5 Critical Control of Well Coverages Operators Need to Know & Understand

Whether your a seasoned oil and gas operator or an up and coming new producer, here are the 5 Critical Control of Well insurance coverages producers need to know & understand before drilling in 2016.

1. Control of Well Coverage: Cost of Well Control

– The costs incurred by the operator in using specialty service contractors in efforts to bring the well under control after a ‘defined’ well control event, whether an above ground even or a subsurface loss of control, and to cap or plug the well. This includes both surface and subsurface efforts such as firefighting, ‘snubbing’ and even relief or ‘kill’ well costs if necessitated.

Blow Out in Woods County, Oklahoma

      2.  Control of Well Coverage: Restoration and/or Redrilling Expense

– Ultimately, when the well is controlled and can be either re-entered to attempt to resume operations or can be plugged and abandoned, the policies all provide that the costs of restoring the original well bore or replacing the lost well via ‘redrilling’ are covered, subject to any policy limitations. There may be monetary or percentage limitations in this coverage or the wording may provide complete restoration or replacement costs to the depth and condition which existed prior to the loss, with only the policy total limit restricting recovery amounts.

     

3.  Control of Well Coverage: Seepage, Pollution, Clean-Up

– Third party property damage liability caused by pollution attributable to the blowout loss and from the well above ground, or, ‘prevention’ costs to contain or clean-up substances emanating from the well above ground. (This is not coverage for damaged sub-surface water or minerals.)  This coverage may duplicate to some degree coverage also found under the insured’s CGL and Umbrella policies.

     

4. Control of Well Coverage: Care, Custody, & Control

– Third party contract’s equipment, supplies, or rental tools, pipe, and equipment on site, either surface or in-hole, is frequently damaged during a blowout loss. The Operator’s General Liability policy almost always excludes liability for damaged property in the Insured’s ‘care, custody, and control’, thus this endorsement is an important part of the coverage available. Limits here are commonly set at $500,000 to $1,000,000 for onshore wells and range up to $5MM for offshore wells.

 

     

5.  Control of Well Coverage: Miscellaneous

– In addition to the four basic coverage issues above, other coverage found within the well control policies include evacuation expenses, ‘making wells safe’, and legal liability for wells of others getting out of control because of the insured’s loss.

It’s important to evaluate your control of well needs based on these 5 critical control of well insurance coverage parts. The control of well insurance market place has never been more competitive as it is right now. With the drastic reduction in drilling due to the weak commodity prices, insurers have drastically reduced their rates. We recommend obtaining three control of well quotations prior to purchasing your control of well insurance policy.

If you’re ready to obtain control of well quotations, please contact us today to get the process started.

 

 

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