Energy Risks

Getting From Here to There

Transportation safety in the oil and gas industry is being challenged by increased production.
By: and | December 3, 2014 • 4 min read
energy industry

Companies within the energy industry are facing growing risks as their trucks roll through urbanized areas and rural roads not designed for heavy-duty traffic.

With the boom in oil exploration comes the need to move high-value machinery, hazardous materials and hazardous waste, and natural resources at seemingly ever-faster paces into locations previously untouched by the industry.

Advertisement




The expansion of the U.S. energy business is evident.

From February 2010 to February 2013, onshore oil production within the lower 48 states increased by 64 percent, according to the U.S. Energy Information Administration, and the number of natural gas wells found in shale plays in the United States increased to 10,173 in 2011, from 5,531 in 2009. From 2010 to 2011, shale drilling expenditures increased by 88 percent, totaling $65.5 billion, according to the American Petroleum Institute.

As a result of this expansion, organizations face greater reputational and environmental liability risks, and may also experience an increase in third-party liability claims.

Risk reduction is possible for companies that develop a robust and proactive risk management strategy that makes safety a high priority.

Fleet operators understand that their reputation is on the line with every accident, whether in the headlines or not. Organizations’ health and safety performance data can hinder a service company’s ability to win contracts. Their entire safety record is made public through the Department of Transportation’s Safety and Fitness Electronic Records (SAFER) system.

Any future business they get within the oil business is contingent on their risk management performance and regulatory compliance. This concern is shared by every link in the energy supply chain, as every ancillary operator in the business — from drilling, to well-servicing and beyond — has drivers, trucks and exposures.

A 21st century energy company understands the need to evaluate their safety risks and develop effective risk mitigation strategies.

Advertisement




Contributing to the transportation risk scenario are key factors such as high levels of driver demand, a relatively inexperienced driver pool across the U.S., increased state and federal regulatory oversight, and drivers operating in unfamiliar locations.

Recognizing the broad and ever-changing nature of transportation risks is crucial, and companies working to keep these exposures in check do so through the development and implementation of a systemic approach to fleet risk management and loss control that includes the following steps:

1. Gap Analysis/Regulatory Review

The first step in a risk management program is to gain an understanding of the current state of affairs.

Part of this involves ensuring that a Motor Carrier Consensus Form is accurate. One good indicator of safety is the SMS BASIC percentile rank that can be found in the monthly CSA Data Preview.

Inspection and violation histories can also help companies identify patterns and trends, revealing which areas of their transportation program (including their own business processes) require improvement.

2. Safety Training

Training involves making drivers aware of Department of Transportation rules. Even experienced truckers, upon coming to the energy business, might need training on the challenges of driving on smaller roads through towns and the varied other operating environments they experience.

Part of any training program must also involve increasing all drivers’ awareness that their performance on the road directly affects the company.

The Consumer Energy Alliance Trucking Safety Task Force recommends making sure drivers know that no load is worth sacrificing safety standards or violating rules.

3. Driver Vetting

This can be a daunting task. The economy of the oil business dictates that operators are active as much as possible while the prices are high; for gas, despite the lower commodity prices, wells are being drilled more and more.

Drivers are wanted. Screening procedures and drug testing are more than ever a necessity to mitigate fleet risk.

4. Periodic Re-Evaluation

Repeat steps one, two and three on a regular basis. As the Consumer Energy Alliance Trucking Safety Task Force guidelines suggest, meet with community members and leaders, local law enforcement and emergency to understand their safety concerns and address them in upcoming training as needed.

Meet regularly with the drivers themselves and ensure they are aware of changes on the ground.

Advertisement




The domestic energy industry is experiencing an exciting and prosperous moment, yet with growth in exploration and production comes growth in risk and its consequences — particularly those centered around transportation.

Some larger oil and gas service companies have already spent millions of dollars to understand and mitigate their fleet risk. Other companies are not quite as far along. Yet all service providers appreciate that creating a safety culture can only help them in the future.

Jeff Melo is an experienced risk management professional and part of the ESIS Health, Safety, and Environmental team. Mike Billingsley is responsible for proactive management of ESIS Health Safety, and Environmental accounts. Jeff can be reached at [email protected] Mike is at [email protected]

More from Risk & Insurance

More from Risk & Insurance

Risk Matrix: Presented by Liberty Mutual Insurance

10 Critical Risks Shaping the Liability Landscape Today

Litigation trends, including ever-rising jury awards, are amplifying new and emerging liability exposures across the board.
By: | June 3, 2019




The R&I Editorial Team can be reached at [email protected]