Cultivating Safety in the Oil and Gas Industry Craig A. Halpern, CSP, CPE, ARM Risk Control Manager - IMA of Colorado Rocky Mountain Chapter – ASSE – Oil

Cultivating Safety in the

Oil and Gas IndustryCraig A. Halpern, CSP, CPE, ARM

Risk Control Manager - IMA of Colorado

Rocky Mountain Chapter – ASSE – Oil & Gas PDC – March 26, 2008

Cross Roads of Accident Statistics

Is Occupational Safety Really Improving ?2002 2003 2004 2005 2006

TCR - Total Recordable Case Rate

(100 employees)

5.3 5.0 4.8 4.6 4.4

TCR

Oil & Gas Industry

(Explor/Drill/Prod)

3.4 1.8 2.6 2.1 3.2

DART - Days Away, Restricted, and Transferred (DART)

(100 employees)

2.8 2.6 2.5 2.4 2.3

DART - Oil & Gas Industry

(Explor/Drill/Prod)

2.2 0.8 1.2 1.2 1.9

Fatality Rates

2003 2004 2005 2006

Occupational Fatality Rate

(per 100,000 employees)

4.0 4.4 4.3 4.2

Fatality Rate

Oil & Gas Industry

(Explor/Drill/Prod)

21.8 43.9 19.3 19.8

Total Annual Fatalities

17 29 17 21

The Oil & Gas Industry still has room for improvement

What the Newspaper’s Tell UsHigh County News “Fatalities in the energy fields: 2000-2006”April 2, 2007 by Ray Ring

“At least 89 people died on the job in the Interior West’s oil and gas industry from 2000 to 2006, in a variety of accidents, including 90-foot falls, massive explosions, poison gas inhalations and crushings by safety harnesses.”


• “Ricky Erb, 19 11/27/06 Schneider Energy ServicesHead injury, blown out of 5-foot hole when a reportedly 40-year-old pipeline Pending ruptured. He and rest of crew were using a cutting tool to open the pipeline, and they didn’t expect it to contain pressurized gas.

• Jacob Farmer, 19 11/16/06 Leed Energy Services Inc.Struck by falling pulley on a well-servicing rig. The victim’s father works in oil and gas. Pending

• Phillip Smith, 44 11/6/06 Easy Street Crane ServiceCrushed by truck. Pending


• Joshua Arvidson, 24 1/25/06 Calfrac Well Services Ltd.Engulfed by 40,000 pounds of sand in a storage bin. $27,825

• Zac Mitchek, 42 11/25/05 Patterson-UTI Drilling Co.Electrocuted while doing maintenance on a light plant for a drill rig. $11,900

• Larry Hill, 42 11/7/05 Union Drilling Inc.

Fell 55 feet from platform on drill-rig derrick while handling hoisted drill pipes. OSHA said the company did not ensure that the worker was using proper fall-protection gear. $19,990


• David A. Vickers Jr. (age not provided) 6/27/06 MarMc Transportation Inc.Run over by a forklift while working with a crew moving a drill rig; he was resting in the shade of the forklift, and a truck driver (not the forklift driver) hopped on it and drove forward. The company had just been cited by Wyoming OSHD for inadequate forklift training. $1,800

• Shane L. Judd, 41 6/9/06 DHS Drilling CompanyFell 90 feet from top of a rig’s derrick. He hadn’t hooked up his fall-protection device. Investigators noted the crew was pulling long work shifts, drilling in the rain; the ambulance took 45 minutes to reach the remote site. $3,150


• Bobby Ray Owens, Jr., 52 11/11/06 Associated Pipeline ContractorsDriving a bulldozer, blading the right-of-way for a new transcontinental gas pipeline, he hit a 36-inch pipeline, went up in a 300-foot fireball that shook the ground and could be seen for miles. Pending

• Steve Robinson, 35 6/1/06 High Desert Services Inc.Slipped from a platform and got wedged between two 11-foot-tall water tanks he was heating with a propane-fired service truck, suffered ”thermal injuries” from being ”trapped against a heated metallic surface.” It happened around sunset as he worked alone at a remote gas-well site; his body wasn’t discovered until the next morning.


• Charles Lindstrom, 57 8/17/06 Energy Systems Ind., Inc.“Blunt-force trauma” while he worked alone on the repair of a pumping unit. $750

• Karl Heller, 31 4/5/06 Cyclone DrillingCrushed by 3,400-pound tank that his crew was lifting with a 1.5-inch-diameter rope when the rope broke. OSHA noted most of the crew was inexperienced and didn’t know the rope’s load rating; the company didn’t have a procedure for training workers to stay clear of loads. $3,750


• Jose E. Figueroa, 18 9/1/06 Grant Geophysical Corp.Crushed in rollover of an ATV, while servicing seismic equipment exploring for oil and gas. He was driving and overloaded the cargo rack. He was part of a 45-person crew that spoke mostly Spanish, working for a Texas subsidiary of a Canadian company; the OSHA investigator needed an interpreter. $9,450

