While an oil rig disaster continues to play out in the Gulf of Mexico, so does speculation about the safety and environmental performance of the industry onshore.
Perhaps the biggest drilling rig “blowout” event in Wyoming's recent history was the February 1998 Cave Gulch blowout near Waltman. Around that time there were five recorded blowout events in the Powder River Basin where drillers were not using any sort of “blowout preventer” equipment at the time.
State regulators responded by rewriting rules to require that coal-bed methane rigs use “diverter” systems, which are a simplified version of a blowout preventer.
Local industry and regulatory officials say there’s a pretty good track record in Wyoming, while others claim there’s plenty of environmental damage here. It’s just not on the same scale or as visible as the giant, undulating blotch of oil in the Gulf of Mexico.
“They don’t have a good track record in Line Creek,” said Deb Thomas, organizer for the Clark Resource Council, an affiliate of the Powder River Basin Resource Council.
Thomas was referring to several incidents by Windsor Energy Resources, including a casing failure in 2006 that contaminated soils in the Line Creek area in Park County. Four years later, state regulators still have not finalized a “remediation agreement."
“They don’t have a good record in Pavillion, where there’s groundwater contamination, or in Jonah and Pinedale, where there are air quality alerts, or in the Powder River Basin where wells are drying up,” Thomas continued.
Bruce Hinchey, president of the Petroleum Association of Wyoming, said the industry indeed has a good environmental track record in Wyoming. Rather than an example of endemic shortcomings of the industry, Hinchey suggested, the Gulf of Mexico calamity is an isolated event.
“Accidents happen. It’s no different than anything else. You can have a plane crash or car wreck, and then you’ve got to figure out what goes on,” Hinchey said.
In the fallout of the disaster in the Gulf of Mexico, there’s some finger-pointing over exactly who is responsible and for which portion of the calamity.
President Barack Obama has stated that British Petroleum is responsible for all of the cost, while BP officials have hinted that others may share the blame.
So far the finger-pointing targets three main companies involved in the Deepwater Horizon well: BP, the company that held the mineral lease; Transocean, the company that owned and operated the drilling rig; and Halliburton, the company that provided cementing and other services.
The oil and gas industry in Wyoming generally operates under the same protocol. When there’s an accident that causes damage here, industry and regulatory officials say they can clearly allocate responsibility.
“It’s complicated, and there’s finger-pointing. But when you get down to it, there is a standard rule of operation,” said Mark Doelger, a geologist with Barlow & Haun of Casper.
Generally, the operator, which is the company that leases the rights to develop the mineral, must post a bond. Bonds are posted with the U.S. Bureau of Land Management if it’s a federal lease, or with the Wyoming Oil and Gas Conservation Commission if it’s a state or private lease.
It’s the operator -- the party that posted the bond -- that must answer to state and federal regulators if there’s property or environmental damage related to the well.
Tom Reese is oil and gas attorney with the Casper firm Beatty, Wozniak & Reese. He said while an operator may be responsible to the state or BLM to pay for damages, the operator may try to seek damages from the driller, a service company or more than one contractor.
While in the eyes of federal and state regulators it’s the operator who is on the hook for damages, operators such as BP, EnCana Oil & Gas USA and ExxonMobil sometimes draw up contracts to specify how responsibilities are divided among the operator, driller and service contractors.
But even if the operator can prove in court of law that a driller or service company bears some responsibility, it is still the operator who is ultimately responsible to the state or federal government to clean the mess up.
“In Wyoming there’s an anti-indemnity statute for oil and gas wells and properties that prevents you from shifting liability for your own negligence,” Reese said.
Bonds and assurances
Posting a bond means a company puts up some amount of money, and it’s usually a requirement for anyone who wants to acquire a mineral lease. Bond amounts vary, but the basic idea is to require the company responsible for the extraction of minerals to first put up enough money to cover the cost of properly decommissioning a well and cleaning up the environmental footprint.
But a bond does not limit how much an operator has to pay to cover the cost of environmental damages.
“I’ve seen companies pay quite a bit more than their bond if they want to continue to operate in Wyoming,” Reese said.
A 2005 report by the Western Organization of Resource Councils suggested that some 84 percent of oil and gas facilities in the BLM’s Buffalo field office area were found to be out of compliance in terms of reclamation. Since that report, the BLM Buffalo field office increased site inspections by 2,000 annually, according to the agency. The office issued some 447 written orders for non-compliance in 2005, and now the office issues about 200 annually.
In a May 12, 2009, letter to BLM Buffalo field manager Duane Spencer, the group suggested that the cost of interim and final reclamation on leases held by a number of small operators far exceed funds put up by the companies under the BLM’s “blanket bond” requirement.
Buffalo field office officials said last year they were in the process of reviewing bonds and facilities of several companies to ensure they have adequate bonding. The BLM may require individual companies to provide bonding well above minimum requirements if the agency deems it necessary.
Asked whether last summer’s review resulted in higher bonding requirements for any coal-bed methane operators, BLM spokeswoman Beverly Gorny said, “Bond amounts are proprietary and cannot be disclosed.”
Energy reporter Dustin Bleizeffer can be reached at (307) 577-6069 or email@example.com. Go to http://tribtown.trib.com/DustinBleizeffer/blog to read Dustin’s energy blog.
Oil and gas bonding requirements
State of Wyoming (for state and private minerals)
* $10,000 for each well less than 2,000 feet in depth
* $20,000 for each well 2,000 feet or deeper
* $75,000 “blanket bond” for all wells
Federal minerals (managed by the U.S. Bureau of Land Management)
* $10,000 per “lease”
* $25,000 for all wells in a single state
* $150,000 nationwide bond
BLOWOUT PREVENTER, definition: A large valve at the top of a well that may be closed if the drilling crew loses control of formation fluids.