Marcellus Explosion-BP Spill: Both Involved This Faulty $7 Piece of Plastic

Email

Sometimes the very smallest part of a complicated piece of equipment can bring down the entire project.

The part at issue here, a thin ring of rubberized plastic, costs about $7. Yet it may be responsible for forcing the U.S. to rethink its entire domestic energy strategy.

Here's what happened.

Clearfield County is a rural area of scenic rolling hills in northwestern Pennsylvania, about an hour from my house. Shortly after 8 p.m. on the evening of June 3rd, I received a text message: The sky over Clearfield County had exploded above a natural gas well being drilled there in the Marcellus Shale. I read the news and knew that, along with the well, much of the last five weeks' work to develop better drilling regulations for the state may have gone up in smoke, too…

But I'll get to that work a little later. It was certainly less pressing than other matters on my mind throughout the night and the next morning. Finally, after a 16-hour-long spillage of gas, toxic flowback water, and brine, the well was capped.

Its effects, however, are just beginning.

The good news from Clearfield is that there were no injuries and little damage in a remote part of a state forest. The bad news is what this event may mean for the move to produce more U.S.-based energy resources.

Two Major Blowouts May Put A Cap on Domestic Drilling

With popular opinion rising in opposition to drilling offshore – thanks to the disastrous Gulf of Mexico oil spill – we now have a similar event challenging the ability of companies even to produce safely onshore .

The Clearfield episode is another blowout, following so closely on the heels of the BP tragedy in the Gulf, and both involve the failure of the same vital piece of equipment – something called a Blowout Preventer (BOP).

At Clearfield, as gas production was beginning, the well experienced a sudden increase in pressure. The BOP, a cheap, rubberized seal, forms a series of redundant valves that should allow technicians to stop the flow of oil or gas, stabilize a system, or even cap a well in the event of a pressure surge.

But the BOP connection malfunctioned; the seal was broken, and with it went any chance of preventing or controlling the blowout itself.

It is also clear that a BOP failure brought about the sinking of the Deepwater Horizon platform in the Gulf, the destruction of the most advanced piece offshore drilling equipment, along with the deaths of 11 people and the likely destruction of an entire region's economy.

We already know the companies in the initial crosshairs of both the political backlash and liability debates. These are the producers – BP plc (NYSE:BP) in the Gulf and EOG Resources (NYSE:EOG) in Clearfield County.

EOG used to be part of Enron (a legacy it is anxious to overcome) and was poised to be one of the major producers in the Marcellus. That aspiration will now be interrupted. The state Department of Environmental Projection (DEP) has ordered EOG to halt operations. The company is prevented from all drilling activities for at least a week; hydraulic fracturing (the movement of large water volume down under high pressure to break open the shale) must stop for at least two weeks; and it cannot complete or start post-fracturing at any of its 265 active wells in Pennsylvania for at least a month.

These bans are likely to remain in place until the DEP has determined the cause of the blowout. EOG, for its part, has indicated that the integrity of a seal (our little $7 guy again) in part of the BOP assembly was compromised, allowing pressurized gas and fluids to flow. Why that happened – and what it means for the thousands of wells supposed to be spudded in the Marcellus – remains to be seen.

EOG is one of the largest independent U.S. oil and gas producers, and Marcellus production accounts for less than 1% of its total daily output. The company says that suspension of activities in Pennsylvania should not prevent it from reaching its goal of a 13% rise in overall extraction volumes this year.

Of course, meeting production goals is less the issue here; what's vital is maintaining public confidence levels on Marcellus and other shale potential. These domestic sources are becoming a major component of the national energy balance, especially in the wake of reduced offshore drilling.

Ultimately, the issue may well come down to the defense provided by other companies, the BOP manufacturers. Here the market is dominated by Cameron International Corp. (NYSE:CAM). CAM built the BOPs at issue in both the Gulf and Clearfield blowouts. The second-largest provider is T-3 Energy Services Inc. (Nasdaq:TTES). Shares in both have taken a hit, although the companies stand by their products. CAM maintains that an electrical problem – and not anything in the BOP itself – caused the Deepwater Horizon blowout.

Indeed, an exhaustive 2009 study supports that contention. In over 90,000 field tests, there were 62 BOP malfunctions – a failure rate of less than 6/100ths of 1%. At Clearfield, EOG said that it successfully tested the BOP before initiating a gas flow.

Nonetheless, the two blowouts have another element in common…

Balancing Energy Needs With Safety Concerns

Each project experienced a massive pressure surge before the blowout. That is of great concern for drilling in Marcellus, where pressure has been consistently higher than anticipated. Greater pressure increases how much gas is coming out of the ground (a good thing for operating companies and their investors), but it also ups the safety risks and concerns.

