higher transportation costs to be able to collect small quantity generators. So you do see margin there. The margin of those small quantity generators that are collected through Jerry Correll's business on Safety-Kleen, some of that is in Jerry's business. Some of it's in the disposal business. The rates of those small quantity drums and containers are higher, though, from large quantity generators in most of all the areas.
Yeah. Yeah. Pricing is much better, I think, overall in the Safety-Kleen line of business because you're really dealing with the onesies, twosies. And the options are much less. Yes.
The return on capital on the incineration range?
Return on capital on the incineration. Jim, maybe that would be a question.
Roughly in the, over 20%?
Over 20% is the return on the new incinerator. Yes. Yes, sir.
You talked about targeting remedial and Superfund activity. What does that mean?
So targeting, remedial and Superfund activities is the question. They are large contaminated sites, that are predominantly at our customer sites that of chemical plants that they had as an example that they had owned and operate that have since been shut down, which may have residual contaminants in the building structures or in the soils. And all of that needs to be remediated under our Superfund laws, stabilized, handled, treated, and then up to be processed, whether it be in an incinerator or a landfill. So there and there's also a lot of PRPs for these responsible parties that have been formed as these sites need to be cleaned up, where there's no one responsible company, no one owner. So the government, you know, administers those.
It's really never been a big program, as Mark, we could agree that, you know, early on, everybody thought it was going to be the $3 billion-$5 billion kind of market per year. And it's quite frankly one of the reasons why a lot of these assets were built in the first place. A lot of these big landfills were originally built by the big railroads in anticipation of all this volume coming from all these big Superfund cleanups. And the bottom line is it's taken years and years and years because it started in 1976. It really didn't kick in till 1980. But a lot of this Superfund volume has really not materialized at the level that we would have expected. And it's still out there, but it's not that big. Is there a question on time?
Should we move to the next one? So I think, you know, for the purpose of time here, Eric, thanks so much. It was a great job. And at this point, we're going to ask Jerry Correll to come up and talk about the Safety-Kleen business. Thanks, Eric. Just a couple words on Jerry. Jerry joined our company from Safety-Kleen back in 2002. And he'll tell a little bit about himself. But I've enjoyed working with Jerry over the last 11 years. And when we acquired the Safety-Kleen parts washer and oil business recently, he was a perfect fit for us to put our guy in there. He knows the business. He knows all the players. He's done a great job in the short period of time since we've owned him to help us run this business and get our arms around this business.
We're excited that Jerry's here to share the story.
Good morning. Thanks, Alan. I was very honored and pleased to accept the appointment as president of Safety-Kleen back in April. It was really exciting for me. And, I'm really excited about the opportunity to integrate Safety-Kleen into the Clean Harbors company and become a key part of the organization. This morning, I'd like to discuss our strategic overview and the associated business segments for Safety-Kleen. I'd like to lay out our industry trends and markets served and to discuss our growth, cross-sell, and margin enhancement strategies. So that's our agenda for my presentation today. Safety-Kleen is a wholly owned subsidiary of Clean Harbors. We're a $1.8, excuse me, $1.2, $1.8, I wish, $1.2 billion dollar business that is designed to serve small and large customers.
We're North America's largest re-refiner of used oil with the ability to continuously refine that oil. In conjunction with Clean Harbors, we offer a totally integrated waste management recycling solutions to our targeted markets. We have a very experienced management team within Safety-Kleen. Our top six execs average 20 years. They have successful track records. They have diverse backgrounds. I've been in the business 27 years. Our most recent hire is Mike Smith. You see there with 19 years' experience in the business. He's our Senior Vice President of Oil Sales. And we recently hired him to totally focus on the sale of our oil products. Safety-Kleen has two primary business segments: Environmental Services and our used oil business. In our Environmental Services business, we enjoy the position, the market position of number one in collecting waste materials and performing services.
We have, as Eric mentioned, over 150 branches in the U.S., Canada, and Puerto Rico. Those branches conduct over 2 million services to customers per year. We focus on the small quantity generator program. We do have a national accounts program, but our focus is on small quantity generators that we can provide turnkey services to. We are the continent's largest provider to that market with more than 200,000 customers. So either Alan or Eric mentioned that we had 250,000 customers within the organization. Over 200,000 of those are Safety-Kleen customers. In the parts washers business, we're number one. We are the largest equipment and service provider, the parts cleaning technology in North America. We also are the largest used solvent collector and recycler in North America. We combine those parts washer services, used oil collection with other services to provide turnkey services to our customers.
We were talking; there was a question regarding pricing on containerized waste services with Safety-Kleen. The Safety-Kleen model is to go into a customer's location and to secure all of the business there that we can secure, including servicing parts washers, collecting waste oil, collecting containerized waste, selling products, allied products we call them, and providing vac services. So our key there is to provide a turnkey solution ultimately that is recognized as value. And we enjoy a premium pricing on many of those services. For Environmental Services, it's pretty simple. We perform the services. We gather the materials. We collect used solvent. We collect used oil. We collect waste. We put those into transport. We send that material to Eric's facilities, either terminals, solvent plants, or recycling centers, and/or treatment and disposal facilities.
So it's a key business process from the very beginning where we are servicing the customer to the effective transportation and management of the material. For the Environmental Services business, our internal revenue business drivers, and these are closely aligned to our growth strategies, which I will speak of in just a moment. We, again, have 150+ branches. We want to add additional branches there because we recognize that that is going to be incremental business to the company. We are always searching for new sources of waste oil. I'll speak to that in a bit. Basically, cross-selling to Clean Harbors customers is a key area. We want to place more parts washers because when we put the parts washers into the business, we can collect the waste. We can provide the vac services. We can respond to emergency responses.
We can do everything that that customer needs for us. So that's a key part of our business. And then, obviously, we try to cross-sell all services that we can into our Safety-Kleen customer base. When we purchased Safety-Kleen, the three key things that we looked for were to maintain our business, to reduce any customer conflict between companies, and to cross-sell our business. And that's been a big focus for us. And I'll address that later on in the presentation. Just to go back there, a note is that you can see at the bottom of the pie chart there that the annual revenue for our Environmental Services business is approximately $600 million. For our oil business, similarly, we collect it out of our branch networks.
We collect, and you'll see the number in a minute, but we collect 200 million gallons of used oil annually. That oil is collected at our branch, at the branch levels. We collect them from automotive customers, from industrial and commercial market customers. We put that oil into transport. You can imagine the complexity of moving 200 million gallons of used oil to various locations, within, within North America. So it's a key part of our business is, is to get that material into effective transport. We deliver that oil typically to an oil terminal, sometimes to a re-refinery, but mostly to an oil terminal. And then we recycle at Eric's facilities and generate our, our oil products. I mentioned earlier that we're North America's largest used oil recycler. 85% of the oil that we collect comes from the automotive market.
I'll address the markets in a couple of slides. 15% of the used oil that we collect comes from the industrial and commercial markets. That's an area of growth for us. That's opportunity. 70% of our used oil collection goes into the re-refinery to meet the capacity needs for our facilities. The 30% that's left, we sell it in the marketplace as recycled fuel oil. And, you may hear an acronym of RFO from time to time. That's our recycled fuel oil business. Our business drivers for our oil business, which is also $600 million. So it's interesting that our oil business is at the same equivalent, revenue approximates as our environmental business. But base oil market demand is a key driver to our re-refining and oil business.
Obviously, additional plant capacity allows us to move more material into the re-refinery to create products. We've had some increase in capacity in our Ontario re-refinery. We've expanded blending capabilities at our East Chicago, Indiana facility. That allows us to take more base oil, blend it, and sell it for a premium price as opposed to being subject to the volatility of the base oil market dynamics and rates. We see greater acceptance and demand for recycled products. We see a number of our competitors and our customers who are moving toward acceptance of recycled engine oil and hydraulic lubricants. And we're also focused, again, on cross-sell between segments.
A key focus for us is to go into our large Clean Harbors corporate accounts and find industrial oil that we can manage for them that we historically, as Clean Harbors, paid no attention to. This is an interesting slide. Many of you understand the dynamics of the base oil markets. The green line there that you see reflects Gulf Coast number 2 crude, which correlates to what they call ultra-low sulfur number 2 diesel. So you can see from Q2 of 2012 through Q2 of 2013, a fairly steady line with some fluctuations in there. What's important to note is that the majority of the oil that we pay for is indexed to that Gulf Coast number 2. So that's what we're paying for the used oil, some percentage of that.
The red line you see is the progress, or I shouldn't say progress, is the pricing in for Group II base oils in the marketplace. You can see I noted Motiva there. Motiva took the lead in reducing base oil Group II pricing beginning in Q2 of 2012. You can see a bathtub effect there where it fell and it's stayed down. This is unprecedented. It is a major disconnect between our crude pricing and what we're able to charge for our products. And it squeezes our margins. You'll hear more about what we're doing about this as I go through the presentation. Our oil strategies for re-refined oil, incoming feedstock, it is critical that we reduce our pay-for-oil pricing in all markets. I have a specific slide on that as we go forward.
But that is our priority for incoming feedstock along with making, ensuring that Eric's refineries get what they need to operate at capacity. On the product output side, as we are able to increase the volume of our blended product sold and use more base oil to make those blended products, we blunt the impact of the volatility associated with base oil rates. And so our focus is on selling, generating more, producing more blended products and selling those. Our EcoPower brand is our internal engine oil brand, multi-weight, as well as hydraulic lubricants. We're promoting that very heavily in the marketplace and are working with fleets, companies and distributors to push it, push that brand.
In addition, we are currently converting all of our Clean Harbors fleets, which is significant, across North America to 100% usage of EcoPower. I wanna go back to pay-for-oil just for a minute. Pay-for-oil pricing strategies are affected by regional supply and demand dynamics and logistics. For example, California, because of regulations, Canada, because it's just used oil has not been a focus. Those rates, the PFO rates, are significantly lower than U.S. average rates. Conversely, in the upper Midwest, where we have a lot of refinery capacity and a lot of supply, we face upward pricing pressures as companies tend to need to move that base lube product. So we see the pricing based upon where the oil is and where it needs to get to as well as what's happening in the region.
We are being very aggressive with new initiatives to reduce our PFO. Our national accounts group is focused on that. We've identified a significant number of accounts, and we're continuing to do this. It's a relatively new initiative to reduce our PFO to those national accounts. National accounts typically generate high volumes, good quality engine oil. But we need to be able to move those and to reduce that spread between what we're paying for the oil and what we're able to charge for our base lube rates. On the branch accounts, we have two initiatives. It's a two-pronged strategy. One is to take existing branch accounts and reduce the PFO at those locations. We have sales incentive programs in place with our oil services sales reps and our sales folks to reduce that.
We also have a strategy to go out and find new oil business at lower PFO rates. Both of those strategies are working well. They're both new, started in June. So we're having some success on both ends. This remains my top priority. On the oil trends for re-refined oil in the short term, you may have noted that Safety-Kleen moved its contracted pricing on Group II base oils by $0.10 a gallon effective October 1. We made that announcement in conjunction with the movement of price by other manufacturers of base lube. We applied that increase to around 50 million gallons to contracted customers. We also sell base oil on a spot basis, and we are moving pricing up there as we can, as the market dictates.
We also announced a $0.20 per gallon increase on blended products for the end of September. We made that move, just made that announcement week before last. And so we're seeing an ability in the short term to move our pricing up to some extent. In the short term, we're gonna continue with, we believe, to see continued financial pressures to the industry as a whole due to depressed pricing and high PFO cost. In the mid to long term, we're gonna see additional base oil capacity come into the market within the next year. We believe that the re-refinery industry is ripe for consolidation. And we believe that Safety-Kleen is well-positioned in this marketplace in the mid to long term due to our consistent supply of high-quality used oil, our efficient operations, and high-quality base oil products.
Just real briefly on our markets, I'll address the automotive, industrial, and the commercial markets. In the automotive market, it represents about 40% of our revenues. As I mentioned earlier, about 85% of our used oil volume. It's characterized by large numbers of customers, shorter sales cycle, heavier route density, high-quality used engine oil. This market recognizes, strongly recognizes the Safety-Kleen brand. For the industrial markets, 40%, the same as the automotive, market segment as far as revenue's concerned. But only 9% of the used oil collected comes from industrial markets. That, again, is a window of opportunity for us to grow. It's characterized by larger revenue per customer, smaller number of customers, and some customer crossover between Clean Harbors and Safety-Kleen.
In the commercial markets, this represents our smallest, most diverse market, about 20% of our revenues, only 6% of our used oil total. It has government, retail, personal services, construction. Midsize to large customers are common in this market. We do have some customer overlap with Clean Harbors. So that's our markets growth strategy. When I took the job, Alan asked me to focus on growth. That was a well-received strategy by Safety-Kleen, who had been used to tightening down the hatches and weathering the storm and watching its costs. So, we've developed four major growth strategies, and we commonly refer to them by the number 10. The first is 10 new Safety-Kleen branches. The goal is by the end of 2014 to expand by 10 new Safety-Kleen branches.
We've identified 14 locations for branch expansion through a thorough analysis of the marketplace. We've had some success in opening branches in Western Canada, with 2 in Alberta starting up. 10,000 net new parts washers. We've got sales, incentive, and marketing plans in place and implemented to target growth segments for parts washers. We're having some success there. This is a recent new initiative that's been kicked off. We're focusing on organic growth in our existing branches. Obviously, those 10 new branches are going to bring additional parts washers for us. We're looking at new sales channels for parts washers. The third 10 is 10 million gallons of used oil collected from Western Canada. We had a major account win recently in Alberta where we leveraged an existing Clean Harbors relationship that Dave Parry's team had built in the Fort McMurray area.
We've already received customer commitments for 2 million gallons. That's annualized, of used oil coming out of Western Canada that would be either moved to Breslau or into California for re-refining. Obviously, there are major opportunities for those large customers in Western Canada where we have strong relationships to cross-sell. Our fourth growth strategy is 10 million gallons of EcoPower above a 2012 volume. We have a team that's tracking that and measuring it. We have sales incentives in place. We have our new SVP who is focused on this. We've realigned our sales force to have more of a focus on fleet and distributor business, which is key for us. We've moved some sales focus off of base oil into blended products. Then we're focused on specific markets within those, within the blended products to grow our business. We've had, again, some success.
We've sold 2.2 million more gallons of EcoPower from January to date, excuse me, in the first half than we did over the first half in 2012. So some really nice traction there. On the cross-sell front, this is key for us. This slide addresses cross-selling Clean Harbors services to Safety-Kleen customers. We focused on two areas to begin with. One is emergency response agreements that we sell to a Safety-Kleen customer in the event that they have a spill. We've executed over 300 standby emergency response agreements out of the Safety-Kleen customer base to this point. And those 300 accounts that we've signed up, we've had $2.2 million in emergency response revenue generated as a result. Every dollar of that revenue was generated by a Clean Harbors Field Services facility. So that's critical. This is a business.
It's like an annuity. It's gonna keep on growing because simply because you have a spill this year doesn't mean that you won't have a spill again in the following year. So we're continuing to grow this. We've got a good sales incentive program going, and it's good. On the Total Project Management services side, this is business for Field Services where a company needs a tank cleaned out or a sump pumped out or needs to have some lab packs or chemicals picked up. Historically, Safety-Kleen went to a third party to have that service provided. We've internalized that now. So Dave Parry's Field Services group and Eric Gerstenberg's Technical Services group provides those services. And we've made the connection between our sales folks at our branches and those groups. And so we're really seeing some nice traction coming from that.
