Drilling through danger Chapters 2 & 3: Oil & gas industry’s practice of farming out work can have deadly consequences, client legal immunity prevents many injured from suing, even when fault is clearly the client’s

Colorado’s workers’ comp rules complicate accountability, “Exclusive remedy” provision gives companies immunity from lawsuits by John Ingold, September 26, 2016, The Denver Post

On the first day of Von Phathong’s trial against drilling company Tesco, his attorney left little doubt about who she believed was to blame for her client’s injuries.

“Tesco was just waiting for someone to get hurt,” the attorney told jurors. “They were totally and willfully irresponsible and reckless.”

By the end of the trial in 2012 in Denver federal court, jurors agreed and awarded a more than $3.7 million verdict to Phathong and his wife, including more than $1.3 million in punitive damages against Tesco, his former employer.

For 98 weeks, the verdict stood, and Phathong, whose back injuries from an accident on a Garfield County rig left him unable to work, believed he would have enough money to care for him and his family for the rest of his life.

Then, on the 99th week, the 10th U.S. Circuit Court of Appeals threw out the decision.

It didn’t matter whether the company was at fault for Phathong’s accident, the appeals court ruled. He never should have been allowed to sue them in the first place.

The case highlighted a little-known truth for workers injured on the job: By law they cannot sue their employers if they receive workers’ compensation for their injuries.

Some version of this arrangement has existed for decades in the workers’ comp laws of every state in the nation, and it applies to all industries, not just oil and gas.

Known as the “exclusive remedy” provision, it is meant to be a win-win for employers and employees: Injured workers receive quick benefits, even if they are at fault for their injuries; companies are protected from costly lawsuits, so long as they participate in the workers’ comp system.

“It takes out the concept of employee fault,” said Mimi Metzger, a Denver attorney who specializes in workers’ comp law. “That is what employees take for granted.”

But the provision also is a significant shield for companies.

In Colorado, there is no such thing as punitive damages against companies with lax safety programs that injure or kill their employees. Workers are limited to recovering only what workers’ comp says is needed to treat their injuries — typically paid out by a company’s insurance carrier.

In scouring federal and state court records, The Denver Post found six lawsuits filed in Colorado by injured oil and gas workers since 2000 that were thrown out because a judge ruled the company was immune from suit. Another lawsuit, filed by the widow of a worker killed in a gas patch explosion, was tossed for the same reason.

But no case illustrates the complexities — and the consequences — of the law better than Phathong’s.

In December 2005, Phathong, a floor hand, suffered broken bones in his back when a nighttime drilling operation went awry. His crew was trying to hook a pipe of one size up to another of a different size, but the rig’s supervisor, awakened from a sound sleep at 2 a.m. to give guidance, didn’t ensure the connector he told the crew to use had the correct threads. When the rig’s motor torqued to screw the pipes together, the connection failed, pinning Phathong against a derrick leg.

“I thought I was dead,” he testified at the federal trial.

At first, Phathong sued energy giant Encana, which owned the drilling site near Rifle. But that suit was thrown out because, under the workers’ comp law’s exclusive remedy provision, companies that employ subcontractors such as Phathong also are considered employers immune from suit.

Phathong was ordered to pay Encana more than $12,000 in legal fees.

The provision also would have barred a suit against Tesco except for a potential opening created by an unusual legal maneuver.

On the last night Phathong went into work, he was employed by Tesco. But, the next morning, as Phathong lay in a hospital bed, Tesco sold most of its drilling rigs — and all the employees working on them — to a company called Turnkey E&P Corp. The two companies then backdated the sale to midnight, meaning that Phathong may have technically been a Turnkey employee at the time of the accident.

Workers’ comp law does not forbid an employee of one subcontractor suing another subcontractor for injuries. So Phathong filed suit against Tesco, and a judge ruled it could go to trial.

At trial, Phathong’s attorneys pilloried Tesco. A former Tesco employee testified that the company had the worst safety policies of any he had worked in 15 years in the oil and gas industry. An expert witness hired by Phathong’s lawyers — a former drilling engineer and supervisor named John C. Magill — said Tesco provided workers with inadequate training and had a “hurry up” culture that prioritized speed over safety through “fear and intimidation.” Company reports about the accident were inaccurate and safety changes were few, Magill said.

(Phathong, who lives in Louisiana, could not be reached for comment, and his attorneys did not return multiple calls for comment.)

Tesco’s attorney responded by blaming Encana, questioning the severity of Phathong’s injuries and suggesting Phathong had willingly taken on the risks of the job.

“He knew what he was doing,” the attorney told jurors.