And that brings me back to that text message I got on June 3rd. One of the immediate casualties of Clearfield may be proposals to change drilling regulations in Pennsylvania. We started the process five weeks ago with a major meeting at Duquesne University in Pittsburgh, my academic base. The Pennsylvania Environmental Council brought together experts from around the country to develop recommendations for DEP.

The intention was nothing less than meeting the requirements for energy needs and environmental safety at the same time. Our conclusions were working through the state government in Harrisburg… and then a $7 seal got in the way.

What is beyond doubt, however, is the need to become increasingly reliant on unconventional production to satisfy our energy thirst moving forward. This requires that we solve the concerns over shale production and do so responsibly. Whatever the impact, it's sure to be nationwide, as more shale deposits come under development.

In my next column, I'll bring you out to California, where the Monterey Shale is rapidly bringing what was once thought to be an exhausted production basin back to life.

This time, it is all about oil shale – as much as 500 billion barrels of it.

Kent

Ride the
$220-a-barrel bull…


Find out the
5 Energy Shocks of 2010…
and why oil is about
to skyrocket.


Sign up for this free
web event.









We Value Your Privacy

Join the conversation. Click here to jump to comments…

About the Author

Dr. Kent Moors is an internationally recognized expert in oil and natural gas policy, risk assessment, and emerging market economic development. He serves as an advisor to many U.S. governors and foreign governments. Kent details his latest global travels in his free Oil & Energy Investor e-letter. He makes specific investment recommendations in his newsletter, the Energy Advantage. For more active investors, he issues shorter-term trades in his Energy Inner Circle

Read full bio

  1. James Griffin | June 15, 2010

    Oh yes, lets really get down on the drilling industry that is very helpful when so many jobs are on the line and livelyhoods depend on these jobs. We have had "accidents" in the oil industry as long as i can remember and they will continue to happen as long as drilling continues. Howeever, accidents are in all industries, air, sea, land, underground etc, so lets all shut down everything until we get 100% assurance that accidents will never happen again. Well if you believe this I have part ownership in the Golden Gate Bridge I will sell anyone at anytime. Lets get real and stop trying to be phoney. You cannot get all the accidents eliminated by shutting down the industry, that is just plain "stupid" to think so.

    • KEN COLLINS | June 18, 2010

      MR GRIFFIN IS RIGHT ____UP TO A POINT. YES THERE WILL ALWAYS BE ACCIDENTS,
      BUT SAFETY BEGINS IN THE MIND. WE NEED TO CONSIDER THE RISKS THAT ARE
      PART OF ALL OF OUR LIVES, THEN PLAN TO MINIMIZE / OR ELIMANTE THOSE RISKS.
      EVERY MAN ON A RIG IS PART OF A TEAM , PUSHER,DRILLER, FLOOR HANDS TO THE
      MAN ON THE MONKEY BOARD AND SAFETY IS THE GEL THAT HOLDS THEM TOGETHER
      FOR TO SURVIVE, THEY MUST WORK TOGETHER AS A TEAM FOR SURVIVAL. BASED ON ALL OF THE STORIES RELATING TO THE BP DISASTER, IT'S CLEAR SOME FAULTY
      THINKING, LACK OF PLANNING, LACK OF KNOWLEDGE, & THE UN-KNOWN RISKS OF
      DRILLING AT 5000 FT INTO NEW GEOLOGICAL FORMATIONS. WE JUST DON'T KNOW
      HOW MUCH BP DIDN'T KNOW, AND THEY SURE AREN'T GOING TO TELL US THE TRUTH TO THAT QUESTION. WHAT WEIGHT OF MUD WAS REQUIRED TO MAINTAIN AN OVERBURDEN ?, WHAT WAS THE WEIGHT OF THE CEMENT USED TO CEMENT THE
      CASING? HOW WAS IT POSSIBLE FOR THEM TO TAKE A "KICK" AFTER BUMPING
      THE PLUG? A LOT OF UNANSWERED QUESTIONS BUT A LOT MORE "MONDAY
      MORNING QUARTER BACKS" & KNOW-NOTHING GOVERNMENT BULL-SHITERS TRYING
      TO GARNER SOME POLITICAL CLOUT WITH PEOPLE EVEN LESS KNOWLEDGEABLE
      THAN THE POLITICIANS. MAKES ME SICK TO THINK OF ALL THE GULF-COAST PEOPLE
      WHO MAY HAVE LOST THEIR CULTURE, JOBS, FOR EVER.

  2. Jason Seyler | June 15, 2010

    John Hofmeister has a "sound" Energy plan for this nation and the administration is starting to listen.