We probably are gonna be close to $50 million in net business in 2013. On the other side, we wanna sell Safety-Kleen services to Clean Harbors customers. We wanna go into a large plant that has a maintenance shop that may have five or six parts washers in the back that our Clean Harbors folks never looked at before. We wanna be able to go in there and win that parts washer business. So we're focused on that. We've developed over 250 opportunities, pipeline value of over $1 million. That's only about $4,000 per opportunity. But you please recognize that, you know, selling a parts washer or providing a vac service isn't the same as coming in and managing some large volume of waste going into an incinerator or landfill.
But we do have a focus on this, and we are excited about the opportunities to grow the Safety-Kleen business in this area. And then I mentioned earlier about going into our Clean Harbors corporate accounts program and targeting used oil opportunities. Typically, when we do that, we see that the pay-for-oil rates at those facilities is much lower than what we're seeing in the automotive markets. We've evaluated 97 opportunities. It's a recent initiative. We've closed 5 used oil accounts at about 1.4 million gallons. So it's just the beginning of this cross-sell initiative. But I feel very good about this. And we've got acceptance from the Clean Harbors corporate account managers to make it work. On the margin enhancement side, as Eric mentioned, headcount reduction.
We've taken significant reduction in corporate headquarters and continued to look across the entire organization to ensure that we have the proper headcount to conduct our business. We are going to reduce our PFO rates. That's a commitment. We're gonna eliminate selected outsourced services. Safety-Kleen had a business, outsourced a lot of different services. We are in the process of eliminating many of those and will continue to do so. We're gonna internalize our branch containerized waste. Eric talked about that, and there was a question about that. So that's going very well. And then where we can, we are looking to consolidate a Safety-Kleen branch and a Clean Harbors facility. And we've done that in some areas, in some markets. We've been able to bring two separate facilities under one roof.
That not only saves us money on lease cost, but it also allows the two groups to work closer together, to, to leverage each other's business. In conclusion, in summary, Safety-Kleen's strengths, it's brand, it's industry leadership, it's 50 years in the business as an industry leader, it's collection model, its ability to collect and refine used oil. When we combine that with Clean Harbors industry leadership, its disposal network, its logistics network, network, and its track record of success, we've got a company that's, a dynamic industry leader. And, we're gonna, we're gonna deliver world-class results, value to customers and shareholders. Our goals are to, to perform high-value, quality services to all size customers and to leverage Clean Harbors to grow our business and provide value to our stakeholders. Thank you.
Thank you, Jerry.
Yeah.
We've got time for a couple of questions for Jerry.
Yes, sir.
As it relates to industry consolidation in the re-refinery market, do you wanna be a consolidator? And if you're, if you don't, let's say you sell those assets off to somebody else or somebody else consolidates the bank, what would you lose by not owning those assets?
Yeah. So the question is, do we wanna be the consolidator on the re-refining side? And if we're not, if we were to sell off our assets, what would we lose there? You know, certainly today, and maybe I'll just chime in for one point that you know, Clean Harbors has been in this oil collection business for 40 years. You know, I've been in it for 40 years. Clean Harbors since I started the business. We were only a collector. Safety-Kleen was obviously the big gorilla out there that had the assets and the capabilities of taking the oil and recycling it and making it into a recycled product. And that's where you really get some margin and you can really make some money. So today, there are many people that go out and collect oil and sell it as a fuel.
But that market has really changed. The price of natural gas being where it is has really driven a lot of the folks that used to buy that oil to natural gas. We would have to sell our oil at $0.85 a gallon today to compete with natural gas. And as you probably can imagine, you know, our product is worth $2-$3 a gallon. Our blended product's worth $6 a gallon. So we really wanna add as much value and process and produce as much product as we can. We don't wanna be out there selling oil as a recycled fuel oil.
We believe in the future, both from government regulation, stopping the burning of waste oil because metals and other materials in it, particularly waste oil heaters that are used in these small shops, we believe that our technology and being in the re-refining business is really the key. And we think that's why there's been such a strong interest in adding more disposal capabilities and recycling capabilities like these re-refineries. Now, that being said, the market has really been struggling. As you saw that chart that Jerry showed you there, I mean, this has been unprecedented. And it was right at the time when we bought Safety-Kleen, where the price not only was bad, but it got worse the following month. And so we've had to work real hard to take a business that was generating about $170 million of EBITDA.
You can imagine the price impact that it had on our business. We work really hard. Jerry and his team work really hard. Long term, we think this is the business we wanna be in. Yes, sir.
So a couple of questions. Let me see if I can start on the re-refine side. So you, you had called out $1.5 million in terms of the pay-for-o il reductions. What is that versus when we, we exit you? And how much of that perhaps is either incremental? And then, as kind of a follow-on to that, how much more runway do we think we have? And what, what in your mind is an appropriate target for, for reduction of net sense? And then, I guess part C is you talked about pricing pressures in the upper Midwest.
Yeah.
Is that also incremental? And is that providing any type of an offset to the savings that we've talked about?
The question is really first, I think on the savings, on the lowering of the 1.5 million gallon, Jerry, what is?
That is, yes, that is incremental on a go-forward basis. Yes, it is.
Yeah. And then the other question is on the Midwest. I think your question is about what does that mean to us today in regard to what's going on in the Midwest? I think it was probably more of a general statement that that market, because that's where Safety-Kleen is based and where their main facility was, has always been historically the highest PFO price.
Yeah. Yeah. It's the point that I wanted to make was that when we look at the PFO markets and the used oil markets, we can't—one strategy won't fit everything. Our strategy in California has to be radically different than Florida or in the Midwest. And where we see a lot of refinery capacity, not only with Safety-Kleen, but well, also with some of our competitors there, we're going to, you know, you gotta move that oil, that base oil. And the less you have to transport it, the more, you know, the more money you can make.
But we're not seeing a worsening in that environment, that local regionalized environment terms in the last couple of months.
Th-that's correct.
So we're not, we're not seeing it. The question is, are we seeing any worsening?
Yeah. That's correct. We are not seeing any worsening in that market. No. We believe that we've stabilized.
Yes.
If you re-refine 140 million gallons and a little bit less than half of that is blended, and you're getting $0.20 on that blended product starting in September, we should assume, you know, on an annualized basis, $12 million EBITDA. That right? And then, and then you're getting $0.10 on 50 million, so it's another $5 million EBITDA. And then just talk about the opportunity to take out, lower your price for oil over the next year or two. What, what's, what's the goal?
Sure. So the question really is, what's the financial impact to the two initiatives that Jerry talked about? One was the $0.10 a gallon improvement in price on base oil and also the $0.20 a gallon improvement on blended. Sort of what would that mean to us, at least on a short-term basis here?
Yeah. What we're thinking is on the PFO rates, especially with our national accounts, we'd like to really move that number down by anywhere from 20%-25% for our national accounts. Our national accounts pay oil rates are significantly higher than our branch oil rates. We've had a recent plan in place where we've been able to bring in new oil at our branches, non-national accounts, at around $0.43 a gallon on average. So there is a real opportunity for us to move PFO rates down at the branch level. And what we wanna be able to do is to mitigate the impact of high PFO rates on our national accounts.
I think one thing to mention, excuse me, is just that Safety-Kleen really did not wanna be handling hazardous waste, waste oil. So when they exited California in 2005, it was because it's hazardous waste. New Jersey, it's a hazardous waste. Massachusetts, it's a hazardous waste. A lot of states look at waste oil as a hazardous waste, and it has to be manifested and tracked just like Eric has to do everything, even for his incineration business. That was not what Safety-Kleen's business was all about. They, they were not a big hazardous waste supplier on the waste oil side. That's our business. We wanna be in the hazardous waste. We wanna be in California. We already have 1,000 people. We have a dozen plants of our own in California. So we wanted to be in California.
And the good thing is it's the lowest price oil in California. So it's a huge market, over 50 million gallons. We wanna be in that market, and that's where we're gonna lower our price. Just entering a new market is gonna help us there.
Correct.
Yes.
In general, what do you think the driving factors are on driving the, you know, discrepancies in, you know, pay-for-o il versus when you're selling cash in this unprecedented environment?
So what's the driver on the disconnect that happened back in June of last year with base oil to crude, Jerry?
There's plentiful inventory of base lube material, especially Group II. The industry calls it long. So the inventories are long. And that has resulted in some major companies such as Motiva in moving those rates down. There's also an expectation that there's gonna be more capacity coming into the market next year. There's a major base oil refinery that's being built in Mississippi as we speak. That business was targeted, that volume was targeted to go overseas, but the overseas markets have been soft. And so we may see some of that, and there's some conjecture that some of that volume is going to be sold here in the U.S. So you have higher supply.
But I think there's also probably a thought that, that Group I is gonna go away eventually. I mean, Group, the Group I, suppliers are really gonna get hurt here. And the Group II, which is what we're at, Group II+ , they're really gonna be the companies that should benefit.
So in light of that, how do you effectively what's in your control then for you talked about trying to reduce this pay-for-o il price? How much of that is actually in your control versus just the?
It's in our control.
Yeah. So the question is, what control do we have on the pay-for-oil side is the question, right?
The challenge that we have is that historically in this business, the pay-for-oil rates have been tied to crude pricing. It wasn't too long ago that companies were paying to get rid of used oil. It's moved from that end of the spectrum to the other.
Right.
And so as the market leader, it's our responsibility to step up and say, "We can't have this disconnect between what we sell our product for and when we have little to no control over that and what we're paying for it on the top end." You know, our statement to our customers is, "We like your oil. We like your volume. We just can't afford it." And so we are aggressively looking at our customers, our contracts to determine how we're going to move those pay-for-oil rates down. And as a leader in the industry, we have that responsibility.
Yeah. I'd probably add a little color to it. I think it's Safety-Kleen's fault where they're at today. I think they are the leader in the industry. I think they put the wrong incentives in place, drove volume for the idea behind building a third re-refinery in the Gulf. And they today have an excess of 40 million gallons of oil due to that initiative that they put in place 2 or 3 years ago. And those incentives were not price, you know, controlled. They were volume controls. And so if I talk to the competitors out there, they'll always blame somebody else anyway. But I really, truly believe it's within our control to get the business back, put those right incentives in place. Jerry understands this business extremely well, and he knows, you know, we just gotta fix this problem.
Yeah.
And we've seen this before. We saw this in incineration 10 years ago when we bought, you know, a number of incinerators from Safety-Kleen. They were the big dog. They owned all the capacity. They just didn't price it right. And it takes a little bit of time, but you put the right controls in place and right processes, and you get the right incentives, and we're gonna fix this pricing problem and make sure that next time we have this unprecedented separation, that we're gonna manage our way through it.
Yeah. I think my comment.
I get just one.
Do customers know yet that they're getting these price increases and what kind of pushback?
Yeah. Yeah. Yes. Yes. We're.
You're getting that?
Yes.
Yeah. So the.
We're hoping.
Yeah. Yes.
The question is, do customers know what we're doing?
What pushback are you getting?
We're firing some customers today.
Yeah.
We are because the customer's saying, "We're not gonna go along with that and say, 'Well, we can no longer afford to pick up your material because that is, it is just below, you know, it we just can't make any money servicing you.' " So we are taking a very aggressive approach on that situation.
Right.
Jerry doesn't like me saying that sometimes, but the fact of the matter is you have to let customers know that we wanna be here for you in the long run. We've gotta make investments in these plants. We've gotta run our plants safely. We're not gonna cut corners in servicing them to deal with this. We're gonna address it at the price level.
I think Michael had a question.
Yes, Michael.
Thank you. Yeah. So if you're quite concerned about down near something by $1.5, it says you're about $0.875 blended between auto and industrial commercial.
That's right.
Where's that 87.5 go in the next 24 months?
Where does the $0.87 number go, which is what you're thinking our PFO price is?
Yeah. Well, I'm backing into it.
You're backing into it. Okay.
Yeah. Again, I think over a year's period, I think we're gonna be able to make a significant dent in that, from a percentage standpoint, Michael. It could be anywhere from, hopefully 15%-20%.
Yes. I think with that, we probably wanna take a quick break 'cause I know we're running a little bit late. And, Jim, do you wanna tell us what to do here?
Just, we'll make it a quick 10-15 minutes, and then we'll come back with you to try to stay on the schedule.
All right. Thanks, everybody.
You went away and my heart went with you. I speak your name in my every prayer. My every prayer. Please tell me how do I prove I always will love you? I wish you'd show me how. You'll never know if you don't know now. You'll never know.
We'd like to get started back up so people could take their seats. Okay. I'm pleased to introduce David Parry. And Dave's gonna come up and talk about the industrial and Field Services business and another long-term Clean Harbors employee that Dave's done a wonderful job with. If you remember back in 2008, 2009, the company acquired Eveready, which really put us into the Western Canada market. We had up until that time been into the Eastern Canada market in a pretty big way on the environmental business.
And Dave really took a leadership role in integrating the Eveready business as well as a number of other acquisitions. As part of our acquisition of Safety-Kleen, as I mentioned earlier, Eric took over all of the facilities, including the re-refining. Dave took over the Field Services business as well as a substantial amount of the Total Project Management business that Jerry talked about, that TPM business. So Dave has got a significant organization he'll talk to you about here, but he's been a key member of the team, and I look forward to having him share the story here.
Thank you, Alan.
If you'd have asked me over 25 years ago when I joined the company, if I'd be spending a lot of time in the oil sands building lodges and watching catalyst crackers get changed out, I'd have told you you were a liar. So I'm pleased to talk about and give you a high-level overview, a review of the Industrial and Field Services organization. I'm then gonna go through some of the operating groups within my business unit to take you through the competitive situation they're in and some of the trends we're seeing. And finally, I'll conclude with a few slides to talk about our high-level growth drivers and some of our margin enhancement strategies for the business.
Earlier this year, as Alan mentioned, we took the oil and gas business that was part of my team last year and we moved that over to Laura when she joined the company. She'll be up next, and we're really pleased to have her experience, her leadership, driving that organization. During that time, we pulled the Field Services business into the industrial segment. We did that for a few reasons, but predominantly because, really the nature of what we do in the overall industrial services business, which includes the work we do in the oil sands, as it relates to, it's really a time and material business, a lot of people, a lot of equipment serving the heck out of our clients. Those are a really good tie-in, particularly with the cyclicality of the turnaround businesses and with the field service seasonal businesses.
We're able to shift people that are similarly trained back and forth between those organizations throughout the geographies, and especially that's true of the equipment. It also provides us a great platform to be able to cascade equipment, a lot of which we start off in the oil sands where it really gets a lot of wear and tear with the weather and because a lot of it operates at 24 hours a day. And then we're able to transition that equipment down as it ages down really through the Gulf with our industrial businesses. Finally, on the right-hand side, you'll see that our lodging business is part of this organization. And we did that because the oil sands, which is part of that industrial overall business, we need those lodges for that industrial business. They really work very well together.
The lodges help provide us a lot of logistics and certainly the housing and accommodations for those industrial employees. Remember that we have about 700 full-time employees plus several hundred seasonal employees that support our oil sands business during the busy times. When we have turnarounds, we could have a surge, a couple hundred people that we bring up there. Having the lodges affiliated with that oil sands business really helps us have, we believe, a competitive advantage, but it gives us a place for those employees that come in from outside of the area to be able to stay at. As well, our industrial business in the oil sands is able to. They bring all of the water to our camps and they bring all the septic out. They also remove the trash and do a lot of other fluid hauling.
So, if I put this chart up in 2008, it would be all blue and it would only be Field Services. Prior to the Eveready acquisition, Clean Harbors wasn't in the industrial lodging or oil sands businesses. And really that chart would show it about $180 million in revenue. As you can see today, it's about a $900 million business for us. Over 50% of it is tied in with industrial type work both in the U.S., Eastern Canada, and certainly throughout the oil sands area. The balance, the rest of the business is tied in with the Field Services and the lodging. So I'm gonna take you through all of those businesses.