The $3.7 million verdict was one of the largest an oil and gas worker in Colorado has ever won against a company for an injury.

But Tesco soon appealed the judge’s ruling that allowed the case to go to trial. Judges at the 10th U.S. Circuit Court of Appeals, in Denver, sided with the company.

“This court concludes the record conclusively demonstrates Tesco was Phathong’s statutory employer and, therefore, immune from Phathong’s negligence claims,” the judges wrote.

The ruling not only reversed the jury’s verdict, it also meant Phathong was responsible for Tesco’s legal fees. Phathong was ordered to pay his former employer more than $76,000, which Tesco agreed not to collect as long as Phathong did not appeal.

When the case was finally over, Phathong and his wife were living in a trailer in Louisiana. His wife worked at a family tamale and barbecue stand and made a few thousand dollars a year. Phathong was unemployed, earning only what worker’s comp provided him.

In the two years after his accident, he received $30,000 in benefits, according to a court record. [Emphasis added]

Oil and gas industry’s practice of farming out work can have deadly consequences by Monte Whaley and John Ingold, September 26, 2016, Denver Post

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“The (oil) patch was my playground.” Jimmy Richardson’s left leg was amputated after a spreader beam rolled off a forklift, hitting him on the head and then crushing his leg. Photo by RJ Sangosti, The Denver Post

Oil and gas companies typically leave management of their sites to subcontractors, a practice that dilutes safety standards and protects companies from liability, making an already dangerous job even more so, a Denver Post investigation has found.

While companies such as Noble Energy, Encana and Anadarko are the face of the industry, its backbone is made up of small companies — many with only a handful of employees. In this environment, responsibilities can become blurred and safety policies can be confused.

“The problem becomes the subcontractors,” said Michael Lynham, assistant regional administrator for the federal Occupational Safety and Health Administration.

“As you trickle down, the quality of safety programs and protocols for employees deteriorates.” [Allowing the corporate/client/”operator” face of industry’s profits to exponentially escalate with every step of legal immunity for the increasing dangerous work practices?]

The Denver Post found documentation for 38 deaths in the state’s oil and gas industry between 2003 and 2014 — and the large majority of those, 34, involved workers for subcontractors. Details of another 13 deaths that the Bureau of Labor Statistics said occurred in that time span were not available.

“Oil and gas has been a poster child for the ways in which contracting out a lot of very hazardous work can be a fatal mistake and cause a lot of really serious problems,” said Peter Dooley, a safety and health project consultant with the National Council for Occupational Safety and Health.

Workers’ compensation laws give the site owners immunity from lawsuits brought by subcontracted workers injured on the job. Contracts between owners and subcontractors often contain a provision — so controversial that its use in the oil and gas industry is banned in several other high-producing states — in which the companies agree not to sue each other over accidents regardless of who is at fault. And site owners can further distance themselves from day-to-day operations at their wells by hiring independent contractors called “company men” to take charge of the work.

All of these issues spilled forth into a Weld County courtroom in 2014 when the widow of an oil and gas worker named Reyes Garcia sued two subcontractors she alleged were responsible for her husband’s death. Garcia had been working at a well site near Greeley when an explosion consumed him.

The subsequent $6 million jury verdict against the companies was among the largest ever awarded in a Colorado case involving an oil and gas worker.

“I don’t think everyone is calloused on purpose,” said Randy Kelly, the attorney who represented Garcia’s family.

“But the business is very profit-oriented, and there are very few incentives to make a site safe.”

“In this case,” Kelly said, “the subcontractors helped kill Mr. Garcia.”

All Lorena Garcia could recognize were her husband’s feet.

More than 85 percent of his body was burned in the explosion, from the top of his head down to his ankles. Only in his bare toes could she still see the man she married.

In July 2007, Garcia was working a pump at a Weld County natural gas well owned by Noble Energy, a $3 billion multinational giant. But on the day of the explosion that would claim Garcia’s life, no one from Noble was at the well.

Garcia worked for one subcontractor. Another subcontractor was in charge of running day-to-day operations at the well. That company delegated responsibility to a third subcontractor, who was supposed to make sure Garcia’s pump was far enough away from a piece of equipment venting flammable gas.

After the explosion, Reyes Garcia was confined to a bed in the North Colorado Medical Center burn unit in Greeley, subdued by drugs to help ease his pain. The 30-year-old father died six weeks after the fire.

Garcia knew his work was dangerous.

“He and Lorena would talk about it sometimes,” Kelly said.

But Garcia was reluctant to complain because he was making $60,000 a year, supporting a wife and child and close to getting his American citizenship.

