The Nelson-Farrar Index Lives on With BakerRisk
For approximately 60 years, the Nelson-Farrar Cost Index (NFCI) has been a key resource of cost escalation data in the oil industry. Produced monthly, the NFCI helps refinery industry estimators, appraisers, project managers/planners, and other related professionals understand how much a refinery or process unit would cost to re-build or operate, based on a known cost in the past. The NFCI is also used in the insurance industry to help insurers value property for replacement in the event of an accident or other loss.
The NFCI was originally developed by Dr. W. L. Nelson and Dr. Gerald L. Farrar. From the 1970s until 2017, the Oil & Gas Journal (OGJ) published the indices monthly, with quarterly summaries featured in the January, April, July, and October issues.
Over time, Dr. Farrar took full ownership of the index and taught his son, Gary Farrar, how to produce and run the index. This proved to be a vital step in ensuring the index continued after Dr. Farrar passed away in 1992. At that point, Gary took ownership and continued producing the Nelson-Farrar Index.
OGJ stopped publishing the NFCI in 2017. Gary was innovative and decided to provide direct, digital access to the indices via an email subscription service. This proved to be a solution that a great number of professionals in the industry were grateful for, since Gary was the only one left to provide the data they had come to rely on.
Sadly, in October of 2019, Gary passed away very suddenly. As a result, the index was left unattended.
On learning of Gary’s passing, and concerned about what would become of the NFCI, BakerRisk’s Principal Process Safety Consultant, Charles Pacella, reached out to Debbie Farrar, Gary’s widow, to share our condolences and inquire about the future of the NFCI.
Debbie recalls, “The first letter that I received was January 13, 2020, from Charles Pacella. His letter was wonderful. It was very touching, and I was very impressed by it.”
Touched by a warmly-worded letter from Charlie, Debbie returned a phone call from BakerRisk’s Principal Process Safety Consultant, David Black. It was during this call that David learned the Farrar family had no plans to continue the work of calculating and publishing the index. Concerned that the index would simply cease to exist, David proposed a meeting to discuss potential options for BakerRisk to take up where Gary left off. Focusing on common goals to keep the index alive and to honor the Nelson-Farrar name and the Farrar family, Debbie graciously agreed to meet.
The first meeting was held in February 2020 at the Boyd Baptist Church, where Debbie attends weekly. During that meeting, Debbie warmly shared stories and memories of Gary and his father, Dr. Gerald Farrar, and how the Nelson-Farrar Index evolved over the years to become a common resource for the Petroleum Industry.
That first contact and conversation led to more phone calls and meetings between Debbie and David, ultimately culminating in an agreement for BakerRisk to acquire the NFCI outright. That agreement was finalized on April 23, 2020.
Shortly thereafter, BakerRisk’s BDM Specialist, Rebecca Hooker, contacted Debbie to obtain further background on the history of the NFCI and her perspective on the Index going forward.
During those conversations, Debbie shared how Gary stepped in to help his dad with the Index while he was still a student at Oklahoma State University. Debbie painted Gary as “a bit of a rebel” because he was busy pursuing a Business Degree despite many in his family being engineers.
Going on, she shared, “This is a man who after receiving his Business Degree went to junior college in Tulsa and got two computer degrees, all while maintaining the Index. [He also] owned a concrete company, did I.T. for Blue Bell Creamery, helped build airplane wings for Spirit Aeronautics, and had 25 acres with cows and horses in Oklahoma. And three daughters!”
Debbie also reflected on her interactions with BakerRisk, “I was really grateful when BakerRisk got in touch with me – I checked [BakerRisk] out and it seemed like a nice facility and I liked what they had to say in how they work.” But it all started with that letter sent by Charlie Pacella.
David Black recalls how Debbie first spoke of the letter that Charlie Pacella sent to her, and how through her emotional conversation he felt “transported to her first reading of it”.
During her conversation with Becca, Debbie read a part of the letter, “We would like to explore with you the possibility of BakerRisk continuing Gary’s work by maintaining and/or publishing the Nelson-Farrar Index.” She paused from reading the letter, telling Becca, “Now by this time I was in tears because I wanted [the Index] to continue. The moment I got the letter it was so touching, and [Charlie] was so polite. There was something about it. I had gotten other letters. I actually spoke to someone else over e-mail, but [other offers] didn’t interest me. I spent some time praying about it before I called [David] after I received the letter and it just felt right. Like this is what God set up a long time ago before I even knew about it.”
Debbie spoke of her contentment with BakerRisk’s acquisition of the Nelson-Farrar Index. “One of the things I liked the best about David and BakerRisk’s intentions, the first thing he said was ‘we want to keep his name on it’ and I thought man Gary would love that, and his dad would love it if he were here. It is hard as a widow because you want to do right by what they worked so hard at, and 60 years was a long time to be doing this. It made me feel good that the Index would continue with BakerRisk and it would be good for the industry, too.”
David further reflects, “We were in just the right place at the right time, and Debbie was a joy to meet and work with as we put together the transition plan. She really is a blessing.“
BakerRisk is honored to continue the Nelson-Farrar Cost Index, and we look forward to making this important data available to the industry for many years to come.
For information on the Nelson-Farrar Cost Index service, please contact NelsonFarrarInfo@BakerRisk.com