I would say that with the Eveready acquisition that took place in the middle of 2009, since then on the Lodging side, we've added, we got the camp and catering business that came with Peak that joined our lodging business. We purchased Elite Camp Services in early 2012. We purchased BCT, the manufacturing facility, later in 2011. On the Industrial side, after the Eveready acquisition, we've added Sierra Processing, which was a California-based material processing and centrifuge company. We also added in December of last year, right about the same time we purchased Safety-Kleen, we added the Catalyst Services business to our portfolio. So at the end of 2010, we roughly did about $520 million. We expect to finish this year over $900 million. So it's been some pretty nice growth for us.
What really has helped us in terms of getting that growth, besides some of the acquisitions, of course, we've had some really nice organic growth. I would say a lot of it is tied in with the oil sands growth. We've grown with that market and we've captured market share. Certainly that's both for the industrial and the lodging. I would say that another key point has been the Gulf, the Gulf Coast has really seen some nice growth with industrial on our industrial businesses. Again, we've seen some additional capacity, particularly with the gas phenomena that we've talked about. We haven't necessarily added any refineries or petrochemical locations down there, but the capacity at those plants has been increased. The third big driver for our business that's helped us get to where we are is the Safety-Kleen acquisition last December.
We've talked about how we've been able to cross-sell. We've talked about the Total Project Management business that Safety-Kleen had. We've been able to internalize the vast majority of the field service work they did. And more than that, because of that large sales force, we now have access to small customers in the automotive market, which Clean Harbors Field Services could really never get at. So the month after the acquisition, in January of this year, we've been telling in our quotes, we basically have doubled the number of opportunities that we're seeing for Field Services work throughout the network. And it doubled as a result of the Safety-Kleen acquisition. So for that business, we see a real nice growth vehicle ahead for us. So I'm gonna take you through some of these groups, and I'm gonna start with Field Services.
The company was founded on Field Services. We're very good at Field Services. It's a big part of our identity, and we continue to be a market leader in that with that group. The way I try to describe that business is that there's a lot of planned work. Our clients have areas on a day-to-day basis that need to be maintained and cleaned at our customer sites. Sometimes it's cleaning tanks, sometimes it's decontaminating facilities, but there's a lot of day-to-day work. And we have some InSite locations where our people report right to the client. And every day we do work for those, for those especially large manufacturing companies and these utilities. We then have what we call our small emergency response business or the rapid response. We don't talk about it. It's not sexy.
It doesn't get a lot of press, but that is a critical aspect to our day-to-day business and Field Services. We do over 100 emergency response or unplanned jobs every day, over 100. So these could be a pump may leak at a customer site and they have a spill of the hazardous waste. It could be a truck collision on the side of the road that breaks a saddle tank. Again, these are critical pieces of the business for us. And we staff up our equipment and our people to make sure that we can do not only our day-to-day work, but we can also respond to these critical issues that our customers may have. Finally, associated with this business, we do our major events. Those are the ones these events get a lot of press.
They could be as a result of an oil spill, a train derailment, a chemical explosion, a fire. Could be a natural disaster like the floods that have taken place today in Colorado. Could be a hurricane that hits the Gulf Coast. So we work hard to make sure we have contracts in place, that we have people prepared and trained, and that we're ready to respond when we get the opportunity, when our clients need it. The key verticals, the customers that we serve in this sector, a lot of the business is on the utility side, transmission and distribution. We do a lot of work with the transformers, manholes. That's a big part of the Field Services business. We also certainly service the terminals and pipelines, transportation companies, chemical and manufacturer big.
And finally, and proud to say, with the addition of Safety-Kleen, the automotive vertical is becoming pretty large for us. The jobs may not be as big. These are a lot of small customers, but there's a lot of good day-to-day work. And this, because of the new clients in these new geographies, we're gonna be able to open up new offices or partner with our Safety-Kleen peers and move into their offices and provide our services in those new geographies. So we're pretty excited, as you can tell. Field services is. There's a lot of competition. There are a lot of mom-and-pops that are out there in all the local markets. It's always been that way and probably always will be that way.
There are some regional competitors where some companies have multiple locations in a set geography, maybe in New England as an example. What you don't see on this chart is a lot of national competitors, either in Canada and the U.S. This is the only chart where you won't see any national competitors. Fortunately, we don't have anybody that has the breadth of services that we have. That's really important when you're dealing with large companies that may have multiple locations in multiple states or throughout North America. We're able to put one contract in place with them and service them in a lot of areas. We find that to be a competitive advantage for us. Speaking of competitive advantage, I think the best thing we have going for us is our brand.
People know that we are the company to call when you're down on your luck. We're gonna come in there. We're gonna help you. We're gonna do it professionally. We're gonna do it efficiently. And we're not gonna draw a lot of attention to you. We have a lot of salespeople out there that'll help us get this work. We have a lot of contracts with government and large commercial clients so that we're prepared. Jerry talked about the standby emergency agreements that they've put in place, just 300 already just this year, and we're just getting rolling, which we're gonna try to have every customer that anybody in Clean Harbors touches have an emergency response agreement so that if they have a problem, they call us.
I think the strongest competitive advantage we have in Field Services, because we're dealing with a lot of contamination and a lot of hazardous waste, the best competitive advantage we have is that we're backed by the best hazardous waste network and oil recycling network in North America. As Eric said earlier, we deliver about $80 million worth of waste to our facilities, and we think we can deliver a lot more. So we're very fortunate to have that. And it helps our Field Services be better because we can do that. Most of our customers, excuse me, most of our competitors don't have that luxury. We've sized the market for those things that we do in Field Services to be about $1 billion in the U.S. and another $300 million in Canada. So North America market about $1.3 billion.
Obviously, a couple of trends that are worth mentioning. First is that the automotive clients, they get inspected, they get regulated. So, we're really seeing that they need our service as well as the small customers. And we're seeing a lot of demand for that. We have seen some consolidation of our Field Services. Some of the small competitors, that always has happened through time. People start up, people slow down. But we're seeing some of the regional competitors start to inquire about exiting the marketplace. And the last big trend I would say is that a lot of little companies popped up after the Gulf spill in 2010. They tried to stay in business by being emergency response companies down in the Gulf. And they're starting to realize you can't live on emergency response alone.
And a lot of those companies that are starting to disappear. So competition got a little fierce down there for a while, and we're starting to see it subside a little bit. I'm gonna jump to industrial services. And as a reminder, the work that we do, the industrial work we do in the oil sands is exactly the same that we do in other areas. It's very similar work. The only difference is obviously you're extracting oil in the oil sands along with potentially upgrading and refining it, whereas the vast majority of our clients were working at integrated plants where there is no oil extraction. A lot of the equipment and what we do for service work and the training of our people is very similar. So I put it together in the same bucket. We are a very good industrial cleaning company.
We're a little bit new to the game in terms of some of our competitors, as you'll see in a minute, but we do a very good job of vacuuming, cleaning, and helping these plants stay in compliance or stay clean and operating efficiently. As Eric mentioned earlier, Clean Harbors has about 1,100 employees, about 10% of our workforce that reports, that rolls up to our InSite program, and they go to work reporting at our customer site every day. They don't go to an office. They go right to the customer site. So 1,100 or so. About half of those are tied in with our InSite programs that are refinery and petrochemical customers, and a big chunk of those are in the oil sands. These are long-term contracts. Our people show up at the site. They don't go anywhere else.
They go right to the site, and they start working. We do that 'cause we help these customers keep these plants clean and running well. So on a day-to-day basis, we have a lot of InSite people there. We're doing things like cleaning tanks, using high pressure, and moving fluids around. The turnaround business. So these large integrated plants, just like our incinerators and our re-refineries, they have to come down for maintenance. They have typically planned outages, turnarounds, or major events. There's a lot of terminology that's used. Clean Harbors has a lot of specialty organizations. We have specialty service groups that provide, perform the lines of business that go in and help those plants come down. We're market leaders with the largest catalyst provider now in North America. We're the largest pigging and decoking, furnace decoking company in North America. These are lead-in businesses.
We are absolutely best in class with these. Going after this turnaround work that tends to be a little bit seasonal, going after that work and demonstrating how good we are is enabling us to add base industrial cleaning contracts into our portfolio. So we look at this turnaround as a great opportunity to get into clients where maybe we haven't worked before, show them what we can do, and then we bring in our day-to-day team and we set up contracts and try to stay right on site with our people, turn it right into an InSite location. So that turnaround business has been performing very well for us. Finally, there's a lot of big projects that our large industrial customers need. As an example, large tank cleanings.
We sometimes coat, we clean and coat pipelines within a plant. We're doing a lot of coke and vessel work, and we do a lot of dredging, dewatering, and sediment control. The two biggest verticals by far that we serve are the refineries and chemical manufacturers. We do work with utilities, pulp and paper, and the consultants that are at these plants. The competitors are, there are some local, few regional, and the national players. Most of these four companies at the bottom, Philip, Veolia, HydroChem, and CEDA have been in business for decades. I believe in the next two to three years, Clean Harbors will be the largest of all of these. We're getting pretty close, and we're bigger than several of them.
So we're really in a neat position to become the market leader for industrial services in North America. On slide 86, for those in the webcast, our competitive advantage is really. We've talked about safety a lot. You can't work in these plants if you aren't a best-in-class safe provider. Clean Harbors is, and we continue to show improvement. Our TRIR, our recordable incidents are below industry standards on our Industrial side. And that's very good for the business. We've got locations in the right area, and we've got some of the industry's best experts. I didn't summarize the year's end, but we've got a lot of folks that have 20- to 30-year range leading our businesses.
Again, our other competitive advantages, we've got a lot of extra equipment from Field Services, and our oil and gas peers help us in Canada when we have turnarounds and whatnot. We're able to share a lot of resources, and that helps Clean Harbors because of our scale. We've sized that market for the things that we do at about $4 billion. So we've got plenty of growth that we can continue to have. In general, I think the trends are that the Gulf and the oil sands are the two areas where the markets are actually expanding, especially in the oil sands. And if any combination of the three pipelines that are proposed to get crude, synthetic crude, out of the oil sands, if any of those come to fruition, you'll see the next tick up in the oil sands.
In the meantime, there's plenty of market to be had there. We're in a fabulous position to continue to expand with our resources and our key people up there. Gonna move on to the lodging services. A lot of people ask us why we're in the lodging business. And I'll. I can give it to you. I can give you an answer within two points. First point is it's very profitable. We do very, very well with the business. We run a great set of lodges. Second reason is in order to compete in the oil sands on the Industrial side, the logistics is a huge barrier to entry up there. Having our lodges gives us a tremendous competitive advantage. It would be very difficult to do what we do on the Industrial side without these lodges.
When you look at the lodging business, the most important part of it is our fixed lodges under our lodging services. We run 9 lodges on property that we control. We control the rates. We control the booking. And we do a pretty nice job of keeping those full at very good rates. And we service the heck out of our clients with good food and good amenities. We also have remote accommodations. Some of you know that as camps and catering. There are some projects that take place in some of the outskirts, out in the bush. Oil and gas is an example, some of the exploration work. They need remote accommodations brought out for groups of 20 to 500 people. We have about 70 camps that we can mobilize, that we do mobilize. And often we're also running all the food.
So we bring them out. We assemble them. We run them. And that's especially a very busy business in the wintertime. Finally, we have our manufacturing firm, BCT, that we added in 2011. It's a smaller piece of the business. We build both for ourself internally. It helps us control our quality. We also are able to refurb older assets and keep them marketable. And finally, we also manufacture and sell to the marketplace as well. The verticals are all that you would expect. We largely focus our lodging business in Western Canada. Most of our lodges are in Alberta. We've got a few in Saskatchewan, and in BC. And we're really serving a lot of that oil sands classic business. We do have our competitors on both the lodging and remote camp side and the manufacturing side.
We know who they are, and we understand what niche and what role we play in the marketplace. We really like our position today. Our competitive advantages really, first and foremost, location. We put our camps in places that are very convenient to our customer. People don't wanna travel far distances to go to work. We also have a reputation as being really, I'll call it a boutique hotel company, where we have small lodges, good locations, great food, and excellent accommodations. We keep our properties up nicely, and we service the heck out of the people that stay there. It's a really wonderful experience. The market size fluctuates a little bit. As you can imagine, some large projects can bring a market up in a given year. In general, it averages about $2.5 billion a year. Clean Harbors has about 10% of it.
We like that niche, and I don't think you're gonna, you know, you're not gonna see us have this business be too much bigger. We like where we're at. We're in a great position, and it helps us be very successful in the oil sands especially. So the last two slides I have in summary, the growth strategy of these overall businesses that I just reviewed, I would say that we expect compounded growth. We expect to continue to see 10% organic growth. We've got plenty of upside in our market. We expect to see that largely through the oil sands and the Gulf growth on the Industrial side, as I mentioned. Clearly, the oil sands will give us. We'll continue to see growth on the Lodging side.
Our Ruth Lake Lodge that we've been manufacturing over the last year—it's; we expect occupancy in the next week or two. And that will be ramping up occupancy and utilization in Q4. And you'll see it; you'll see a very successful lodge financially next year. And that'll be a nice platform for growth for that lodging business. In general, we continue to take market share both in U.S. and Canada on the Industrial side. And those markets in the Gulf and the oil sands are expanding, as I mentioned. And finally, the Safety-Kleen customers are giving us a great venue for growth on the Field Services side. So we're quite bullish on our organic growth potential in front of us. We're always focused on margin, and it's an area; we're all about people and equipment.
The higher we utilize those, the better job we do having well-trained people, well-maintained equipment. It's gonna help us become more and more profitable. The big point I would like to mention is that the company's made a lot of investments in the last 18 months on maintenance. We've done a lot of software. We've added a lot of infrastructure and a lot of mechanics, especially up in Alberta, where we have a lot of equipment, and the wear and tear is pretty heavy. We have two new maintenance facilities and a refurb facility that are gonna really help my businesses tremendously. I expect not only to see reductions in our maintenance costs, but we also expect to see more uptime of our equipment as a result of better maintenance. Certainly, we're focused on price increase and price increases.
I'd like to end by saying that you've probably heard it four times today, but the return on capital is a huge, huge focus of all of, all of us as managers. Getting capital out of the company these days, you gotta go through the gauntlet with Jim and Alan. We understand the need to continue to have better returns on that capital. And I can assure you, my team got its fair share this year. We've built that nice complex and the lodge and the maintenance facility and the oil sands. I've added a lot of nice equipment for this growth. You'll see my CapEx taper down considerably next year. And next year, we're all about leveraging those assets and driving up that margin. The management team, our incentives for not only us, the people below us have all been changed.
Now we've got a lot more emphasis and a lot more focus on that return on capital. We're pretty excited for that.
Great day. Thanks, Tobey. Questions, Sean?
Just to follow up on the return on capital comment, what general level are you at today with the maintenance needs on that?
So the question then on the return of capital is what, where we're at today with Dave's business and where do we wanna be in 2014 and beyond? Jim, maybe you might wanna take a shot 'cause.
To 20%, I would say, and we wanna grow that even higher because some of the projects, for example, Ruth Lake, that'll pay for itself in a few years.
Yeah, that's a good point. Well, your capital investment for this year is it also roughly $80 million?
Yes, sir. Yep.
So he and Eric are both equal. Dave had a significant investment in Western Canada this year. So next year would be probably closer to that $30 million level, I think, is what we're thinking about. And so going from that 20% and really driving that north. I mean, his lodging business has a very, very high return on capital. The industrial business certainly much lower. And then our Field Services business, particularly when we have these big large emergency response jobs, we get some real nice margin from them. We really haven't seen any major events here this year and even in the last 18 months or so. So we're working in Colorado right now in the early phases there. But those are the kinds of things that happen.
But right now, we haven't really seen any major, major events like we've seen in the past.
Is there a consolidation opportunity? Would you put more, a lot more capital from a consolidation standpoint in this area given the high return on capital?