• Kory Dawson, 35 4/13/06 Green Oil & Field Service Inc.Struck, pinned to the ground and crushed by crank arm of oil-pumping rig while his crew tried to repair a part on the rig. Victim died at the scene, but the company reported it to OSHA a week later. $6,750

OSHA’s Response - LEP

• Local Emphasis Program for Oil & Gas – Fatality Rate is 5 times the national average – Focus: Drilling and Servicing Companies (RigData)– Excludes employers with 10 or fewer employees– Counties: Weld, Garfield, Mesa, La Plata, Las

Animas, San Miguel

Owner

General Contractor

Dirt Contractor Concrete Former Steel Erector Plumber

Architect

ElectricianUnderground

Utilities

Contractual Relationships on a Construction Site

Operator

Roustabout (Site Prep)

DrillerCasing

ContractorCementing

CrewWireline

Crew

Investors

WorkoverCrew

Drilling Consultant

Contractual Relationships on a Oil Well Site

Uni

que

Dril

ling

Con

tract

DrillingConsultant

CasingContractor

Investors

Work-over Crew

WirelineCrew

Roustabout

Cementing Crew

Driller

Operator

Contractual Relationships on a Oil Well Site

Operators Use …Master Service Agreements

• Set expectations for each contractor

• Specify minimum insurance requirements

• Layout indemnification for liability

• Typically includes mutual indemnity verbiage where both the Operator and Contractor hold each other harmless.

Drilling Contracts• Agreement between the Driller

and the Operator only.• Driller will indemnify the

Operator for the Driller’s actions and the actions of its employees and sub-contractors.

• Operator indemnifies the Driller for the actions of sub-contractors to the Operator.

DrillingConsultant

Cementing Crew

CasingContractor

Work-over Crew

WirelineCrew

Roustabout

Data Logger

Driller

Operator

Drilling Contracts• Result: • Operator required to pick up the

costs associated with injuries or property damage the Driller causes to other contractors.

OSHA’s Response - LEP

• Who is the real “Wildcard” ?– New/Small Contractors

• Master Service Agreements are typically seen as the extent of the Operator’s involvement in safety.

• OSHA’s experience tells them that Operators (Owners) need to be involved in safety oversight?– Not afraid to use the Multi-Employer Worksite rule to get this

done.

Multi-Employer WorksiteOperators are being expected to take a more active role

in safety oversight of contractors.

• Exposing Employer• Creating Employer• Correcting Employer• Controlling Employer

– Operators have a contractual and financial incentive to exercise oversight, and therefore exercise more control than they realize.

Multi-Employer Worksite$ 1 Million Fine for Pipeline Fire that Killed Five OSHA: Conditions unsafe in pipeline near Georgetown

By Sara Burnett, Rocky Mountain News (Contact) March 25, 2008

On Monday, the Occupational Safety and Health Administration said those conditions contributed to the Oct. 2 deaths of five men inside the penstock at Xcel's Cabin Creek hydroelectric power plant. The men, all employees of California-based RPI Coating, died after an electrical spark ignited a fire, trapping them inside. Four others escaped.

$845,100 fine leviedOSHA levied $845,100 in penalties against RPI, and $189,900 in penalties for Xcel "for alleged serious and willful violations of federal workplace safety and health standards."

Xcel was issued two willful citations, for not taking precautions to protect its workers from hazards in the tunnel and not ensuring proper rescue services were available.

What's next The district attorney for the Fifth Judicial District will decide whether criminal charges should be filed

based on a report from the Clear Creek County Sheriff.

http://www.rockymountainnews.com/staff/sara-burnett/

http://www.rockymountainnews.com/staff/sara-burnett/contact/

Top 10 OSHA Citations• 1910.23 Floor Openings/Guardrails• 1910.130 PPE/Respiratory Protection/H2S• 1910.147 Lockout/Tagout• 1910.184 Slings/Hoisting Equipment• 1910.212 Machine Guarding• 1910.305 Electrical Wiring• 1910.1200 HazCom• 1910.151 First Aid• 1910.157 Fire Extinguishers• 5(a)(1) Improper set up of Drilling Rig

or Workover RigIf you don’t own a copy of API Recommended Practice 54 or 74…get a copy!

Industry’s Response• Pre-Qualify Contractors – (e.g. PEC’s SSQ)

– Trailing indicators = 40% weighting• TCR (< 2.1 ?)• DART Rate (< 1.2 ?)• EMR < 1.0 & you’re better than the rest

– Safety Management Programs = 60% weighting• Substance Abuse Program• Safety Program Review• Training Documentation• Mandatory JSA – Job Safety Analysis

Other Metrics to Consider

• WC Claims Cost per $ 100 payroll• Number of WC Claims per $ 1 million of payroll• Property Damage Costs• Preventable Accidents per 10 vehicles

• Although Important…these are all metrics which only show how “bad” we are doing…hence the name lagging indicators

Other Metrics to Consider

NCCI Code WC Insurance Cost

(per $ 100 of payroll)

Target

(less than 65% loss ratio)

Loss Ratio = Losses/Premium

1320

Operators

Pumpers

$ 6.81 $ 4.43

6235

Drilling Crew

$ 24.57 $ 15.97

Internal Benchmarking based on Insurance Workers’ Compensation Costs

Where do we go from here ?

