American Oil & Gas Reporter - December 2011 - 130

SpecialReport: Insurance Update
spudded during the initial five-year period. The primary term for leases in 800-1,600 meters of water is seven years, extended to 10 years if a well is spudded during the initial period. Leases in water depths greater than 1,600 meters will be good for 10 years, BOEM indicates. The agency says rental rates will remain at the levels established for Central Gulf of Mexico Sale 208 in March 2009: • 0-200 meter water depths–$7.00 an acre for years one-five, increasing to $14.00, $21.00 and $28.00 in years six, seven and eight, respectively; • 200-400 meter water depths–$11.00 an acre in years one-five, increasing to $22.00, $33.00 and $44.00 in years six, seven and eight; and • 400 meter and greater water depths– $11.00 an acre in years one-five, increasing to $16.00 thereafter. Noting that in 2008, the MMS raised Gulf of Mexico royalty rates from 16.67 percent to 18.75 percent, BOEM says it is evaluating different royalty rates and structures for the 2012-17 program. “To hedge against the risk that hydrocarbon prices may climb significantly following lease issuance, newly issued leases could be offered using a price- or value-based sliding royalty system,” the agency states. BOEM’s proposed 2012-17 OCS leasing program may be accessed at http://www.boem/gov/uploadedFiles/Proposed_OCS_Oil_Gas_Lease_Program_201 2-2017.pdf. Ì

Court Finds For Insurers Against BP
NEW ORLEANS–BP cannot use $750 million in insurance coverage held by Transocean Ltd. to pay costs associated with damages from oil that spilled from the Macondo well after the April 2010 explosion of Transocean’s Deepwater Horizon drilling rig in the deepwater Gulf of Mexico, a federal court has ruled. The 42-page order denied a motion by BP, which had asked the court to classify the company as one of the additional insured parties under Transocean’s nine insurance policies, and that the scope of BP’s coverage rights as an additional insured party was not limited to the scope of Transocean’s contractual indemnity of BP in the Deepwater Horizon drilling contract. U.S. District Judge Carl Barbier ruled the contract between the two companies assigned BP responsibility for liabilities from the Macondo blowout. Because BP assumed the oil pollution risks pertaining to the Macondo project, Barbier said Transocean was not required to name BP as an additional insured party for those risks, and because there is no insurance obligation as to those risks, BP was not an insured party and therefore not entitled to the declaration of the coverage it sought. The ruling can be found at http://www.laed.uscourts.gov/OilSpill/Orders/11152011Order(InsuranceActions).pdf. Published analyses of the ruling describe it as a narrow decision that hinges on contractual language concerning the pollution’s origin. The drilling contract defines BP’s and Transocean’s obligations, the court ruling points out, and identifies the liabilities that each company separately assumed. The contract contained cross-indemnities between the two, with each party committed to holding the other harmless for certain specified liabilities. Under the contract, the court document says, Transocean assumed full responsibility for above-surface oil discharges without regard to the negligence of any party, while BP assumed full responsibility for specified oil releases without regard to any party’s negligence, except for specific liabilities assumed by Transocean. Because the Macondo spill constituted a subsurface release, the court rules Transocean’s insurers–which, according to media accounts, include Ranger Insurance and a syndicate led by Lloyd’s– do not cover BP. Additional Insured Parties Under Transocean’s insurance policy, the court document states, additional insured parties are included automatically where required by written contract. That contract also asserted Transocean had the privilege to name those parties only to the extent that was required under contract or agreement. Both BP and Transocean dispute whether and how those provisions applied. The court document says BP asserted the drilling contract required additional insured party protection for certain BP entities, while Transocean maintained it disputed the scope of such additional insured coverage. BP argued that under Texas law, that scope was determined solely by references to the terms and conditions of the policies themselves, rather than indemnities in the underlying drilling contract. Transocean asked the court to rule based on the drilling contract, with coverages to be limited to the liabilities that it assumed under that document’s terms. In its arguments, BP held that governing Texas law required any reasonable doubt be construed in favor of the insured and its coverage claims. According to the court’s ruling, BP cited Texas Supreme Court decisions that held where an insurance contract was subject to more than one reasonable interpretation, preference should be given to the interpretation most favoring coverage. Transocean argued that the pleadings didn’t establish that BP was entitled to unlimited coverage for its pollution liabilities. It asserted any judicial review cannot ignore the underlying drilling contract, the court document reported, because to do so would posit that Transocean would apportion liabilities between itself and BP in that contract and then contradictorily affect BP boundless additional insured protection that BP specifically assumed in the drilling contract. The Transocean argument also pointed out BP never was mentioned in the insurance policies, and therefore, the court was required to look to the drilling contract to determine the extent of its coverage. Common sense indicated that where the