So questions.
What's the risk of the runway ends in terms of the lodging business? You left the lodges where there's not as much people to lodge?
Sure. The question is, is there more consolidation in the Field Services side of the business? What about the end game on the Lodging side of the business?
Yeah, I would answer that by saying that, both in Field Services and in industrial services, there are absolutely opportunities that we'll look at that may fit a geographical need or a particular line of business, a new line that we'd like to get into. It's gonna have to be pretty compelling because for us to organically grow in this business, especially with all the locations we now have, we can do it pretty easily. So we'll wanna make sure we're very selective about those. But there clearly are a lot of companies that are available out in the marketplace today. As it relates to the lodging, I can just tell you that we watch very carefully what's taking place with capacity, not only with us but our competitors.
Several of our lodging competitors are publicly traded, so we have a pretty good grasp on what's going on there. I would say that if the oil sands continues to tick up, there will be a shortage. And we'll make sure whatever we do in the future that we would be very selective and very careful about deciding to deploy more capital.
Yeah. I think the study showed us about 15,000 rooms short right now. A lot of the workforce that works in the oil sands, as you know, comes out of the east. A lot of Newfoundlanders and folks out of Nova Scotia and what have you. So they come, they work for 20 days. They go home for 10. We have to manage everything from the transportation of getting them out to Fort McMurray to housing them, to feeding them, to bring them to the job sites and managing that. It's a very, very complicated logistics situation. So by managing this infrastructure really creates, we think, an advantage to be able to attract better people, safer people, getting a better night's sleep. These are dry facilities, and they're really high quality.
We actually had our board up there, two or three years ago, visit the oil sands and show them firsthand because we're making such a big investment in them. And, it was, they're really impressive facilities. Question? Yes.
Has the lodging business stabilized since it was fully occupied? Are there ways of pulling capital out of the real estate and getting the returns up?
Yeah. So the question is on the lodging, specifically on the lodging, whether we would be able to pull more capital out of that businesses.
Your competitors or counterparts from the business is breaking up the real estate company?
I see. You know, and as far as going to a real estate trust or, or some type of we have not looked at that from a strategy standpoint. I would, I would comment, though, that the company owns thousands of acres of property around a lot of its sites. And we are looking at a number of real estate transactions that, that we would be able to, you know, you know, bring some capital in. Jim, did you wanna talk, touch on?
I just wanted to also say that.
Could you, Jim, would you mind coming up to the speaker and give them that, please, if you would?
Hello?
There you go.
Thank you. I would also say that, as Dave pointed out, we also use those lodges for our own employees, which is unlike the real estate companies that you're talking about. This is really very much integrated into our industrial service business. So that's a complication to breaking it off to a MLP or REIT or anything like that. And then that's, I think, the main point. And the other thing I would say is that from a cash flow standpoint, this is a cash flow generator to grow the rest of our business. And we wouldn't wanna change that model for it to be a into a distribution mode. There's a lot we can do from the cash flow that we're generating from here, and we're doing that.
With Safety-Kleen now in Canada, we have about 5,000 employees in Canada. About 1,000 of them are in these oil sands regions. And they're transient workers. We have another 3,000 seasonal workers that we bring in in the wintertime. So it's very, very important for us to be able to manage the logistics side of this for our customers. It's a real competitive advantage that I think we have. Okay. One more question for Jamie, and then thanks. Dave, one more question. Go ahead.
The second question would be, we also said lodging's kind of reaching its max. Can you still hit that number if you don't see additional investment in the oil sands? Like, I'm getting.
You've got a microphone. You wanna repeat that one or?
Sure. So, I think that question was, in general, let's talk about the contracts within the business. And then finally, talk a little bit about the lodging and what we see for a runway and ultimately what will happen if that tails off. So, first, let me answer the latter question. I may not have gotten the point across as effectively as I would have liked. So we see that the lodging business, the there will be a tremendous need. There is today a shortage. We think that as the oil sands continues to expand its throughput, there will continue to be a need for lodges to be opened up, built in, and opened up. And we will continue to monitor that and oh, you know, watch that very closely and deploy capital as we see appropriate for our fit.
I would tell you that, we have very good utilization today. Next, we've deployed our capital this year for Ruth Lake, and we are gonna reap the harvest from all that hard work over the next several years. And that will provide us tremendous revenue and profitability growth, cash flow growth as well, for the foreseeable future.
But I think one of the things, Jamie, is they're making about 2 million barrels of oil a day. They wanna get to 5 or 6 million barrels of oil a day in the oil sands. So, you know, to Dave's earlier point, when we start thinking about pipeline and, you know, stranded product up there, when they start fixing that problem, that growth is just gonna continue to accelerate. But even today, they're spending somewhere between $18 billion-$20 billion a year in that market up there. I mean, huge investments made by these companies and these facilities. And so lodging, although lodging will taper off in total revenue, as you mentioned, because this is our last camp right now. I guess the other question, Dave, is how do we get the rest of the growth going?
Where do you see the other growth taking place in your industrial business?
Sure.
Adding more people and equipment? You know, how do you see that?
Absolutely. So I would answer that question by saying that there's still a lot of market share that we're continuing to expand into. We are stealing market share from our competitors, and there is plenty of upside there for us to continue to grow for the foreseeable future. In addition to that, the oil sands, as Alan just mentioned, that market will continue to expand. And we're seeing more needs, as these, particularly the petrochemical and the refineries in the Gulf, as they continue to increase their throughput and as they add on capacity with additional crackers and whatnot, we're seeing more need for services, especially in that area. So we have plenty of runway left in terms of growth. To answer your question about contracts, most of our industrial contracts tend to be multiple year.
Especially in the oil sands, they tend to be really greater than 3 years, more like 5-year contracts. So they're very stable amounts of work. Our lodging tends to be in between 1 and 3 years. And the Field Services, you know, can average between 1 and 3 years for the base work as well.
Great. Thanks, Dave.
Thank you.
Appreciate that. So, we're gonna have Laura Schwinn come up. And, we're fortunate Laura joined us this year, coming after a 20-year career in the oil and gas business, particularly with Halliburton. She'll talk a little bit about herself. But, as you know, as part of the Eveready acquisition, there were a number of assets that came to us that really were impacted by the decline in the natural gas, the conventional natural gas business in Canada. And what Eveready really was looking to do and why we were a good partner with them was they were looking to move into the Marcellus and the Bakken and some of these other plays in the U.S. Laura is really an expert. She understands these markets in the U.S.
She's gonna be able to really take a lot of underutilized assets, move into a lot of these markets that Eveready was trying to do, and really put those to work. So she's gonna talk to you about how she's gonna do that.
Great. Thanks, Alan. Good morning, everyone. You know, I really have to say that joining Clean Harbors has been a great experience over the last six months. I really see some opportunities. I mean, it's an opportunity-rich environment in the oil and gas right now that we'll be able to leverage. So today, we're going to talk about, as all my colleagues have, an overview of the business. I'm gonna look at some of the market trends and the metrics that we follow and then really share with you what it is that we're going to do going forward to on our strategies, going forward to improve margin and improve market share. So as Alan said, I have over 20 years' experience in oil and gas working with two of the top service providers in the world.
And what I'm really, what I really think is great about the Clean Harbors group and the Oil and Gas Services group is that, you know, we've heard from our customers over the course of the last probably about 7-10 years, the importance of regulation, environmental responsibility, and, and how much that they want to have service providers who can provide some end-to-end services. So for us, as Eric pointed out, for Clean Harbors, you know, the disposal network is gonna be key. And the operators are really looking for someone like Clean Harbors Oil and Gas to be able to provide those services for them. So let me talk a bit about these services. So as Alan said, we were, we purchased Eveready in 2009, and that's what got us into the oil and gas business.
are 3 lines of business that I manage, and I'll go into a bit more detail about them going forward. But first and foremost, we have Seismic and Right- of-W ay. And what's important about that and really connected to the Clean Harbors philosophy is that it's a low environmental footprint that we help prepare those seismic companies for. Within our Surface Rentals group, that's really about managing the waste from drilling. And then as we go on to the Oil field Transport and Production, that's really about managing the waste, managing, cleaning, and maintaining production within the Oil and Gas group. So what are the business drivers? So this is a $400 million business made up of 14 different lines of business. Some of them were on the slide previous.
But the drivers that really make an impact for our business and the things that we look at, my team looks at all the time are well counts, footage drilled, rig counts, the oil and gas basins, those unconventional plays that have really changed the landscape in North America, environmental regulations, as I said earlier, as well as cross-selling between the segments. It's really important that my team works very closely with Eric's team and that we think about how are we going to continuously fill the disposal network. So let me talk to you a bit about the industry trends. So in the industry, you know, last week I was here in New York, and I attended a significant analyst event that was focused on energy and power.
What I saw there, the consistent message that came out of the 250 CEOs that were presenting was a really optimistic look at the market and what's happening going forward. So if we look at what's happening with oil and gas, with oil, you know, there's an optimistic look at where that's gonna go. It's gonna continue to grow with some of the light, tight oil that's coming out of the unconventional plays. Although gas is a bit muted and probably will continue so, we're still looking at an improvement in the gas, especially in Canada with some increased drilling. Unconventional resources will continue to be a major push. And again, the CEOs from the operators, as well as the other service companies, are looking at increasing their activities within the oil and within the unconventional plays in North America.
And then E&P spend, although most of the operators haven't yet announced officially their budgets, the consensus has been in not only in what I listened to last week, but also in all of the research that there will be a increased spend in exploration as well as in production. So let me talk now a bit about some of the metrics that we look at. So the well forecast. So why is a well count forecast important for us to look at as a metric? The rig count, which I'll talk a bit about later, is projected to be primarily flat, but the number of wells are looking to significantly increase. So why is that important for Clean Harbors? That's important because more wells that are drilled means more waste from drilling, which means more activity into the disposal network for us.
So the number of wells is really important. Footage drilled is another metric that we look at. So footage drilled, there's deeper, more complex, wells. And so that also means with longer drilling days and deeper wells, that means that there's going to be more waste, more opportunities for the services that we can provide for our customers. And if you look at all of these, both the well count and the footage drilled, both of those are trending to go up significantly. And then finally, we certainly do look at the North America rig count. And you'll see in this that every Q2, there is a, the rig count goes down. And that really is primarily due to spring breakup in Canada.
This is why if you also notice on this slide, slide 104, that the overall rig count, as I mentioned earlier, isn't looking to go up that significantly. But the consensus is that with the increased well count and the footage drilled, the service intensity is increasing. So lastly, what do, what do we look at and what is the team focused on? This map on 105 outlines the primary unconventional basins that are with the greatest opportunity. So you'll notice that we have oil and gas offices in most of these plays. And where we don't have specific oil and gas offices, we definitely have Clean Harbors offices. Now, if you remember back to Eric's presentation and Jerry's, both of them showed our extensive coverage across North America.
And for my team, what's really important there and how we work together is, that's how we will be able to grow into some of these new basins where we're currently not operating is, again, leverage the Clean Harbors overall footprint. And as far as the landfills and where we can dispose of some of that waste, Eric mentioned, and it's really important, one of the primary growth areas for the Oil and Gas group will be in the Texas and Oklahoma area. 50% of the rigs or 50% of the wells that will be drilled in the U.S. are in those basins. They're in the Permian, in the Eagle Ford. And it is a opportunity.
So when I say it's an opportunity-rich environment for Clean Harbors Oil and Gas, this is one of the areas that we really have an opportunity to not only offer our services, but to work closely with the Environmental Services group, from a waste disposal standpoint. Also in the Bakken, we have a, right now we have a fairly good footprint in the Bakken, but we can increase some of our service intensity there. So let me talk just a bit about summarizing some of those growth opportunities that we have. So in regional growth, definitely in the Duvernay, the Canadian Bakken, and in the Cardium, those are areas where we will continue to expand. And in the US, the Bakken, the Eagle Ford, Niobrara, Piceance, and Permian.
You know, one of the things that I learned recently is that in the Permian Basin next year, one company is expected to add 100 horizontal wells into that area alone. So horizontal wells have more footage drilled, more service intensity for us. So that's an area where we will be utilizing some of our underutilized assets from Canada and from the gas basins where we were primarily really focused and really have an opportunity to expand the service intensity across the board. From a service line growth and Surface Rentals, which I'll go into a bit more detail later, the geographic expansion will be really important for us.
And then from a customer growth standpoint, you would have heard it from all of my colleagues that we work very closely together to ensure that we have aligned strategies, aligned asset allocation so that we can leverage off one another for our growth. And so just one thing that I wanna outline here from you know having executing on our strategies that were put in place, when Dave was in charge of both the Energy and the Industrial, we looked at diversification from just the gas basins and from Canada as part of our strategy. So how does that manifest itself in this graph that I have before you? If you look, Q2 always has a downward push in the oil and gas services industry.
But what we've been able to do by diversification of where we are working and most certainly by looking at ensuring that we're in those basins that aren't just gas or aren't just oil, we've been able to reduce the impact of that Q2 downward push. In addition, on a flat rig count, our revenues have gone up. And so what that says is we've been capturing market share over the course of the last 12 months, and we're gonna continue to do, continue with that push. So let me just briefly go through some of these businesses. So Seismic and Right-of-Way services. There's four businesses that roll up into that group. It's our primary growth engine for this group is the increased spending that we expect in exploration.
So this is a team that puts together, prepares for the larger seismic companies to come in and acquire data. We have extensive mulching capability and actually have a No. 1 position in Western Canada. We can do line clearing with a low environmental footprint better than anybody. And we have the greatest number of machines, and we have that No. 1 position. And we have skilled and trained resources. So a number of our resources are seasonal, and they keep coming back every year to work with Clean Harbors. And what that gives us is a consistent workforce that focuses on safety and is well-trained. So the competitive landscape, there's a number of companies, small companies that work in this sector.
But the one thing I'd really like to focus on here is that none of them can offer the full breadth of services that we can in the Seismic and Right- of-W ay. And that's important as the focus from our customers is to deal with less contractors. They can deal with us for a number of their needs in the Seismic and Right- of-W ay. So again, completely integrated front-end services, those front-end services to capturing seismic data and skilled and trained personnel really is what differentiates us in the seismic group. In our Surface Rentals business, you'll see that the majority of our business is with the Solids Control. That is our highest margin business. We will continue to grow that. We'll continue to expand geographically in our Solids Control business.
We also have wastewater treatment, so the treatment of gray water that we work closely with the Lodging group, and with some of our other customers at the drill site to ensure that we're managing that water. It's an area where we can grow. The competitive landscape there as well is there are a number of players that touch a couple of those businesses, but they don't touch all of them. So again, in our managing waste through drilling right through to our disposal network, there isn't anyone who can offer what I would call that bundled service completely to our customers. And we really have a competitive advantage there. Significant asset base, we will ensure that that is being distributed for optimal asset utilization. We have versatile equipment, and we have access to cuttings disposal. And that really differentiates Clean Harbors Oil and Gas.
And then finally, Oil field Transport and Production services. So in this business, we have 6 different lines of business. This has the largest business line that's not rig count dependent. So we're working out in production. So we are cleaning, managing, maintaining, some of those production sites. We work closely with the Industrial Services group and share resources as Dave was mentioning when appropriate. It helps ensure that we keep our asset utilization up. So our competitive landscape here, again, a number of small providers, but we really have behind us in our Oil field Transport and Production that reputation for compliance and regulatory adherence to regulations as well as very well-trained individuals. And safety is absolutely paramount in this business as well. So we have service diversity within the Oil field Transport. We have mobile dispatch technology.
