HUMAN CAPITAL DEFICIT, AND HEALTH, SAFETY AND ENVIRONMENTAL RISKS ARE TWO OF THE TOP TEN RISKS FACING THE OIL & GAS BUSINESSES

HUMAN CAPITAL DEFICIT, AND HEALTH, SAFETY AND ENVIRONMENTAL RISKS ARE TWO OF THE TOP TEN RISKS FACING THE OIL & GAS BUSINESSES

Scene from the 2008 Gas Well explosion near Lenovo, PA.

The after the fact assessments of incidents occurred at oil & gas production sites have a very common theme:

· “greenhats” were doing work that they were not properly trained to do;

· standard operating procedures for well control, wellhead work, and the like were not followed;

· the personnel was not properly trained or was not familiar of the proper procedures to be used for a specific assembly of equipment;

· no qualified personnel were available at the time the specific task needed to be executed, and so on.

Here are some illustrative examples:

· June 3, 2010 well blowout in PA: Untrained personnel and the failure to use proper well control procedures were the principal causes of a June 3 natural gas well blowout in Clearfield County, according to an independent investigation that was released today by the Department of Environmental Protection.

· Feb.11, 2014 explosion and fatal fire at Chevron Appalachia’s Lanco well pad in Dunkard Township. The state Department of Environmental Protection issued its report on the fire last week that attributed the cause to human error, noting a lock pin improperly secured on a well head assembly by an inexperienced worker may have allowed gas from the pressurized well to escape and ignite.

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The report criticized Chevron for failing to properly oversee contractors at the site which, among other things, allowed an inexperienced “greenhat” employee of Cameron to do work for which he was neither trained nor properly supervised.

· January 2012, Golf Region. Failure to Properly Bleed Tubing Hanger Void Results in Injury. Prior to well temporary abandonment operations, the surface controlled subsurface safety valve had been isolated and replaced with a subsurface controlled safety valve. During the abandonment operation, pressure was bled off the top of the wellhead and the casings, and the 2-7/8 inch tubing was cut below the wellhead when the injured person (IP) began backing the tubing hanger pins off the tubing hanger during wellhead dismantling. During removal of the fifth tubing hanger pin the entire tubing hanger pin and packing nut were ejected from the tubing hanger head, striking the IP on the shin. the BSEE recommends to the Lessees, Operators, and their contractors that: Proper supervision should be employed to ensure personnel dismantling a wellhead are properly trained, and that proper bleed-down tools are used to verify any tubing head void space has been properly bled.

· October 2011, Golf Region. Worker’s claims arise from an injury that he suffered, in October 2011, while working for Alliance Oilfield Service (“Alliance”) on a plug and abandonment project on a Gulf of Mexico platform owned by Alliance. On the night in question, the Alliance crew was removing the wellhead, or “Christmas tree” assembly, from the platform, and the tubing from the well itself.

· The parties’ submissions reveal that this task usually is accomplished by using a wrench to loosen vertical bolts connecting the Christmas tree casing to the platform such that the tree and tubing can be removed as one unit. In this instance, however, rust on the bolts made removal problematic and eventually stalled the crew’s progress. After several hours without success, the crew proposed using a cutting torch to simply cut the bolts. Alliance’s on-site “company man”, Kruse Gribble, however, advised the Alliance crew that, because of safety concerns, a cutting torch could not be used. Thus, the crew instead proceeded to attempt to “back out” (loosen) hanger pins holding the tubing in place to allow the removal of the Christmas tree followed by the tubing hanger and tubing. The worker loosened four of the hanger pins without problem. As he backed the fifth pin away from the tubing hanger assembly, however, the pin and the packing gland suddenly ejected, because of unexpected pressure in the void of the wellhead, and struck the worker’s shin.

· January 2014, Brooklyn Township, Susquehanna County. The PA Department of Environmental Protection (PADEP) announced it has fined Cabot Oil & Gas Corp. of Pittsburgh $76,546 for a January well control incident at the company’s Huston well pad in Brooklyn Township, Susquehanna County. “Cabot lost control of the Huston J1 gas well for 27 hours, to which the department responded to promptly to ensure there were no significant environmental impacts,” DEP Director of District Oil and Gas Operations John Ryder said. “In this incident, mostly gas was released, which dissipated quickly to background levels within 100 feet from the well.”

· The incident began the morning of Jan. 5 when a Cabot subcontractor was replacing equipment on the wellhead. The subcontractor did not follow standard operating procedures for the process by failing to first warm the wellhead prior to conducting any work in the freezing temperature. This resulted in damage to a wing valve.

Health, safety and environmental issues have risen on the oil and gas industry’s agenda, reflecting both increased public pressure and more complex operational challenges. In May 2006, Range Resources Corporation provided the SEC with a prospectus. In a surprisingly forthright moment, Range Resources explained to potential investors the risks of hydro-fracturing:

"Our business is subject to operating hazards and environmental regulations that could result in substantial losses or liabilities. Oil and natural gas operations are subject to many risks, including well blowouts, craterings, explosions, uncontrollable flows of oil, natural gas or well fluids, fires, formations with abnormal pressures, pipeline ruptures or spills, pollution, releases of toxic natural gas and other environmental hazards and risks."

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