“I think he hoped one day to become a well supervisor, who can make six figures,” said Kelly. “And I think there is a little bit of machismo to doing this kind of work.

“It’s a little bit like having a football player mentality. You don’t want to let your teammates down. You want to stay in the game.”.

On the day of the explosion, July 25, 2007, Garcia was part of what is called a workover crew, which cleans out a gas well after it has been used for fracking. There are only two safety measures that would keep the gas where Garcia was working from exploding: wind, which is expected to blow the gas away, and the distance between the piece of equipment venting gas and the other equipment being operated by the workers.

But because there is no state or federal regulation regarding equipment placement, crews are supposed to rely on an industry standard to set the safe distance. In this case, the American Petroleum Institute says the minimum distance between a “gas buster,” which helps to separate and disperse any gases coming out of the well into the air, and other equipment needs to be 100 feet.

In a typical arrangement, Noble Energy — known in the industry as a well’s “operator” — handed off daily oversight to Schneider Energy. Schneider then hired an independent contractor named William Smith to be the “company man” on site.

All of which works well, if the subcontractors adhere to safety recommendations. In the Garcia case, as in others, they did not.

“These big companies, they never have to take responsibility because they are not the ones on the ground,” Kelly said. “But the guys on the ground are basically told to take their chances.”

During the week-long trial in Weld County, Smith — who was named a defendant in Lorena Garcia’s suit, along with Schneider Energy Services — told jurors he was a graduate of the “school of hard knocks” and that the night before the accident, he “eyeballed” the distance between the equipment and Garcia’s crew, called it good and gave the operation his go-ahead.

It turns out Garcia’s pump was only 75 feet away.

After the trial, defense lawyers asked jurors to fill out a questionnaire, and they blistered Smith and Schneider Energy for lax attitudes about safety standards.

The jurors felt Smith and Schneider Energy had been in the best position to implement American Petroleum Institute guidelines, but they did not know the standards.

“Ignorance breeds ignorance,” one juror told attorneys after the case was decided.

Another said the defendants were typical of the “arrogant” guys in the industry, ”and that they just kept doing things the way they’d always been done instead of looking up the right way to do it.”

Another juror pointed out Garcia was “new in the country and doing this dangerous work because it is the best-paying job that does not need an education.” Jurors said they were compelled by testimony that Garcia had not even completed his safety quizzes fully and his employer — Leed Energy Services — put him out in the field anyway.

The $6 million verdict — which soon became the subject of additional lawsuits over whether Schneider or an insurance carrier was responsible for paying it — sent an emphatic and possibly historic message, Kelly said: Oil and gas companies should be forced to adhere to safety standards that, until now, have been largely voluntary.

“Basically, the defense in this case said that the oil companies didn’t have to follow published safety standards,” Kelly said. “But if you want to take that kind of risk, and not follow those written standards, then one day the state or some rule-making body will tell you to do it.”

Representatives of Schneider did not return messages seeking comment, efforts to locate Smith were unsuccessful and his attorney during the case declined to comment.

However, the Reyes verdict didn’t extend to all companies involved.

Neither Leed Energy nor Noble was part of Lorena Garcia’s lawsuit because of immunity provisions in the state’s workers’ compensation laws. The workers’ comp rules protect companies from civil suits brought by injured employees or their families — so long as the companies paid out workers’ comp benefits for the injuries. Subcontractors and their employees can sue other subcontractors. But if an employee for a subcontractor is hurt, the company that hired the subcontractor is entitled to the same immunity.

There’s another issue that complicates safety on oil and gas sites when big and small companies are involved.

In Colorado, site owners can include clauses in their contracts protecting them financially in the event a worker for a subcontractor is hurt on the job, even if the owner is at fault. Contracts may also contain reciprocal clauses whereby the site owners agree not to go after the subcontractors if one of the owner’s employees is hurt.

Legally, this is known as “indemnification,” and it is so controversial in the oil and gas industry that four of the nation’s highest-producing states — Texas, Louisiana, Wyoming and New Mexico — have laws that ban or limit indemnification in oil field contracts.

Safety experts say the clauses can further promote an arm’s-length relationship between site owners and worker safety.

“Much of that is an attempt to reduce their liability,” Dooley said.

A master service agreement between energy giant Encana and a small subcontractor that was filed in connection with a 2013 lawsuit provides insight into the arrangement.