This is something that we implemented probably about 18 months ago. In this mobile dispatch technology, our guys out in the field, as they're you know out going from production site to production site, have on their iPads the ability to be able to enter in the work that they're doing. We can track all of that. It's one of the initiatives that we put into place that has really made a difference in our collections and in our tracking of the services that we provide. We have skilled trained personnel. We have great safety records across all of our Oil and Gas Field Services and spend a lot of our energies focusing on ensuring we're keeping our employees, our customers, and the environment safe.
So as you've seen in the other groups, we're expecting in excess of 10% organic growth. So we're going to increase service intensity. So what I mean by that is on those areas where we might only have one or two assets, we're going to be able to identify other opportunities where we can deploy further assets. We're gonna optimize those assets geographically. 50% of the wells drilled will be in Texas and the Oklahoma area. We'll ensure that we are leveraging our existing client relationships from our great work up in Canada as well as in the Marcellus to be able to deliver our services in Texas and in Oklahoma. We'll deepen those customer relationships, and we'll ensure that we expand appropriately our geographic footprint into new plays. All of this in an opportunity-rich environment.
I feel confident that with the team that I have underneath me, who is well versed in oil and gas, understands the market, understands drilling, as well as leveraging the other parts of the organization that will be able to deliver this. So just in summary, we also have, of course, we want to expand with organic growth, but we're going to do it profitably. And we will achieve that double-digit organic growth at the appropriate margin levels and increase our margins through increasing our asset utilization. You know, primarily right now, most of our business is in Canada. So we do have coming out of spring breakup some underutilized assets where you have we're using state-of-the-art tracking of our assets to ensure that we are going to increase our utilization. And my team is focused on ensuring that they can track that utilization.
They know that we're not going to go to ask for more capital until we can prove that we have deployed our assets in the optimal place, getting the appropriate margins before we get that capital. And we're also going to enhance the management team. So bringing on more industry experts who can sit across from the drilling engineers, can sit across from the exploration managers, and really put forward those plans, get ahead of the curve, not be reactive to when there's something happening on the rig site, but actually partner with some of these drilling managers and these exploration managers to be there and set out with their drilling plan how we're gonna be able to provide services. So we'll continue to increase that footprint of oil and gas experts. And then again, comprehensive workforce training.
We have great training for our managers and our leaders, at Clean Harbors. And, you know, we're the newest group into Clean Harbors, and we're ensuring that we're leveraging all of those processes and training so that we have the best team out in the field. So with that, I'd like to open it up to questions.
So maybe one of the points I think that would be helpful to mention with Laura's presentation is, you know, we have the capacity to surround about 100-125 drilling rigs at any given time. And we have about 250 or so centrifuges. And these are, you know, solids that's part of her Solids Control business. And when she talks about Solids Control and looking at the drilling rigs and what have you, a lot of that drill cuttings and that waste needs to be managed. And, you know, certainly as regulations start changing, particularly on the fracking side and on the frac water side, you know, we'll see where that takes us from a water treatment standpoint.
But I think one of the messages that we really wanna, you know, make sure that you're hearing loud here is that there's a lot of waste material and a lot of environmental needs, including the Field Services business that Dave is running on at those drill rig sites. So any questions for Laura? Mike.
So when you talk about utilization often in the organization, it's really about Surface Rentals. So where is utilization today? Share Canada versus U.S., where do you think it will be in the next 12 to 12 months?
Where is utilization, both U.S. and Canada today? And where do you think we can get it?
I'll focus the answer right now on Surface Rentals. So in Canada right now, across all of our assets, it's at about 40%-41%. In the U.S., it's higher. It's at about 60%. Now, some of the assets are utilized at 80% and some maybe a little bit less. What I do know is that we should be able to our target right now is 75%-80% utilization as an average across all of our assets. I believe it's absolutely doable. And I think that we can probably get there as we're going into the more active drilling time right now. And with our relationships, we're gonna be able to get there.
In 2014?
Yes.
In 2014.
In 2014.
So one of the things we tried to do, as you know, we got caught with a very limited number of customers that we were working with after buying Eveready. They had really entered the U.S. market within a very limited scope with very limited customer base. And a number of those wells laid down, or drilling rigs laid down when gas went under $2. And so I think the team has really done a great job, you know, here in the U.S. I think we're above budget right now in the U.S.
We are.
And if it wasn't for certainly the flooding and a lot of the impact in Western Canada, I think Laura's business would be doing a lot better than it has been. But we're, we're really confident, I think, in her ability to get that utilization level up.
Can we just make one dive in? So if you improve utilization, the aggregate's what, 50 today and you're going to 75-80?
Yeah.
That's 25 basis points. What's that equal in margin if we're saying every 5 basis points?
The question is, if our average is 50 and we go to 75, what's that margin benefit to the company?
It's, without giving you a non-answer, it's difficult because of the different types of assets we have. But I'm confident that two or three points at least is what we will be able to return.
Yeah. Probably much more than that, I would think.
There is.
'Cause a lot of that, obviously, depending on price, with utilization.
Yeah.
This business historically has been a very high margin business.
Yeah.
Very similar to some of our other niche businesses up there, like our seismic business, very high margin business because of our niche in that industry there. Question?
Yeah. I think everybody knows the Permian basin's gonna be, you know, drilled off next year. What sort of lead time do you guys have with visibility to ensure that that's going to happen?
The question is lead time and visibility on some of these new plays?
Yeah. So there's a couple of ways that we look at it. And so there's already drilling plans by the time you actually spud a well. Drilling plans have been in place for at least three months, three or four months. And in the Permian, that's absolutely the case. They're looking at another 100 horizontal wells coming in there above and beyond what's already planned. I, I think that if, from a combination of different research and then what I heard from the operators, it most certainly is going to increase exploration spending, and the North America outlook is quite bullish.
So you ramp up now or in December?
The question is, do we ramp up now or later?
In December, we're already starting to ramp up. I mean, we have, we've already got plans on how we're gonna be able to get into those areas. We also have. Well, we have space where we can actually park some of our equipment given the rest of the infrastructure from Clean Harbors. So it's a fairly easy my ops manager.
We're repositioning assets and.
Yeah.
Taking advantage of laying them down in Clean Harbors locations that are, that are not necessarily part of the oil and gas business yet, but at least repositioning our oil and gas assets there. Yes.
Are the assets you're moving to the Eagle Ford and the Permian predominantly idle today? Are you taking packages out of the Bakken and bringing them south for Bakken?
The question is, are they currently idle and are we repositioning idled equipment, or is there a movement of existing assets that are utilized?
No. It is currently idle equipment. We have customers that are counting on us in the Bakken and Marcellus and up in Canada already that we wanna continue to service. These are idle assets that we will increase our utilization.
Is the pricing better now that it is up in the business?
Pricing better in Canada than the U.S. at this point?
The pricing is dependent on the service intensity. So in the Eagle Ford, there's better pricing. It's pretty well the same, but we have, depending on the type of drilling and on the closed loop systems that are required, the pricing can change. But it is. It's fairly consistent.
One of the other things we do is with our Eric's organization. He has 11,000 roll-off containers and vac boxes. Our goal really is to position those next to Laura's assets out these sites and take those cuttings and really provide that one-stop shop to handle everything from the transportation, the processing of the material, the disposal of that material, and really tighten up that whole environmental piece for those companies. So and that's really been playing quite well, I think. One more question? Yes, sir.
The environmental questions on water treatment seem to be very controversial. I'm just wondering where is the water treatment business headed and, how big could?
Sure. The question on the water treatment side, probably on the fracking and flowback water. I'll take a shot first and I would tell you the Clean Harbors Eric, how many water treatment plants are we running commercially right now?
12.
So we have 12 facilities that are processing truckload quantities of water. So we're not tied to any pipelines per se. We're trucking water in. And we've handled historically frac water. But I think the bottom line is what you know, each play is a little different. The geology and the types of water and the flowback is different. So we really are trying to tailor our wastewater treatment capabilities based on the different types of formations that are out there. I think when regulations kind of firm up in regard to recycling and reuse, I think that's gonna have an opportunity for us to really focus in on providing a solution on the water side, whether it's providing reuse and recycle of existing water or providing you know, disposal for the water from these frac jobs.
But right now, that has not really been a big opportunity for Clean Harbors, outside of the Pennsylvania market. So thank you. I think we'll take some more questions at the end and maybe try to keep going here. Laura, thanks so much. Brian Weber is gonna join us. And Brian and I have been working together for a number of years. And he certainly he'll tell you he's a 20+-year employee as well. But for particularly for the past 10 years, been instrumental in growing the business and helping us with the acquisitions that we've been making. And does a fabulous job. I can tell you that nobody does it as good as Brian. And I think you'll be impressed with the work that he has to share with you here. Brian?
Thank you, Alan. Good morning. As Alan said, I've been with Clean Harbors now for almost 24 years. For the past 10, I've overseen our acquisitions. In that time frame, we've closed about 20 deals. So it's great to be here with you this morning and share with you a little bit of our, our M&A program. I'll also bring you up to speed on the Safety-Kleen integration, talk about our most recent acquisition of Evergreen Oil, and then finally give you some perspective on where we see M&A out into the future for Clean Harbors. As you can see from our growth chart, acquisitions have certainly been a key driver of our overall growth strategy here at Clean Harbors. In fact, in the 33+ years that we've been in business, we've closed over 35 transactions.
Some of the more notable ones, just to mention, would include the acquisition of Chem Clear in the late 1980s, which gave us some terrific treatment and disposal assets and also helped us expand, or accelerate our geographic expansion beyond the Northeast at the time. The Kimball incinerator put us into the lucrative, hazardous waste incineration marketplace. The acquisition of the Chemical Services Division of Safety-Kleen really gave us an unparalleled network of disposal facilities and service centers across North America, basically for cents on the dollar. Eveready, as folks before me have mentioned, really put us into the booming energy services market in Western Canada, as well as strengthened our position in the industrial services marketplace, and also gave us some really nice complementary lines of business, such as lodging services and the catalyst handling businesses that Dave Parry spoke to.
Of course, more recently, the Safety-Kleen acquisition at the tail end of last year sort of reaffirmed our commitment to Environmental Services and recycle and reuse options across a broad and extensive customer base. To take a look at some of the deals that we closed in 2012 that will hopefully give you a perspective for some of the diversity in our M&A program, as Dave mentioned, we acquired a company called Elite Camp Services last summer. They're a camp and catering and lodging services provider that we were able to acquire at a very attractive price. They had some terrific assets in Alberta and Saskatchewan and were operating in regions that we historically didn't have camps in. So it's a nice strategic fit for us there. Sierra Processing is a specialty industrial business that provides tank cleaning and materials processing services.
What was most attractive about this deal is they had long-term contracts where they provide people on a full-time basis inside 11 major refineries and petrochemical plants in the U.S. So it was a great opportunity for us to sell our full suite of services inside those accounts. I believe Dave mentioned the Catalyst Services business as well that we acquired in December. And this was very much like the catalyst handling business that we got into through our Eveready acquisition back in 2009. And by bringing these two businesses together, it makes us the number one provider of catalyst handling in North America. And then finally, we closed out the year with the Safety-Kleen acquisition, which was obviously our biggest deal of the year. So the first three I mentioned were fully integrated shortly after close. And we expect Evergreen to be fully integrated by year's end.
I'm sorry. Safety-Kleen. So certainly, we envision M&A to continue to be a key part of our growth going forward. As a company, we've really developed a core competency around M&A where we've gotten very good at it over time. We've got a great deal team and due diligence process, very experienced integration team leaders, very aggressive day-one cutover plans. And I'll give you a little more color on each of these phases in future slides. And more recently, we've put a lot more focus around our post-merger process and have a much more robust post-merger process. We keep our integration teams intact and our steering committees ongoing for six months to a year after the deal's closed to ensure that we can deliver on the synergies that we've targeted and deal with integration issues as they arise.
We really see a healthy deal flow across all four pillars of our business. We have a number of opportunities that sort of bubble up proactively through our sales and operations leadership out in the field. Those opportunities are generally aligned to the growth strategies of our four pillars. Due to the diversity of our service offerings and the geographic reach that we have, we field a number of inquiries each week from investment bankers that are bringing businesses to market that they think might be a fit with Clean Harbors. So we're fielding anywhere from, you know, 8-12 opportunities per week. We run them up against the evaluation criteria that we've developed over time. We're always very mindful of sellers' expectations around value. We don't overpay for our deals.
We never pay for our own synergies and really view ourselves as value buyers. So there's a number of things that we consider when looking at a target. Maybe to mention a few, does the target give us an opportunity to extend our lines of business? And certainly, Eveready was one of the better examples of doing just that. Does the target allow us to grow geographically or maybe create greater scale in one of our existing markets? We love opportunities where we can drive incremental waste volumes through our fixed cost disposal facilities because we've shown over time that when we can do that, we see some really solid margin pull-through. We obviously look at areas like historical financial performance as well as prospects for growth. Always consider that both the growth and maintenance capital requirements of the target and how that might impact cash flow.
We never underestimate the cultural fit of bringing the two businesses together. It's always been very important to us. And we're mindful of the competitive environment as well. Really, our aspiration is to be the number one or two service provider across our major lines of business. So we obviously have a detailed valuation model that includes assumptions around historical and future financial performance, always with assumptions around synergies as well. And we look at all of the things you would imagine, like accretion and dilution analysis, return on capital, revenue and EBITDA multiples that we'd be willing to pay. Always try to structure our deals in a way that gives us the most beneficial tax treatment as well. We've got a great due diligence process that runs anywhere from 30-60 days based on the size and complexity of a deal.
We're lucky to have a deal team with over 10 years of experience that has been working together on the past 20-plus deals that we've closed. So great experience and extensive focus in the areas of financial due diligence, tax implications, risk, operations, environmental liabilities, etc. We always like to get out and visit the sites that we're contemplating acquiring. We love to tour the plants and kick the tires on the assets and spend time with the management team so we can assess the cultural fit. We report our findings back to a deal team that's chaired by Alan on a weekly basis. All of this activity is concurrent with the drafting of an acquisition agreement.
Immediately after the signing of a definitive agreement, we launch into our integration planning phase, which again will run from 4-8 weeks based on the size of the deal and whether or not regulatory approvals are required. We've got a tried-and-true process that we've continuously enhanced over the last decade. We're lucky to have some very experienced and seasoned integration team leaders. The general deals would require 25+ integration team leaders that are organized under 4 silos that would include corporate teams, operational teams, IT, and commercial teams. We always seek the participation of subject matter experts from the target companies and that they work side by side with our team leaders. We use a weekly steering committee process to drive the teams, identify and resolve issues as they arise and make key decisions along the way.
So some of the deliverables that are common across each of these teams in any deal would include things like a detailed team charter and work plan. This really forces the teams to document everything that's gonna be required to ensure a successful integration. We try to develop a keen understanding of the targets, business processes and the systems that they use to administer those processes and then ask our leaders to make recommendations on the post-closing process and systems that we ought to employ. Additional things would include very exhaustive day-one checklists and some team-specific items like synergy targets maybe our recommended organizational structure for that particular function. By all accounts, our day-one approach is a very aggressive one, but that's served us very well over the years. It generally involves a full cutover to our industry-leading systems and our back-office shared service model.
We like to eliminate redundant headcount as quickly as possible. And where there's opportunities for office consolidation, we usually start with those initiatives right on day one. We like to have our own personnel out at all the acquired sites on day one as well. So we purposely close our deals on Fridays. We like to use that opening weekend to do a lot of training and orientation and team building. And in fact, this past weekend, in conjunction with the Evergreen acquisition, we had over 40 Clean Harbors and Safety-Kleen people out on site at the various Evergreen locations. So it's a key part of our day-one approach. We think this aggressive approach helps us capture synergies early on and really gives us great transparency into the acquired business. So there's a number of keys to success in any integration.