• Compliance will always be a tough sell to management

• Citation avoidance is a function of luck

Where do we go from here ?

• There is no good way to quantify the number of accidents and the cost of accidents that were avoided by our safety program

• There is no good way to quantify the number of spills or permitting violations that were avoided by our environmental management program

Cultivating Safety Performance through Accountability

“You can only manage what you can measure”

- Deming

Cultivating Safety Performance through Accountability

Safety needs to have Corporate Goals just like Operations and Finance

1. Figure out how to tie Safety Goals to Operational Goals

2. Measure what matters most – Activities Drive Safety3. Identify “Leading Indicators” and set goals4. Develop and publish executive level exhibits regularly5. Tie performance goals to performance reviews

• Major League Baseball Team– Owner’s Expectations: Make Money or Win the World Series ?

General Manager Skipper (Manager)

Player

- Revenue

- Cost Control

- Merchandise Sales

- Attendance Numbers

- Win/Loss %

- Making Playoffs

- Win World Series

- Recruiting

- Batting %

- RBIs

- ERA

- Saves

US Coast Guard’s Performance Management Plan

Mission

Outcome Goals

Strategy

Program Alignment

Resource Alignment

BEFORE

Safe Waterways

Increase compliance 10%

Fines/Incentives

# of Fines

Increase # Inspectors and Training

AFTER

Reduce Accidents/Deaths

Decrease Substance Abuse and Increase Maritime Skill

Partner with Associations, Community, & Not for Profit

10% reduction in Accidents & Deaths

75% reduction in Accidents & Fatalities

Accountability on all Levels• Employee Performance

reviews need to be tied to metrics to truly drive performance.– Safety = 10 – 30% of

total• For Executives, safety

needs to be at least equal to production or financial incentives.

Safety Goals/ActivitiesVP of Operations District Manager

Drilling Manager

Lead Pumper

Tool Pusher

Rig Operator

Pumper

Rig Hand

Truck Driver

- Maximize Revenue

- Control Costs

- Number of field visits completed

- Number of safety meetings attended

- Pre-Qualified Contractors list updated

- Well down time %

- WC deductible costs

- Property damage costs

- Average days to close maintenance requests

- % Safety Training completed

- Daily Safety Huddle %

- Competent Person Training Completed

- Number of JSAs completed

- Number of Safety Contracts

- Rig Inspection score

- % modified duty accommodated

- % safety meetings attended

- Be ready to start work

- Maintain safe driving record

- Wear PPE

- Utilize designated medical provider

- Keep worksite orderly

Leading Indicators vs. LaggingLagging Indicators

– TCR– DART– EMod– WC Costs

Leading Indicators– Management

Commitment– Supervisory

engagement– Hazards eliminated– Training/Education– Behavior Observations– Attitudes about Safety– Process

Improvements

Leading Indicators in Energy Industry

Schlumberger Goal: Reduce Fatalities from driving – Balancing workloads to

reduce fatigue

– Dispatch and schedule to use safer highways

– Don’t expect the crew to push home…get a room for the night

– Training on tire blowouts


ExxonMobilGoal: Meet Delivery on Offshore Platform

– Executive involvement in walk around inspections

– Foreman involvement in morning huddles

– Hazard Identification

– Observation & Coaching

– Housekeeping

– Training on Hazard Identification


Grant PridecoGoal:

Develop ownership in a consistent safety management process

– Active Leadership by Executives

– Location Management Engaged and Responsible for Safety Process

– Hazard Abatement Closure Rate

– Order & Housekeeping

– % Safe

– Recognition


Other Ideas– Rig operator for workover company

shares in profitability of rig

– Incentive programs encourage training attendance

– Imbed safety into task training

– Contractor Pre-Qualification

– Utilization of JSAs

– Safety should be 10-30% of total performance review

Closing Thoughts

Approach Safety like a Doctor

1. Ask where it hurts

2. Measure a couple of items to confirm

3. Prescribe a course of action

4. Identify 2-3 measures and track and adjust

5. Celebrate the success

Select another target and start over again building on what you have in place

Resources

• www.AESC.net

• www.IADC.org

• API/AESC – Safety Conference

• www.BalancedScoreCard.org

• www.ASSE.org

• American Strategic Management Institute

http://www.aesc.net/

http://www.iadc.org/

http://www.balancedscorecard.org/

http://www.asse.org/

Resources (cont’d)

www.dbo2.com SafetyNet

www.clmi-training.com PerformTrax

[email protected]

(303) 615-7407

http://www.dbo2.com/

http://www.clmi-training.com/

mailto:[email protected]

Documents

Cultivating Safety in the Oil and Gas Industry Craig A. Halpern, CSP, CPE, ARM Risk Control Manager - IMA of Colorado Rocky Mountain Chapter – ASSE – Oil