On Page 5 of the contract, under the heading “Indemnities,” the contract states: “Contractor hereby agrees to release, defend, indemnify and hold the Encana Group harmless from and against any and all loss, cost, damage or expense of every kind and nature … arising out of bodily injury (including sickness to or death of persons and losses therefrom to relatives or dependents) to the Contractor Group.”

Further language, written in capital letters, makes clear the deal applies “WHETHER OR NOT RESULTING IN WHOLE OR IN PART FROM THE SOLE, CONCURRENT OR COMPARATIVE NEGLIGENCE OR STRICT LIABILITY OF THE ENCANA GROUP OR ANY DEFECT IN THE PREMISES, EQUIPMENT OR TOOLS OWNED, OPERATED OR CONTROLLED BY THE ENCANA GROUP.”

In other words, if a subcontractor is hurt on an Encana site, even if Encana is to blame, the subcontractor’s employer can’t sue Encana over the injury.

Since 2007, Colorado law has limited indemnification in contracts for most construction projects. The legislature adopted the limits, according to the text of the bill that created the limits, over concerns that construction companies were shifting the financial responsibility for their negligence onto others.

“It creates a disincentive for the party being indemnified to exercise due care because even if they mess something up and cause damage, they’re indemnified from that,” said Denver attorney Jared Berg, who specializes in construction law.

But despite these concerns, Colorado has no similar restrictions on the oil and gas industry. Therefore, indemnification clauses appear to be common in the state’s oil patch. The Post found several other examples of indemnification clauses in oil and gas contracts filed as exhibits in Colorado lawsuits.

Jimmy Richardson always kept moving. Cowboy. Soldier. Truck driver. Oilfield worker.

Before 2011, his life moved from one job to the next, a continuous stretch of work that began when he was 15 years old.

“I always had an itchy foot,” said Richardson, now 57. “My ex-wives didn’t. That’s why I have four ex-wives.”

On Aug. 10, 2011, Richardson was working on an oil site in Moffat County near Craig. He was a winch truck driver for J.D. Field Services — a job he held for only 10 days. Richardson said J.D. Field Services didn’t provide him with any training, but otherwise he felt he worked in a safe environment. J.D. Field Services has since gone out of business.

The company’s task that day was to load up and move a disassembled drilling rig, and there was the familiar stew of companies involved. One company, Quicksilver Resources, owned the well site. Another, DHS Drilling, owned the rig and took it apart. But only workers for J.D. Field Services were on site for the move.

A forklift raised up one of the rig’s beams, according to a police report. The beam teetered and fell. Richardson was in its path.

“I don’t remember much at all of what happened,” said Richardson, who now lives in Vernal, Utah.

He suffered a traumatic brain injury. His left leg was crushed and later had to be amputated.

It was clear that something had gone wrong. But who was to blame?

Soon began a legal odyssey that laid bare the confusion and protection that exists when subcontractors overlap on oil and gas sites.

OSHA didn’t inspect Quicksilver or DHS Drilling after the accident, a Post review of OSHA records shows. The federal safety agency did inspect J.D. Field Services and fined the company $3,000.

DHS and Quicksilver had indemnification clauses in their contract that protected them from suits by each other in the event of an accident.

Richardson ended up suing DHS, arguing that the rig owner hadn’t warned the trucking company of the dangers. Depositions and an expert witness’ report revealed that each company had its own safety policies but was uncertain whose should be followed on the job.

In a deposition taken in the lawsuit, a Quicksilver drilling supervisor said the subcontractors had not followed the company’s safety rules because the subcontractors did not conduct a job safety analysis, which those rules required. The supervisor admitted that Quicksilver did not check to make sure the companies had followed through in conducting the analysis.

“Quicksilver doesn’t go through and ensure or verify that that (job-safety analysis) was prepared?” Brian Bolinder, a lawyer for Richardson, asked the supervisor, Dennis Barrett.

“No, not all the time,” Barrett replied.

When pressed, Barrett said he was uncertain whether J.D. Field Services was supposed to follow both DHS’s and Quicksilver’s policies or just the latter’s. Barrett said he wasn’t even sure where a subcontractor would look to find Quicksilver’s safety protocols.

“They’re at a link,” he said in court.

“Where do they get that link?” the attorney asked.

“I don’t know,” Barrett said.

A safety expert hired by Richardson’s legal team blasted Quicksilver, noting holes in the company’s safety policy and a lack of supervision at the well site.

“These failures,” expert Edward Ziegler wrote in a report, “lead to an unsafe workplace and to an unreasonably dangerous and unsafe premise where contractors are required to work.”

But U.S. District Court Judge Philip Brimmer ultimately dismissed Richardson’s lawsuit, concluding that Quicksilver and DHS were not at fault because J.D. Field Services should have known the risks.