To mention a few, building one company is at the top of the list. We wanna get all the right people on the bus from day one and work together toward a common set of goals and objectives. Identifying the key talent at the target and doing everything we can to retain those folks is of utmost importance. We don't wanna lose a single customer through any acquisition and work tirelessly to ensure a smooth transition for our customers. We wanna leverage our WIN system to the maximum extent possible. As Alan had mentioned, we have over 20 years invested in over $100 million in building this proprietary system that really differentiates us from our competition. We wanna capture the full synergies that are inherent in these deals and do so as quickly as possible.
And finally, honest and open and consistent communication throughout the entire process is critical. So moving on to the Safety-Kleen update, as you know, we, we closed Safety-Kleen at the tail end of 2012. And I've really been thrilled with the cultural fit between the two organizations. It's been better than we could have hoped for. And, there's been really tremendous teamwork over these past nine months in, in working through integration issues. We're within weeks of having the entire company up on a single ERP, which is no, no small undertaking. We've integrated Safety-Kleen's front-end order-to-cash system with our WIN system to give them the benefit of our low-cost disposal routing logic, our best-in-class waste tracking systems, as well as our logistics systems.
Just recently, we've built out a new proprietary platform for them to manage the sale and logistics and distribution of their re-refined products as well. We continue to see $70 million-$75 million in-year cost synergies and have recently launched about 30 strategic projects, many of which Jerry spoke to in his update, that are really focused on revenue and profit growth for the Safety-Kleen business. On slide 134, you'll note that at the time that the transaction closed, we identified nearly 600 post-closing actions that our integration team leaders needed to close out. We continue to drive this process through a weekly steering committee. I'm happy to say that as of the end of last week, we're 85% complete on those post-merger items and are fully confident that we'll close out the remaining 15% by year's end.
I've mentioned, the line of sight to $70 million-$75 million of cost synergies in 2013. That's gonna translate to about $100 million in, cost synergies for full year 2014. We're realizing those synergies across a number of categories, the largest of which is headcount reductions, which will account for about 60% of the total, but certainly getting meaningful, contributions through internalizing waste disposal, internalizing things like transportation and maintenance, all of which were, or much of which was outsourced under the Safety-Kleen model. So moving on to Evergreen, as you know, that's a deal that we closed last Friday at a purchase price of $60 million. Evergreen is an Environmental Services company operating throughout California.
Their principal asset is really the Newark re-refinery, which is capable of processing about 24 million gallons of waste oil per year and producing about 17 million gallons of Group II base oil per year. Throughout their history, they've re-refined over 175 million gallons of waste oil. They also have a transfer facility in Carson, California, to service the Southern California marketplace. Very much like Safety-Kleen, they offer a number of complementary Environmental Services such as parts washers, drum collection services, wastewater services, etc. The facility underwent a major expansion project in 2008 where they built a second re-refinery train and essentially doubled the size and capacity of their facility. Shortly after completing that expansion, they suffered a major fire, which took both trains down for a number of months.
So as a result of rebuilding from the fire, overspending on their expansion program, and coming out of the global recession, they ran into some real cash flow challenges, which ultimately put the company in bankruptcy back in the spring. So after much due diligence and many negotiations, Clean Harbors emerged as a winning bid. We know of at least two higher bids than ours that both required financing. And we were able to offer a bid with no financing contingency and certainty to closing and ultimately emerged as a stalking horse bid. Evergreen has a number of locations throughout the state of California, again with Newark being the primary facility in the north and Carson the primary facility in the south.
As Alan mentioned, the California market has been a real strong market for both Clean Harbors and Safety-Kleen, with well over 1,000 employees throughout the state, a number of permitted facilities, and a number of Safety-Kleen branches. As Alan also mentioned, Safety-Kleen exited the waste oil business back in 2005 as regulations became more stringent and largely due to the fact that they didn't have a West Coast facility where they could consolidate and treat the oil. And it was no longer economically viable for them. So we're thrilled to be back in the waste oil business and to allocate Evergreen's assets across the Safety-Kleen branch network. As part of this acquisition, we took on about 170 employees and about 80 pieces of rolling stock. So the deal was attractive to us on a number of levels.
First and foremost, it gives us a facility in the west in California, which complements our midwest and eastern Canada refineries that Eric spoke to quite nicely. As Jerry said, the California market waste oil is regulated in California. And therefore, the acquisition costs of that waste oil are the most favorable in the state and in the country at about $0.50 a gallon as compared to closer to $1 a gallon in the rest of the country. We can immediately direct Safety-Kleen's excess feedstock to the Newark re-refineries so we can manufacture a base oil and sell it at a higher margin dollar than if we sold that oil in the recycled fuel oil market. I did mention that Evergreen is the second largest collector of waste oil in California.
California collects about 100 million gallons of waste oil each year. Evergreen collects about 12 million of those gallons. It's a feedstock-rich state for us. I mentioned the Carson and the ancillary Environmental Services, which accounted for about $12 million in revenue last year for Evergreen. As we look to the future, we continue to see M&A as a key lever of the company's growth strategy. We'll be opportunistic as we have throughout our history, but a somewhat more targeted approach aligned to the growth strategies of our four presidents. We continue to be well-positioned to be acquisitive. It's something that we're very good at. We've got a good track record. We have a strong balance sheet. We've demonstrated that we can be selective and patient and really seek out the best values in the marketplace.
We've got a strong pipeline really across all of the segments of our business. We don't have necessarily any priority to find a new line of business. We'll continue to focus on North America where we still think there's plenty of room for growth yet. We'll continue to look at 10 or so opportunities a week. That seems to be the current rate of deal flow that we're experiencing. We do expect that there'll be a number of environmental businesses on the market in the next 12-18 months, particularly in Eric and Dave's area. There's a number of sponsor-owned businesses that are coming up at the end of their time horizon. As well as a lot of family-owned businesses that, as we understand it, will be looking for an exit strategy.
So we're excited about the potential for a fair bit of acquisition opportunity, in this space in the future. So with that, we can open it up for questions.
Great, Brian. Thank you. Michael.
So the tough one is we bought Eveready and Safety-Kleen. And if you added up or did them individually, I can choose. Can you talk about the success of your returns on capital for the, you know, you bought them having an expectation of payback period between so many years, you know, to bring them to re-.
Yeah. So the question really is, the success on return on capital on our most recent acquisitions and, or lack thereof.
Right.
You can field that one.
Yeah.
Like.
Yeah. So, I think the Evergreen, I'm sorry, the Eveready business was up and down. And, and, I think we've seen a nice growth trajectory in that business since we've acquired it and, and seen pretty good returns. I think to a lesser degree, we've seen that for Peak. We bought Peak at sort of the trough of the cycle. It ramped back up quickly. And with the natural gas prices going down, we've seen pressure on the utilization of those assets and haven't seen as great a return over the last 12 months as we would have liked.
Safety-Kleen, certainly.
And certainly Safety-Kleen being the third. We've really yet to realize a great return on our investment. But as we work through the initiatives that Jerry spoke to and as pricing comes back, we're pretty excited about the potential there.
Yeah. And I think when you look at the synergies that we've been able to find and, and continue to find, if it were for not that chart that, Jerry shared with you on the disconnect on base oil, I think we'd be, sitting here with a different story on that, not from a return standpoint. But, you know, we, we believe that's sort of a short-term issue for us and, continue to see more opportunities on the synergy front.
Yeah.
Yes.
So you've mentioned that there's probably gonna be a lot of environmental opportunities in the next few years. Just did the Evergreen acquisition, that was a really nice opportunity to build a hub in there. When you think about the re-refined market, when you think about used oil, as well as what had been the excess capacity that Safety-Kleen has had, how interesting is it to you for getting more collection for that market going into the next year?
So I think the question really is probably more to do with the re-refining business and.
How interesting is used oil collection in the Safety-Kleen?
On the collection side rather than the re-refining side? Or is that the question or both?
Yeah. Both.
Yeah. I think one of the things I'll mention and maybe Brian can chime into is that, Safety-Kleen, prior to us being involved with them, negotiated a couple of times on Evergreen. And they were talking more on that $100 million level, to buy that business back then. And so a lot of due diligence was done on that business. A lot of work was done. But in the end, they had backed away on it as we were in the process of merging or acquiring them. Yeah. Other comments, Brian, on?
Yeah. I would say that we're seeing a good amount of activity within both the oil collection business and the re-refining business. It's a business that we're now in and that we're good at. And we'll be opportunistic going forward.
Yeah. Yes.
So as you're going through the M&A process, you buy a company that has parts that you like and other parts that may not fit. How aggressively do you look at divesting, Jerry? So do you think about that in terms of the strategy, where the company's going or.
Sure.
You say it's a good return business for Peak?
Well, I think the question is about divesting some of the businesses that might come with some of these acquired companies and whether we divest some of them or not. And I think, you know, to speak to that issue, I would say that we have divested small companies. Eveready was a roll-up, and to some extent, a failed roll-up, under the tax structure that they were trying to work within and the businesses that they were acquiring. And we divested a number of businesses there, Brian. Do you remember offhand?
Yeah. A couple of small industrial health businesses that were aligned to their mobile workforce as, as well as a European Catalyst Services business. So probably three or four in total.
Yeah. But I would also say that, you know, as we've looked at the portfolio of services that we have today and the lines of business and the customers we're servicing, I think we're always looking at, you know, are we doing the right thing for our customers? Are we the best service provider for the needs that they have? Are some of our capabilities maybe better off being aligned with somebody else? And if so, should we merge or acquire their business or should we sell maybe our business and move on? So I think we are looking at that. I think we keep our eyes open. Some of the niche businesses though that we're in, it's safe to say they're very profitable and we have number one share in those businesses.
So we run a $100 million catalyst business today. We not only go into a refinery and remove catalyst, which is one of the most expensive things that happen inside a catalyst. Remove and install catalyst could take 7, might be a $7 million cost to them. But we also recycle that catalyst at one of our thermal treatment plants and give those customers credit for that, for the precious metals that are in that catalyst. So when we think about that integrated service that we offer, you know, that catalyst business might be a little niche, but we're number one market share in North America and it really fits nicely in with our disposal business. So that's an example.
You're saying you've got these things strategically not just on return.
Yeah. I would say we're in the midst of going through our 2014 budget. The team next week is actually getting together. And we're gonna go through every single line of business that we're in. What are the markets? What's our share both in U.S. and Canada? What's our capital, our return? You know, we really, I think we really do a good job of looking at the business from a portfolio standpoint, making sure that we're making the right decisions here, particularly for capital investment and return on investment, right? I mean, some of the businesses we have, and Laura knows this, you know, she's got a lot of underutilized assets and these are very expensive assets. And so we've gotta put those to work before we start spending more money in some of the, these businesses. So we know that. Yes.
On that topic, in the first place yesterday, you said there's gonna be a significant amount of capital that's gonna go into Evergreen. What order of magnitude is that in terms of your incremental capital?
The amount of capital to go into Evergreen.
Yeah.
So I would say $5 million-$7 million over the next two years. A lot of that to upgrade their fleet and some of it to make de-bottlenecking improvements at the facility. That will trail off to about $1 million of maintenance CapEx on a go-forward basis.
Yes, sir.
Larry.
Just on Evergreen, the enhanced capital that increased your capacity. What is the utilization now at that facility?
Is the capital gonna increase capacity there?
It will indeed. Yeah. They're running at about 50% capacity. The nameplate capacity on the plant is 24 million gallons a year. It'd be our aspiration to get north of that.
Can you collect all? I assume the 12 million is all collected in Canada and in California. Can you collect still that whole 24 just in California where it's lower price as opposed to bringing your excess from out of Canada to make it higher? So, is the opportunity there to collect all of the needs of that plant right there in California?
Yeah. And, and we think it is. Evergreen today collects about 12 million gallons. Safety-Kleen still manages about 12 million gallons of waste oil that they use a partner to collect for them. And so when they exited the business, they sold the trucks and basically hired someone else to service the customers. But we still manage a relationship with those customers. And about 80% of those customers are contracted national account customers. So between Evergreen's volume and Safety-Kleen's volume, we've got about 24 million gallons already in the state.
Yeah. And the company runs a fleet of over 1,500 rail cars. About 1,000 of those are moving oil, waste oil. So from a logistics standpoint, we can redirect volume to any one of these three plants. We're really good on the logistics side to handle the needs of these plants. Other questions? Super. Great. Thank you so much, Brian.
Thank you.
Great job. Obviously, Jim knows he needs an introduction here. I think all of you probably know Jim, Vice Chairman of the company. He's done an awesome job. 8 years now, I think, Jim.
Yeah.
Unbelievable. And, you know, joined the company back when we were $600 million or so. And so done a great job, you know, leading the charge here. So, Jim.
Thank you so much, Alan. Good morning, everyone. What I'd like to do is just review some aspects of our financial performance and talk a little bit about the key metrics that we look at that were not only important in the past, but what are also important for our future growth. First, just a quick recap on our Q2 results. As you probably saw, our revenues increased 64% from $523 million to $860 million. $300 million of that revenue increase roughly is from Safety-Kleen. Our EBITDA increased 39% during the period. Our net income declined slightly by about $500,000, year-over-year. Clearly, in the quarter, we saw the increased non-cash depreciation and amortization of intangibles mostly associated with Safety-Kleen in the quarter. And that was in the $28 million range.
We also saw year-over-year, our debt expense, our interest expense go up about $9 million associated with the acquisition of Safety-Kleen. And we also had about $7 million of integration and severance costs during Q2 associated with our integration. Q2, although our incineration volumes and our landfill volumes were strong, we were hit with a number of headwinds that kind of all hit at the same time. And one of them that was key was the historic amount of flooding that we saw in Western Canada, which was somewhat unprecedented. If you followed that at all, it was unbelievable what, what had happened there. And it affected several of our businesses. Some of my colleagues here noted some of the difficulties that they had during that period. It caused some of our locations to need to be closed down.
Some of our customer sites needed to be closed for a while. We saw delays in some projects. Also during the quarter, we saw delays in projects associated with the refinery business, although the refinery business has been going very strong and unprecedented efficiency that we're seeing at our customers. And so the turnarounds, taking those plants down for turnarounds has been delayed. But the good thing is that that work does come back to us. And we can respond to our customers both for planned outages and turnarounds as well as unplanned outages. Also, due to some strategic decisions within Safety-Kleen on the blended to base oil sales, we decided for one particularly large customer from a price standpoint to walk away from that on the blended side. And also, due to in the government with the sequestration, our business there has declined.
So what this caused was it didn't affect our overall volume, but it caused a shift, more to the base oil side of what our sales were. And from a revenue perspective, clearly that has an impact because it's a higher price. The margins are roughly the same, but it certainly had an impact during the quarter. So what we had done was we reduced our Q2 2013 guidance to reflect, one, what happened during Q2, also the delays of some of the projects that we have seen, that change in the blended rate. And we also decided we have typically in the past included in our guidance events. And as you know, the company has worked on events that range from, you know, $20 million to $250 million one year, where we respond to emergency events. And we typically put $20 million in.
We took that out. So it’s icing and upside if we respond to events that way. So our guidance was 3, is now $3.5 billion-$3.55 billion. And our EBITDA is $535 million-$545 million. We exited Q2 with very strong position, cash position at $274 million. This chart, and for those on the webcast, it’s number 144. That is the page I’m on. It’s just a tabular depiction of what I just talked about. But I’ll just mention one thing on this slide that represents an opportunity. And we’ve been through this before and we’re doing it right now. If you look at the EBITDA margin last year at 17%, 14.4% was the margin in the second quarter of this year.
Therein lies the opportunity wherein bringing in Safety-Kleen with our integration costs, putting them on our central platform, that is the opportunity of bringing the overall company margin up to 20% as Alan talked about over the next three to five years. I'll come back to that in just one second to talk further about that. Looking at our historical revenues going back to 2005, what you see is a compounded annual growth rate of 17%. Clearly, this both reflects our organic growth as well as our growth through acquisitions. Of that 17%, roughly 8% represents the organic growth. One of the other things I would point out, the increase in 2009 and 2010 reflects the Eveready acquisition that we had done. But also this growth rate incorporates the very severe Great Recession that we had in 2009.