  3. albert | June 20, 2010

    Let's see. We will end our dependency on foreign energy by stopping drilling until it is 100% safe! What in this world is 100% safe? Let's not enter WWII unless we have zero casualties? let's not have cancer operations unless it will result in a 100% cure rate? Let's not have heart bypass until a patient never chrokes! The idiots in PA will not be happy until everyone is living like the Amish. The real Amish. Who spend their entire lives behind a stinking mule. WAKE UP AMERICA….. Life is not perfect. PA of all places is in an economic hole. It desperately needs funding flowing into the state. It produces nothing but lawyer ambulance chasers. The stupid communist corrupt philly governor addopts California environment standards to attract new business. HAS ANYONE SEEN THAN NEW BUSINESS DEVELOPMENT. If not for Federal gov employment PA would be in a big hole. Life rewars those who take risks! So what if a useless tree in the middle of know where burns down. These blue collar idiots keep voting for democrats and they wonder why they are still poor. PA has nothing to offer new business, and natural gas is the wave of the future.

  4. A.H. van Herp | June 20, 2010

    @ James Griffin | June 15, 2010

    In general you are right but……..

    Surely 2 identical blowouts must be investigated.

    As far as the workers are concerned, they should be paid their wages, they are not responsible.

    It does cross my mind that if that is so then they might have to pay if they are.

    They are rich enough, or damages can be limited to $1000.00:-)

    Henk-2

    LISTEN TO YOUR CONSCIENCE, NOT TO CORRUPT POLITICIANS

  5. Alix Berenzy | June 20, 2010

    Yes, there will always be accidents in any industry. Anything in life involves some risk. But pumping millions of gallons of toxic chemicals into the earth and hoping it stays underground and does not slowly leach into our aquifers….is an awfully huge gamble, don't you think?
    And the stakes are so high- especially to our children who are the ones that will most probably have to suffer for our gambling.
    Could we all get behind the risk of investing in truly green alternative energy? Wind, solar-calling.all you inventors! i believe in the creativity that living in a free country engenders. And if we were to set up a system like this that takes us away from fossil fuels- what a gift to present to future generations.

  6. FG | June 20, 2010

    WHY no one has mentioned THIS I don't know. I watched the Channel 2's "60 Minutes" program some days after the well blew. The guy that was in the control room of the rig at the time of the explosion was being interviewed. HE, luckily escaped by jumping OFF the rig. Anyway, his story has not been mentioned. He told Who, What and Why of the explosion and WHO gave the orders to continue when the rig people saw bits of the rubber gasket coming up.
    As Paul Harvey used to say, "and this is the rest of the story…." Do we have some people
    being paid-off not to talk? In this world, I wouldn't be surprised. What a shame for all of
    this mess and death for a $7 part and a jackass giving a bad order.

    • John Deden | July 14, 2010

      Read the above comments. Each illuminates only a small part of the causes and little to nothing on max prevention of recurrance. PUBLISHED REPORTS have been made and it appears "squashed/silenced" for power/politics/Obamaism reasons.
      These two (plus several others not mentioned or well known) most probably could have been prevented by far better Quality Control OVER parts selection and application, and end product use and application. My information sources have told me that months of prior warnings noted to BP (for example) that they could expect pressure surges of 100,000 psi whereas the BOP design was maxed out at 10,000 psi ability to contain. A guaranteed masive failure mode. Cheap electronics and no redundancy of controls etc , etc also guaranteed the events to happn.
      OH YES THINK ABOUT IT ! NO FAILURES !!

  7. Ross Cameron | June 20, 2010

    Unfortunately in the USA you suffer the same set of double standards and hypocrisy that occurs in Australia where mining anything is concerned. If you can sit on your comfy couch in Sydney, Melbourne a long way from anything mining then you are free to pontificate how mineral extraction should be done and how bad these industries are. You will of course still drive to the shops and turn up the heat or aircon and demand all the very best services – just as long as you don't have to accept what pays for or provides them.
    I agree with the first comment. If we want the energy sources and minerals we must accept that there are risks. This does not mean not striving for the best result and to minimise the possibility of accidents doing all that we practically can but it does mean the community at large accepting some of its collective responsibility as well.
    By the way – the pathetic spectacle that the US Comittee made of itself in Washington last week – that the world's last superpower and most pwerful democracy dmeans itself like those Congressman did – it was pathetic – play the issue not the man boys. I cannot believe that any reasonable US person would think that acheived absolutely anything – truly pathetic.