“There is no doubt that work on well sites can be dangerous,” Brimmer wrote in an order. “However, such risks are not to the general public, but to entities like JDFS that are experienced at working in such conditions.”

Richardson couldn’t sue J.D. Field Services, though, because the company was protected by the workers’ comp immunity, as was Quicksilver.

So, in the end, Jimmy Richardson lost his leg and his employer got hit with a fine.

Richardson now fills his days with his “comfort dog,” Bear, in his Vernal apartment. The constant pain where his leg used to be reminds him daily of the accident. He has tried acupuncture, massage and pain medication to ease his discomfort, but nothing quite works well enough. Phantom pain is what the doctors call it — a hurt with no source.

Richard says he isn’t bitter about what happened, even though his life has now stilled. He will probably never drive a truck again.

“I accepted it at a young age that this oil field work is a rough, dangerous job,” he said. “You just bite your tongue and keep going. You just put your head down and move forward.”

CHAPTER 3: Critics say oil and gas companies need to be more aggressive and move safety off back burner by Monte Whaley and John Ingold, September 27, 2016, Denver Post

Death came to Jim Freemyer through a toxic plume of volatile gas escaping so fast it knocked him out and left him lying face-down over an open tank hatch on an oil rig in remote Weld County. The gas that hit Freemyer in July 2014 was a deadly mix of unstable hydrocarbons — including benzene, butane and propane — that robbed the 59-year-old truck driver of oxygen and disrupted his already diseased heart.

A coroner found that the respirator Freemyer was using on the day he died — a $30 unit his employer would not even pay for, according to his family’ s attorney — was not fit-tested to ensure it covered his face properly. Freemyer probably would have survived had he been given a more expensive oxygen unit that supplied him with fresh air, much like what firefighters use when they enter a toxic, smoke-filled environment, Weld County medical examiner Dr. James Wilkerson said.

Yet the federal government does not require the use of any type of respirator by workers when they measure the oil in tanks for volume and water content. The practice of “tank gauging” is primitive in an era of satellite imagery and cellphones. It usually involves a truck driver, like Freemyer, dropping a glass vial and tape measure through an oil tank’s “thief hatch.”

Vapors amass just above the liquids in the storage tanks and often are released with such force that they can blow off a worker’s helmet.

Another potentially life-saving technology — remote sensors in tanks that eliminate the need for manual measurements — also is optional for operators. Industry groups have argued that remote sensors are prohibitively expensive for many companies and that requirements for the technology would place “unnecessary costs on oil and gas development.”

These safety gaps frustrate industry watchers who say neither the government nor employers go far enough to protect oil and gas workers.

Peter Dooley, safety and health project consultant for the National Council for Occupational Safety and Health, said safety recommendations often go unheeded.

“You can have all the voluntary industrywide safety days you want,” Dooley said. “But if there is not a requirement to do something, that often puts safety on the back burner.”

Oil and gas proponents concede 2014 was one of the worst years ever for deaths in the industry — at least 144 oil and gas workers died across the nation, a 29 percent jump from 2013, according to Bureau of Labor Statistics data. But they still point to an overall improving safety record, which they attribute to a constant focus on bettering processes and training employees. And they say the industry’s brawling, hard-living days of roughnecking are long gone.

“Most of what we do these days requires good, capable computer skills,” said Dale Robinson, an Occupational Safety and Health Administration-approved instructor who helps prepare employees for safety certification in the oil patch. “We really don’t have time for that type of nonsense that we had in the past.”

The industry says it has spent $7 billion in new technology since 2003 to enhance exploration, production and safety. New tools such as optical-gas-imaging cameras, premium-efficiency flameproof motors and virtual-reality oil-rig training are clear signs the industry is becoming safer and more efficient, industry officials say.

Stephen Flaherty, director of state and local government affairs for Halliburton, says his company has seen “double-digit decreases in accidents and injuries because of our safety practices.”

But in Freemyer’s case, the industry failed to provide him the basic technology to survive a day of work.

In his case, OSHA, which oversees worker safety in the oil and gas industry, fined his employer, Now or Never Trucking of Greeley, $19,500 for violations that included providing inadequate protection from petroleum fumes. The amount was negotiated to $12,500 in a settlement.

“I think a lot of operators out there are not held accountable for some of the actions like my dad’s death,” said Freemyer’s son, Mike. “They believe their process is sufficient, but until they get enough people dying under their watch, or unless someone forces them to, they are not going to invest in the type of technology that prevents these deaths.” [Emphasis added]

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