We're proud of the fact that we've been able to grow through that, as you can see on this chart. Looking at those same years and looking at our EBITDA, you can see that our compounded annual growth rate was 23%. If you compare that to the 17% in revenues, you can see the operating leverage in our business model. Clearly, as we have been working through this, we have a way of approaching this. It involves cost reduction. It involves smart pricing from a value standpoint of what value we're providing to the marketplace. Pricing is centrally controlled at our company and evaluated. Then also the operating leverage, not only from our equipment and people, but also SG&A.
What I'd like to point out on this chart is if you look at 2013, the last 12 months ended June 30th, 2013, you see that we've hit a new level where we've crossed $400 million in revenues. And with the guidance that we're talking about for the full year 2013 as we go through the rest of this year of that, say, the midpoint $540 million, you could see that we've clearly hit a new step, a new upward step here, similar to what we had in 2009 after we acquired the Eveready business. But what I'd also like to point out, and you've heard a lot from our folks today, that we're working on a lot of initiatives right now that have an annualized effect that's not fully reflected as our base earnings, if you will.
As we enter 2014, I think you can easily see that we're, we'll be operating at a base of around $600 million. How do I get there specifically? Brian had shown a chart where he talked about the synergies that we're working on with the Safety-Kleen integration of $75 million this year. But clearly, not all of those savings were from day one this year. So the annualized effect of that, of all that we're doing, is $100 million by the time. So that adds $25 million. If you look at the Ruth Lake project that Dave talked about, that's coming on at the end, during Q4, will be fully implemented. That's gonna add another incremental, almost $10 million of EBITDA when that's operating for a full year next year.
Also, this year, we'll have had at least $15 million of severance and integration costs that won't be going on next year or will be less 'cause we're always doing acquisitions and integrating. But clearly, this is a big one, $15 million that we'll have been spending this year. And then we alluded to before, and Jerry had put up there, the base oil price increase of $0.10 is also gonna add certainly some EBITDA to our numbers. And certainly, we're also working on the blended side with a price increase there. So it doesn't take much imagination to see how that $540 million becomes $600 million, which clearly is a whole new step as you look at this chart from an EBITDA perspective. But about margins, let's look at margins. And this was the opportunity I was talking about before.
If you look going back to that same time period from 2005, you can see that our overall margin was 12.7%. And by the way, it was about 11% prior to that. I'm looking at the red line going across this chart. And it, this is the same EBITDA chart that you just saw, just with these lines added on the top. And I'm on page 147. After the Eveready acquisition with a lot of the initiatives that we had done back in the 2009 timeframe and the initiatives that I described before, centered around cost reduction, pricing, and operating leverage, we've been able to take that EBITDA margin up to the 17%-18%. Clearly, in 2013, if you look at the last 12 months, that has come down to 14.9%.
But clearly, that's bringing Safety-Kleen, which is somewhere around an 11% margin business, with the integration savings, all that we're doing there. And what I had mentioned, and you heard from Jerry today as well as Alan and Brian, that having that company on our central platform and addressing that company, this is gonna be a major driver toward margin expansion beyond the savings just from the integration. One of the things that we're particularly proud of is our free cash flow generation in our business. And here you can see, going back to 2009, that we were generating $50 million of free cash flow, and we've grown that into the $100 million range. And there's two lines I just wanna focus on for a moment on here.
If you look at the change in working capital, in fact, if you look at 2011 and 2012, you can see our free cash flow generation was $42 million one year and then $156 million the next year. I would encourage you to average those two at roughly about $100 million because if you look at that change in working capital, we had an investment of working capital of $74 million in 2011. We did some acquisitions where the DSO and the extent to which those companies that we acquired were in electronic billing caused us to have to invest in working capital. Bringing that DSO down by 10 days and putting them on our systems has enabled us to recover. You can see the next year in 2012, we generate cash from working capital of $45 million.
So that's the main reason why I would tell you to look at that. So we're at a $100 million level. We'll continue to be at a $100 million level this year. And I see that growing substantially, due to the EBITDA growth that I mentioned before, going forward. The other line that I would just focus on for a moment is the capital expenditures line that we're generating this kind of free cash flow despite the fact that we're investing heavily in our business. This year, or last year, we were, we had CapEx in the area of $200 million. This year, it'll be $280 million, as was referenced to before. And a lot of growth projects, some nice returns that we can continue to grow our business and still generate good free cash flow. Just a few words about our balance sheet.
It's very important that we keep a strong balance sheet, not only from the standpoint of being prudent, but also it's important to our customers. We're engaged with them heavily. They're entrusting us with some very important services that we provide. And it's important that they know that we're gonna be around forever. So we keep a nice strong balance sheet. We like to keep some cash on hand. Our long-term debt right now is $1.4 million. Our net debt leverage is about 2. We wouldn't wanna go much over 3, for the right investments. We're not gonna over-lever the company, but there's a lot of debt capacity to continue to grow the company if we want, which we do intend to do. Environmental liabilities, as Alan referred to before, is at about $220 million.
I have a chart here to just give a very high-level overview of the environmental liabilities. Certainly, if you read our 10-K, we have a lot of disclosure around it, and it's all explained. But I can just do a high-level recap here of the same numbers that you would be going through in there. Of that $220 million, nearly $50 million represents asset retirement obligations in accordance with generally accepted accounting principles we need to put on our books, the liability of closure and post-closure of our operating facilities in the future when that happens. Also, we have about $170 million of remedial obligations. These represent projects, for the most part that we've been working with over the last decade. We know them very well.
We have engineers that are involved in them, working very closely with the various regulatory authorities on the various projects. We have a very good handle on these. I will tell you that the total environmental liability is conservatively stated because in accordance with GAAP also, we must report these at third-party costs. But we are an environmental service company, and we're quite often able to do a lot of the work ourselves. And we also bring new technology to this. And we've done that in many projects. We're actually able to save money. So this is a conservative assessment, I would say, of, in accordance with GAAP, of our environmental liabilities. Talking about capital allocation for a moment, a lot of the, I was so pleased to hear the group focus on that.
Each of you talked a lot about returns. This is a real focus for the company. Clearly, we're in a lot of different areas. We wanna. It's a little bit like competition for the capital that Alan and I have set up. Our maintenance CapEx overall, we would assess and say is probably about $130 million of that $280 million. The rest are high-growth projects. We talked, for example, just to give one example, the lodging camp facility at Ruth Lake. That project will pay for itself in a few years. It's a nice return project. Well, you've heard from my colleagues. You probably saw one common theme through what everyone was presenting. It is the core of our business. What Clean Harbors does is maintenance, cleaning, disposal, and recycling wherever we can.
Eric put up a great chart of our asset base where across North America, we have an incredible, unparalleled asset base with utility and industrial-grade facilities. The strategy has been to build services around that asset base, complementary services in several verticals. So I would point out to you and say that we are a diversified company. We want to be diversified. What's great about the assets we have is that if one vertical is not doing so good, we could move those assets into another vertical, whether it's taking our disposal and maintenance capability into the oil and gas business because we know that energy is a major theme going on in North America. And we've seen that.
We're invested there because we can bring our services and our environmental capability, which Laura so aptly pointed out, that industry could use the number one provider of Environmental Services to help find solutions in that business or to consolidating and getting into the small quantity generator business with Jerry's business. So that, but we're still doing that same kind of business, but we're touching many different verticals. And we've been doing that for years, whether it's pharmaceutical, utilities, government, refineries, chemical companies. That's really what it's all about at Clean Harbors. So the way to think of us is we're the premier environmental and industrial service provider, as I just pointed out, through our asset base. There are high barriers to entry. We have the permits, we have the facilities, and we have the network.
The markets that we're serving, we're concentrating on those that have dynamic growth. We have a large customer base. We've been working with customers for decades. There's so many referrals to our business that come through having that kind of long-standing relationship. The cross-selling, as we expand the services that we provide and as we extend our geographic reach, there's a lot of cross-selling that takes place in all of the businesses that you just saw. As I pointed out, from a performance standpoint, it's a leverageable business model. There's strong earnings potential. We have a strong balance sheet to be able to continue to grow. We have a proven management to be able to continue the kind of organic growth and the acquired growth as you've seen in the past going forward.
So we're really excited about it. Alan and I are so glad to be able to have our colleagues here for you to get to know them better because you're probably tired of just seeing Alan and myself and Jim talking. So, I think with that, I think we're turning it over to general questions for everyone. Is that what we're doing? Yes, we're gonna have all the speakers come up.
Okay. Thank you, everyone. Questions?
Thanks. This question is. It's probably for, I guess, Jim and Alan. So, based on a lot of the acquisitions you folks have done in the last few years, there's certainly now, you know, perception that you have become very much a cyclical company. So I wanna see if you could address that and then, at the same time, the degree of the sensitivity you have as a management team in considering, you know, who you a re as a Clean Harbors, you know, identity and profile. Thanks.
Sure. You wanna take a shot at that one?
Sure.
I'll start, and then, Alan, I'm sure will wanna add something. I think what I described just a few moments ago about, to give oil and gas as an example, we're not doing drilling. We're kind of, there's a lot of opportunity. There's still a lot of rigs that we're not on. We're getting into an area that's a hot area. I don't see it as having the cyclical implication for us as much as if we were the one doing the drilling or operating the wells. And I think the perfect example of this is when gas prices went down last year, our utilization went down, but we brought it right back up in the U.S. because we moved into other plays, and we were able to do that.
Plus, if you think of the producing well, it's not, that's what we're really geared toward. We wanna be able to do that maintenance and cleaning at a producing well. And that goes on for a long time, and it's not immediately impacted. They don't go on and off with the price changes of oil and gas. I know I'm concentrating in that area, but that is an area that people would say is the most cyclical. But even there, we feel very comfortable. I don't feel that same degree. Certainly, there is some 'cause we're on rigs and we've seen some of that.
I think the kind of work we're doing, that maintenance, cleaning, disposal, and the environmental work that we will be increasing, I think is a little less cyclical than most, just to use that as an example.
Great. That's great. Absolutely.
Can you tell us what percentage of your revenues at this point is based on selling things that you recycle?
I couldn't hear the question. I'm sorry. Was that mic on? There you go.
Can you, maybe I speak too softly? Can you tell us what percentage of your revenues are based on things that you recycle and sell as opposed to other revenues?
Yeah. We, I think on recycling, we historically have recycled everything from, you know, copper out of the transformers. We handle catalysts from the catalysts. We recycle the metals and, solvents and, you know, oils and catalysts, all those. I think total revenues right now of all recycled products, including oil, is probably about $700 million. Probably about $700 million now of recycled revenues, roughly.
Alan.
Sorry.
Yeah. In Eric's discussion earlier, he talked about one of your barriers to entry, your competitive positioning was the cost, to your customers, of actually choosing a different provider.
Yes.
and what, Jim just sort of alluded to was the fundamental essence of the company is the replacement cost, right?
Yes.
This is big moat. Can you just talk a little bit about, I guess, first with Eric's things, if you can try to quantify what those costs are for customers to actually switch, what the switching costs are? That's a, that's a drill minute, minutiae question. But also big picture, just in terms of the entire disposal complex, what you think the cost to replicate this would be?
Yeah.
You know, the one thing that doesn't seem debatable is that we're gonna increase the amount of hazardous waste that we're producing in this country, you know, and just seems like you guys have a pretty special position in disposing of those assets.
Yeah. And I would say that all of the permitted facilities that we have, the only way we got those is through acquisition. We ourselves tried to permit an incinerator 25 years ago. And after spending about $12 million in three years in the effort, we withdrew our application. It is impossible with the NIMBYs and all the other, you know, issues out there of getting a new permit. So a lot of the permits that we have were grandfathered when RCRA really came in place in 1980.
Although a lot of them have closed and a lot of competitors went out of business, the company really looked strategically at what facilities, to your point, you know, were worth a lot of money that we could buy and afford to buy, and also we could leverage. And the key one really was the Safety-Kleen acquisition of 2002. We essentially bought, you know, almost $2 billion worth of assets that were created by the major railroads and the major waste disposal companies. And because they went into bankruptcy, we essentially paid $35 million in cash and took on those $200+ million of liabilities. And that was really what we paid. And it was a fabulous opportunity.
I mean, just if, if you take Deer Park alone, the cost to rebuild or build a Deer Park incinerator, if you could get a permit, would be $300 million probably today. I mean, you know, so to answer your question, you know, like, how, how much would it cost to build out just 100 facilities? It's, it's in the $ billions. I mean, these, these are really, really nice plants. We, we've got some great assets. So, you know, the key is to continually drive performance and improvement, you know, and, and, and get a better return on those investments 'cause they, they are expensive to keep up and running. And, and we really have, I think, based on Jim's chart there, really showed you that we're starting to drive more volume into them. The big thing that these facilities need was volume.
It's one of the reasons why they became available to us. They, they were built and nobody came. You had to put a collection network out there to get the waste and fill up the holes, fill up the landfills. We closed one landfill. It's been closed for 10 years right now. But we have a second landfill, for example, in California. But our current landfill in California is full right to the permit every year. And, and so, you know, we, we haven't yet reached that profitability level where we wanna make that capital investment to open up that second landfill yet. You know, pricing is really good. Margins are great. But, but it's, it's an example of sort of the decision-making that we're, we're doing in each one of these assets. So I hope, hope that gives you a little bit of color on it.
Now, Eric's question is, can you try to quantify what that is? If Eric could try to quantify what the cost of switching would be?
The cost of switching, I preface it around the costs of a customer who drives disposal volumes into our sites of switching. It's really, Alan had mentioned the profile costs associated with taking all the existing waste streams that they ship into our disposal facilities and then rerouting them or finding a selection of that. Probably I would say over 20% of the revenues that they ship to us, that's probably the equivalent switching costs that they may have incrementally of switching away from our disposal facilities. Does that help answer your question?
Yeah.
Yeah. Plus, you know, it just adds another issue for them to worry about in their portfolio from a liability standpoint. So, I think the most significant thing, Eric, is the customer's willing to add another facility to their list of approved sites.
Yeah.
Don't you think? 'Cause they've been trying to shrink down the number of sites they're using to lower their liability. So I think opening up that liability door is probably a bigger issue for them.
Yeah. That and that's difficult to quantify, but obviously, it's very, it's very important for them to make sure that they limit their liabilities short term and long term.
Yeah. Yes.
Alan, you've done an absolutely wonderful job over the last 30 years building this company from a small New England little business to a global or national North American hazardous waste business. The company's gotten so much more complex. The end markets are so much broader and deeper, and there are things that you're doing that you never thought you were gonna do. However, as Michael inferred before, your return on invested capital last several years hasn't really met up to snuff. Last several quarters have missed your own internal expectations, even with much more synergies from the Safety-Kleen deal.
Mm-hmm.
How are you? How would you measure how you've been able to manage the business over the last couple of years? And how are you wanna be measured as a public entity in terms of return on invested capital or growth or capital deployment?
Sure. Am I having my review now? Is that, is that?
I've been gone for a while.
Well, I would say certainly we're not happy with the return on capital, particularly over the last year and a half or so. We took on a lot more debt last year, as well as new equity, particularly to do the Safety-Kleen deal. And I think as you saw Jim's chart, when we started getting up to that 18%-18.5% EBITDA level, we were feeling pretty good there. And a couple of things hit us and, along with the acquisition that we recently made. So, over the last 18 months, I would give us a poor grade, you know, as a team. However, you know, we can't beat ourselves up too bad because, you know, we're here for the long run. You know, we're investing in the future.