  8. Angelo Garcia | June 28, 2010

    Given all the heavy investment by market players in this country to secure oil in other countries with other peoples blood and money, its hard to rule out sabotage by those who have a $ interest in the status quo. We have been blessed by God to have domestic resources of gas in this country, that can supply All our energy needs for the next 100 years,but players in wallstreet are bugeling this just as they have brougth us to economic bankrupsey, with the fairy tale of free trade and deindustrialization of America. I live in Midland ,Texas and oil and gas has kept Texas out of bankrupsey unlike the northeastern states who sent their jobs to China. I have been listening to outright lies about water pollution
    by hydrofracking. Why is it that Fort Worths water is rated much purer the New York City's when they have hyrofracked gas wells within their city limits? Texas has over 500,000 fracked wells over a 60 year period, and absolutely no pollution of drinking water. The same group of thieves that caused this current worldwide economic depression want to repo the Marcellus. Grow up smell the coffee and stop listening to morons with a money agenda like Jeffery Fox
    who was raised by a bunch of dope heads. Try being a Real Patriot and support development of domestic industry and energy.

  9. John Deden | July 14, 2010

    YES< in any venture there is risk. I have been a ww2 combat pilot, a test pilot and an innovator as a degreed engineer and specialist in design proofing before release to production. The designs produced unde my QC requirements , from 50 year life sattelites to rockets to oil patch products and major utility and oil patch systems have for 50 years exhibited 99.999 percent reliability,almost a 100% no-failure-rate. Too bad management since my retirement some 25 year ago seems to have chosen to go "cheap" and hope for "luck". Business managers of today and the last 20 years have sold their souls for pressured performance and for piles of bonuses. BP has a history of saying "NO" to somewhat "costly" safety/QC controls, but we're way behing the 8-ball in profitable results and we now see today, while the stupid, un educaed "talking heads, and un educated simple President ( a mouth for desstructive hidden forces) sit back and watch the destruction happen, repeatedly. REMEMBER FOLKS: WHAT GOES AROUND COMES AROUND, and here it comes !!!

  10. J S Foster | July 14, 2010

    95% of all I have recently seen posted
    re: the Macondo blowout, hydraulic fracturing
    processes in the Shale plays and about
    oilfield operations in general has been
    ridiculous unadulterated bull crap.
    All the loose talk about oil companies
    having little or no concern for safety
    is a lie. All the talk reverts to a belief
    that all oil compnies are driven by greed at all costs
    this is really a psychological expose
    of how truly greedy and jealous the public
    has become on account of the historical
    allure of oil riches/–only the common public
    can't or won't take the tremendous
    financial risks that those in the oil indutry
    do–they want to demand money
    plunder and tribute when the great
    man or enterprise stumbles or fails.
    There was a time in the USA when such
    outstanding engineering and scientific
    endeavors were hailed and celebrated
    and the nation felt bad along with them when they
    stumbled or fell short. AND prided itself
    on redoubling those efforts toward a worthy
    cause and relished the challenge to solve and overcome
    the problems encountered. What we have
    lost is killing our people, our nation, and
    our future

  11. james | July 14, 2010

    the guy that calls pa a hole is an idiot check out his spelling to get an idea how big i would pay twice as much for all fuels to get them from a desert where no one lives than so close to peoples houses where they drill in pa i will make this short did anyone of you commenters see the hbo special Gasland where the guy lights hid faucet on fire the water coming out of HIS KITCHEN FAUCET CAUGHT FIRE Anyone living in those conditions will say stop all domestic drilling and start thinking about new tech SUN AND WIND……………

  12. Kemp | July 21, 2010

    ALL activity includes a risk,pure and simple.
    We can minimize them but not completly wipe them out.
    Auotomobiles cause more deaths and damage everyday but
    nobody stops production of them ,as a matter of fact our
    Gov.subsidizes them to keep producing their forgien made junk.
    And how many die from falling off ladders??
    How many homes burn because of electrical causes??
    I feel for the people in the Gulf ,this is a terrible EVENT
    I can't call it an accident

  13. james | July 21, 2010

    this is to deden dont close off the wells get tham out of peoples site like miles away. did you see Gasland its a must watch they ae\re trying to lease the New York watersherd tofrakkig this wll ruin water from yhe top of nyc tothe bottom of jrasey gi uoe live any where near there that over 9 million people pisoned YUO MUST CLL YOUR CONGESSMSN OR LADY AND TELL HIM OR HER TO OPPOSE ALL FRACKING WITHIN A 10 MILE RADIUS AT LEAST….EVERYONE READING THIS MUST SEE GASLAND ITS OB HBO THE GUY SPENT EVERY DIME HE DAD TO MAKE THIS FILM ONE LAST THING THE OIL EXECS SAID THE WATER WAS SAFE====== HOW MWANY DO YOU THINK DRANK It ??????000000000000

Leave a Reply

Your email address will not be published. Required fields are marked *


− three = 5

Some HTML is OK