The petroleum company Marathon Oil recently reached a $241 million settlement over environmental protection regulations in North Dakota.
The company was illegally emitting greenhouse gases by burning waste gases at almost 90 of its facilities. The Environmental Protection Agency and Department of Justice brought this case against the company for air quality violations.
As part of the settlement, Marathon Oil will be required to use measures to mitigate its environmental harm and reduce its pollution levels. This will take a multi-million dollar investment to implement the correct compliance measures.
The cost to oil and gas contractors that do not address risks is great and can ruin unprepared companies. Here are several ways to mitigate risk.
Challenges and Managing Risks
Oil and gas risks are not universal, and it can be hard to fully cover the many risks your business faces.
Some of the biggest challenges oil and gas contractors face are:
- Navigating volatile markets due to ever-changing geopolitical events
- Following strict safety and compliance requirements
- Hiring and retaining skilled workers
- Managing fluctuating incomes
- Spills and contamination
- Equipment breakdown and property and fleet damage slow down the job and decrease profitability
With a fatality rate seven times the national average of workers in all industries, oil and gas workers face more safety risks than they know.
- Construction workers in the oil and gas industry spend considerable time driving between sites because well sites are isolated. This greatly increases their risk of being in vehicle crashes on the highway.
- Struck-by and caught-between accidents are common due to lots of large equipment moving heavy materials, as well as high-pressure lines, present at oil and gas construction sites. Here, worker protection equipment, machine safety mechanisms, and training are vital to protect workers.
- Wells release gases that can ignite and cause explosions at sites. This risk is unique to gas construction, and there are many safety standards for gas storage to help prevent leaks.
- As with many construction jobs, falls from heights are a risk. Many pieces of equipment and procedures commonly used by contractors are too dangerous to avoid the risk of a worker seriously injuring themselves from a fall.
- There are many constricted areas on an oil and gas construction site, from petroleum storage tanks to mud pits. This means that if there is a gas leak and not enough air, workers can suffocate; sometimes, that gas can catch fire and cause an explosion that seriously injures or kills the workers in a small space.
- Awkward repetitive lifting on the job can lead to strains that result in worker injuries. This is a common problem in jobs with heavy materials that must be transported.
- Machinery always invites risk, especially when there is inadequate training on how to use the machines safely.
The best way to address risk is to avoid it in the first place. This can be done by implementing a comprehensive risk management plan. A thorough risk assessment is invaluable in determining a contractor’s specific risks and exposures.
Best Insurance for the Oil & Gas Industry
The next best way to address risks is insurance.
- Pollution Insurance covers pollution incidents that are sudden and unintentional. It is the best type of environmental coverage for oil and gas contractors. Under this policy, a contractor can also invest in:
- contractors’ pollution liability, which covers third-party claims against contractors for damages from pollution
- storage tank liability, which covers the actual storage tanks that may leak and cause pollution
- Commercial Auto Insurance covers business vehicles. With a hired and non-owned auto endorsement (HNOA), contractors can also cover employees’ vehicles used for work purposes. Commercial Auto Insurance is invaluable because contractors face unique risks, such as heavy equipment transport and high vehicle theft rates.
- Equipment Insurance/Inland Marine Insurance covers any equipment transported on land. It covers costs such as equipment repair and vandalism cleaning.
- Builder’s Risk Insurance provides coverage for the structures on a construction project. Risks such as severe weather and theft can damage these structures. Additionally, Builder’s Risk covers faulty materials and workmanship.
- Control of Well Insurance covers damages to wells, a common risk for oil and gas extraction sites.
- Oil Lease Property (OLP) is a specific form of insurance for petroleum storage.
- Riggers Legal Liability covers oil contractors who are using equipment on their sites.
- Rig Equipment Physical Damages under Business Interruption insurance covers oil and gas rigging equipment damage from weather and breakdowns.
- Crime Liability Insurance generally covers crimes to the company, such as theft and embezzlement.
- Workers’ Compensation Insurance covers employee injuries on the job. The high injury rate of oil and gas workers means that Workers’ Comp is vital.
- Training for safety hazards such as falls, getting caught, fires, machinery, and hazardous materials can be monumental in preventing unsafe working environments for oil and gas workers.
- General Liability Insurance covers personal injury and physical damage claims. Because of lawsuit potential and subcontractor liability, contractors find General Liability Insurance particularly helpful in covering many legal and medical expenses.
- Umbrella Liability Insurance is a helpful policy that covers many risks not typically covered by other forms of insurance.
- Professional Liability Insurance covers accidents caused by professional services, such as making a drill site, designing a well, and more.
- Errors and Omissions Insurance covers negligence claims regarding a contractor’s professional design and engineering services.
- Directors and Officers Insurance covers errors made by a company’s executives and board members.
- Employment Practices Liability Insurance (EPLI) covers wrongful employment practices such as discrimination and sexual harassment.
- Cyber Liability Insurance covers any mishaps, such as data breaches, relating to technology.
POWERS Insurance can Help Oil and Gas Companies
Insurance alone is not enough to fully protect your business. Managing risk involves various strategies, with a key focus on addressing your financial risks. The first step is to implement a strategic risk management plan.
We can help with that! We will conduct a comprehensive assessment of your risk profile to identify known and unknown risks.
At POWERS Insurance & Risk Management, we stand by your side. We understand the unique risks that construction businesses face. We want to help you understand those risks and prepare accordingly.
Our role is to help you select the insurance product that best suits your needs, ensuring you maximize the benefits of your policy. Following this, we will collaborate with you to develop an integrated risk management plan, empowering you to make informed business decisions.
Schedule a free consultation today.