We believe that, although we've had a couple of quarters set back here, particularly as it relates to pricing on the Oil side of the business, a lot of the things that we set out to do, we're doing. And I think if you look at next year and what our performance will be, I think that should be, you know, the story if we don't deliver. We've got 13,000 people. We've got a great management team. You're meeting some of them here today, but we've got a great workforce. Safety is number one in our organization. We feel very confident that we can run a safe and in compliance organization, which we think is first and foremost, most important to our customers. And from a return, I think we can do a much better job. So we're not happy.
If I can follow on my esteemed colleague's comment about return on capital, what is the number today? What's the 2013 return on invested capital of the company?
If you take into account the annualization of synergies, we're probably operating at about 8+% right now.
Okay.
The point I wanna make, obviously, here is that we've just made a major investment. I mean, we bought a company that's more than half our size that you haven't seen the full earnings potential from.
Okay. Fair enough. What was last year's number without it?
We were at, over the last few years, we have ranged between 11% and I think in one year we were at 14%. And as Alan put up in the chart, our goal as we grow the company over the next three to five years is to be in that, yeah, I mean, clearly 15% is the target. And we think 12%-14%, being conservative, that's kinda what we're working on right now.
Okay.
But when you add that much, I just wanna, when you add that much debt and equity on and you don't have the earnings potential, you are gonna go through a period where your return is not gonna show. And I just wanna, I hope everybody gets that 'cause I know you guys do by the nature of your question, but I'm not sure if everyone is focused on us enough to see that. We're working with a very big investment that we see a world of opportunity in. So I just wanna get that point out there too.
All right.
Sorry. Go ahead.
Fair enough. So following up on that then, you've spent $150 million this year in growth capital. And lots of companies talk about maintenance versus growth. In the end, the growth is really maintenance with the different, you know, just got a different uniform on. So get how, what's the conversion of a dollar of growth capital into cents of EBITDA? As how should we think about that?
Sure. I think in general, the way to look at this and obviously our growth CapEx has a lot of projects. You're talking about hundreds of projects that we're working on in the different parts of the business and the branches and the facilities. What I've generally seen on average with the way we're looking at returns, that for every dollar we spend, we roughly get revenues of an equal size. You know, there are exceptions to that. And the kinds of returns that we're expecting to get from that are in the 15%-25% range but from an EBITDA standpoint. So looking at it another way, what we basically do is we take our projects and growth projects and break them down into three groups: high resiliency, medium, and low resiliency.
From low, low resiliency, which means more cyclical, more risk to it, less number of customers, or any kind of concentration, we're looking for a 40% IRR. On a high resilient, really resilient project, like, say, adding containers at our customer sites that we know year after year, you're gonna have those waste streams, we would be looking for an IRR of, say, 20%. So that's more on a discounted cash flow basis. But the EBITDA, I would say, you know, we wanna be in that 15-25 range depending upon the project. And revenues are fairly close to what we're investing.
Okay. So we follow that math in your comments earlier about the EBITDA. You led with starting January, you're gonna have $600 million as a base of EBITDA.
Right.
If I got $150 million of growth capital, I pull Ruth Lake out, there's still sounds like an incremental $20 million that comes in new EBITDA just from growth capital ex Ruth Lake.
Yeah. I would say that's fair.
And then, and then there's the whole rest of the company. So then there's back to, Dave's conversation actually Jerry's conversation about used oil pricing, base oil pricing, blended pricing. I mean, if I follow those numbers correctly, there's $50 million of EBITDA was the target.
Well, but we've got a, we're, we're.
You gotta roll it in. You gotta roll it in again.
Yeah. And we're kinda planning for the worst and hoping for the best, right? But right now, you know, we're managing the business as where it is today from a pricing standpoint. If there's upside, great. But we're gonna run the business knowing what we've got dealt with us right now. So we don't wanna go with having you add $50 million from pricing to a few.
But that's all the math there is. It holds up based on the way you laid it out. It just is, it's a timing issue. Okay.
Yeah. And plus you have to look at our total business.
Right.
I mean, we're in a lot of verticals. Some have issues.
Mm-hmm.
Some don't. So it is a dynamic business too. But if you're only looking at incrementals, yeah, yeah. But it's, it's a total business too. And that's kinda what our budgeting, as Alan alluded to, our budgeting cycle, the way it's pretty complex what we go through and what the team does in terms of budgeting where we look at all of that. And when we do our call in November, we will go through and give our preliminary guidance for 2014. And that's some I think it's the first week in November when we'll be doing that.
Yes.
Hi. So Jim, in your slides, I think it was one of your slides where you put the, you know, $5 billion in revenues and $350 million in free cash flows. Okay. Alan.
It's all there.
What's the capital intensity you're assuming in that $350? You know, how much CapEx does that $5 billion require?
I think in the model that we had, it was about 300.
Yeah.
If I'm not mistaken.
Yeah.
Roughly.
Toward the end of that.
Yeah.
Next year.
Toward the end.
It's a lot less.
Yeah.
A little over 200.
Yeah. But if you were in that $500, if you were in that $5 billion range, I think in the model that we had, was about $300 if I'm not mistaken.
That's the right amount.
Okay. Is that the question, Jamie?
Yes. And then I just had one other one that actually might be for Laura, but I was just wondering. I know the question came up about margins, but the business is very seasonal, and somewhat cyclical too. Is there a rule of thumb on, you know, a normal seasonal basis what the incrementals or decremental margins would be when we think about modeling that business out?
On Laura's business, you're asking?
Right.
Yeah. Go ahead, please.
So on the seasonality, that really is only impacted in Canada. And it would, you would probably go down by from a 18-20 to a 5-10 range. That is about 20% of the wells are drilled in Canada. So you mitigate that by further exposure into the U.S. or further delivery of services into the U.S. where you don't have that same seasonality. The cyclicality you can deal with from ensuring that you're in both oil and gas basins. And it looks like the long-term view, at least in the next 10 years, is pretty good as far as from being in more oily basins than being in dry gas basins. And that's how we're going to, that's how we're gonna be able to mitigate that. So two things, both on seasonality and cyclicality. It's only in Canada for the seasonality.
So, is there a rough number that you're looking at for kind of a your run rate margin target?
Absolutely. So run rate margin target is gonna get back to where we were in 2011. I mean, that's where we want to be when we were at the peak of the market and we had high utilization of our assets. That's the, that's the margin target that we have. So we're setting it as aggressively as we can. I've got a great team behind me to be able to deliver against it and a market trend that's matching that.
And I think, I think our exposure is pretty small too here, right? 'Cause, you know, the number of rigs and the number of assets that we have out there, we're, we're a pretty small player in here. And this, and this is, you know, $400 out of $4 billion here. So we're.
Right.
We're not talking about the whole company. Yes.
You, you guys have certainly built some, you know, very impressive assets, and you have a lot of opportunities ahead and certainly a lot of synergies. But given the fact that returns are not meeting the areas that you'd like to see, would you guys consider hitting the pause button on acquisitions and just focusing on what you've got so that you could put all your bandwidth towards optimizing?
You know, we.
What you have now?
Yeah. I think, you know, if there was a large acquisition tomorrow, we would probably not be in a position to do that after the work that we've been doing on Safety-Kleen and all the integration work that we're doing. You know, the small deal that we just finished this year, or this week, I should say, you know, we've got a good team that and we're not too distracted with that. But a big deal, you're absolutely right, we would take a pause.
However, we just had a board meeting, and I think collectively across the entire directors group, I think is really agreeing with our strategy, agreeing with our 3-5-year plan, and the investments we're making and realizing that, you know, we have a plan to get to the kind of returns that we're talking about here. And so, we wanna be opportunistic, but it's not the only thing we're doing is driving acquisitions.
Yes, sir.
Following up on the question about your 3- to 5-year goal of $5 billion and $350 million in EBITDA and free cash, you said $300 million of CapEx. Can you divide that between what you consider to be maintenance CapEx and expansion CapEx?
With that number particularly, I'd be probably guessing. But I was just reflecting back on, you know, we've kinda taken a very detailed look at a model that would deliver those kinda results. It's something that we shared with the board. And we've put together ourselves as part of our strategic plan. I don't know, Jim. Probably you might wanna.
Yeah. I would say probably.
Take a guess maybe?
About the $100 and I was thinking about the $170 million range.
For what?
For, maintenance.
Thanks.
Yeah. But I think, you know, I think if we need to throttle back on CapEx, we, we certainly can down to that $130 million range. That's our current maintenance CapEx number. But, you know, we're investing in some really good projects right now. I think you're, you're failing to see the return necessarily on some of them. For example, in Eric's business, close to $30 million of capital being put in the landfills this year versus normally what would be $10 million. Well, that, that, that, that is certainly gonna tail off over the next couple of years. And he's gonna make a lot of money in his landfill business without spending a lot of capital. So some of these construction projects that we have to do at our sites are very, very large. They're very, very expensive. And so it's not just short-term growth.
It really is more of a long-term growth. It takes, you know, some of these projects, you know, are over 3 or 4 years, particularly on the landfill side. The incinerator is another good example. You know, we'll invest upwards of $80 million in a new incinerator. We're gonna have a permit. We're gonna make that investment. It's gonna be an investment that's made over a 3 or 4-year period of time. But it's not gonna generate $1 of EBITDA or $1 revenue during that period of investment. And so we know that that's gonna hurt our returns during that period of time. But it's gonna be a great, profitable business for us when we turn that switch on. And we need that capacity 'cause we know customers are shutting their own plants down.
So we need to balance these investments with the returns. We know that. And we know we need to do a better job of getting better returns. Absolutely.
In that long-term goal of $1 billion of EBITDA, is there a shift in the mix of the business do you see over the next 3-5 years to get to that, to get to that level? And I guess it's dependent on what acquisitions come to your desk. But.
Yeah.
Are there more acquisitions in oil and gas or industrial or environmental than to, to kind of change it?
I think if you look at the four pillars of our business, both in the U.S. and Canada, there are opportunities to acquire competitors and acquire share. We're not gonna grow it all equally, you know? And we really wanna continue to leverage our disposal assets. That's where the margin is. To get to that 20% margin, we need to maximize utilization of those 100 plants. So we know where we got our sight on that goal.
Just going to the 3- to 5-year targets, on the top line, the $5 billion plus, can you give us a sense for the split on your expectations there to build to it from organic versus acquisition?
You know, if we even conservatively grew 5% a year over 5 years, I think it gets you to about $4.5 billion. That's just conservative 5%. We have, as you saw with Jim's chart, been growing without acquisition at about 8% or 9%. So, I know as you get bigger, it's harder to grow, right? So if you conservatively grow the business at 5% organically, it would get you in 5 years to $4.5 billion. So that would say you got about $500 million of additional revenue. But in, in our thinking, you know, maybe $100 million-$150 million of acquisition-related revenues over that 3-5-year period of time, you know, would, would, would complement that, you know, that growth. So that's sort of our thinking.
You talked about the $350 million of cash flow target, you know, $100 million right now getting to that level. And you think ROIC's depressed at the, you know, today. What's the appetite to buy back stock in the event of, you know, no big deals that you talked about?
You know, once again, we just had a board meeting. We had an extensive discussion over a two-day period of time about, you know, the fact that we are generating a lot of cash. We're gonna continue to generate a lot more cash. And we really think the investments we're making in our business will provide a better return to our shareholders than to buy back our own stock. We really do. We've had, we've debated this. We've had a lot of inquiries from many of you and others. And, you know, there are some great growth opportunities for this business. And we think we're a good, you know, steward of capital, right? And Jim, any further?
I would just add that, you know, it is something that, as Alan just implied, is continually evaluated. So never say never. We're never saying we're never doing. But when we look at the opportunities that we have, you know, putting services around that asset base or adding to our asset base with all the synergies and all that, the numbers just speak for themselves that it is a much higher return.
Right now.
That's what we're looking at.
Yeah.
Okay. So actually a little bit of a different approach to the question. So I was looking to see if I could ask basically for all of the, the business heads to address a differing view of their business. So we, we've heard a lot about the growth opportunities and drivers. Could each of you talk to the risks specifically in your business as you look to the end of this year and into 2014? Can you characterize those risks and the degree of confidence you have around whether those can be effectively mitigated or really how you're, you're viewing what could create or disrupt that, that growth?
Good question. We'll see how we do.
I would say that the biggest risk to my business is people. In the oil and gas industry, ensuring that we have the right people that have the right focus on safety and that we have access to them. We're mitigating that through sharing of resources, through ensuring that we have great training programs. We have a very strong recruitment group internally. But I would say that for, for the oil and gas business and the basins that we are playing in, it would be people.
Eric.
Within the Technical Services business, the risk in my area, we continue number one to see very strong waste volumes into our facility network, which we talked about a number of times today. Regulatory drivers always inherently present some risks. We wanna continue to see regulations push more waste into our facilities. The one area that would probably be a risk is about large projects, those Superfund remedial areas that could affect substantial volumes into our landfills. That would be the one area. And then on some of our smaller businesses within Technical Services, there are some areas such as metals and recycling that could be affected by some of the back-end markets and sales for those.
Dave?
I would say.
Jump up here.
I would say in the Industrial side of the business that my biggest concern or biggest risk is making sure we keep our people safe. A bad fatality or a bad incident at one of our client sites would could impact us. So that's why that's such a major focus. I would say the second point would be just labor constraints and costs in particular the oil sands, but in general in Alberta, those costs have continued to escalate. And they continue to pose the ability to continue to grow our capacity. And certainly, we need to make sure that we're passing those costs along to the client base. On the Field Services side, I don't see quite as many risks. I think it's a pretty diversified business.
And then the Lodging side, I feel like, there aren't a lot of headwinds except that we gotta keep these lodges. We gotta keep the water safe and keep the lodges clean. The cruise ship industry is a great example of one that's been tarnished by poor operations in some cases. And we need to make sure that our lodges stay right up top 'cause you can gain a pretty bad reputation quickly. So I would say those are the three major areas.
On our Environmental side, our branches, the 150-plus branches, are a really powerful engine of growth and business. There's over 300 salespeople. There's sales representatives driving trucks. All these people are facing the customers. And I think one of our biggest risks there is ensuring that we have good management to make sure that we've got the right focuses in place, we've got the right incentives in place, and then we continue to feed that engine. Because when we do, it is something to behold as far as developing business. On the Oil side, it's clear the risk is not our inability to reduce the spread between what we're paying for our oil and what we're selling our oil for.
And so to that end, we've got to work on both sides of that, again, selling more products, blended products, keeping that driving up and trying to lower that volatility on the base oil side, and then doing everything in our power to move that pay-for-o il rate down.
Thanks. I just had a follow-on, maybe Alan from a portfolio management perspective. You've laid out the return on capital targets. Maybe at what point, and you said, you know, buybacks really aren't in, in the cards. At what point do you start to think about maybe divesting some of the businesses that might not get up to that 12%-14% return on capital? Maybe you can just add some color there.
You know, I think we're gonna look and continue to look at our business. And some of the business that you've heard about today and some of the things that we do are not driving waste into our plants. And I'm sure that's what you're looking at. And you're saying, "Geez, these guys are in 30 or 50 different lines of business. Some of these aren't doing what Alan's saying we're trying to do." The fact of the matter is we're servicing a lot of customers with a number of different services. And we, through the acquisitions we've made, have a reputation of delivering those high-quality services. And in many cases, those little niche businesses are very profitable. And we've got a great share in that particular line of business.
So we're gonna be really careful that we don't go and say, "Geez, you know, we're gonna go exit and sell this," without really damaging our reputation with some of these major customers that we have. So I would answer it by saying we're looking at that, and we'll make sure that we're continuing to focus on being in the right business for what our customers are looking for.
We good? We wanna thank you so much. Great questions. We really appreciate you being here. And we look forward to seeing you again hopefully next year. Thank you.