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130 THE AMERICAN OIL & GAS REPORTER


http://www.boem.gov/uploadedFiles/Proposed_OCS_Oil_Gas_Lease_Program_2012-2017.pdf http://www.boem.gov/uploadedFiles/Proposed_OCS_Oil_Gas_Lease_Program_2012-2017.pdf http://www.boem.gov/uploadedFiles/Proposed_OCS_Oil_Gas_Lease_Program_2012-2017.pdf http://www.laed.uscourts.gov/OilSpill/Orders/11152011Order(InsuranceActions).pdf http://www.laed.uscourts.gov/OilSpill/Orders/11152011Order(InsuranceActions).pdf http://www.laed.uscourts.gov/OilSpill/Orders/11152011Order(InsuranceActions).pdf

Table of Contents for the Digital Edition of American Oil & Gas Reporter - December 2011

American Oil and Gas Reporter 12/11
Contents
Reports
Calendar
Oil & Gas Counts
State Legislative
Industry Digest
Tech Connections
Washington Watch
Keystone XL
Liaison Committee
Shale Gas Subcommittee
Endangered Species
Midstream Startups Emerging to Meet Booming Demand
Liquids Resource Plays Have Oil Production Rising Again
Organizers Anticipating Big Things for 2012 PBIOS
Cover Story
R&D Areas Key to Improving Fracturing
Natural Gas Offers Solutions as Transportation Fuel
Completion Design, Frac Modeling Optimize Eagle Ford Wells
Novel Drill-In Fluid Excels in Horizontal ERD Wells
Technologies Optimize Sand Control
Operators Must Manage Risk Before, During and After Drilling
OCS Access: BOEM Offers Business-as-Usual OCS Leasing Plan
Court Finds for Insurers in Gulf Spill Ruling
OIPA
Clean Air Act
IOGA NY
COGA
IPAA Annual
Louisiana
West Virginia
Pennsylvania
Texas
The American Well Servicing Directory, Winter 2011
Industry Focus
Classified Advertising
Advertisers Index
American Oil & Gas Reporter - December 2011 - American Oil and Gas Reporter 12/11
American Oil & Gas Reporter - December 2011 - Cover2
American Oil & Gas Reporter - December 2011 - Contents
American Oil & Gas Reporter - December 2011 - Reports
American Oil & Gas Reporter - December 2011 - 5
American Oil & Gas Reporter - December 2011 - 6
American Oil & Gas Reporter - December 2011 - 7
American Oil & Gas Reporter - December 2011 - Calendar
American Oil & Gas Reporter - December 2011 - 9
American Oil & Gas Reporter - December 2011 - 10
American Oil & Gas Reporter - December 2011 - 11
American Oil & Gas Reporter - December 2011 - Oil & Gas Counts
American Oil & Gas Reporter - December 2011 - 13
American Oil & Gas Reporter - December 2011 - Industry Digest
American Oil & Gas Reporter - December 2011 - 15
American Oil & Gas Reporter - December 2011 - 16
American Oil & Gas Reporter - December 2011 - 17
American Oil & Gas Reporter - December 2011 - 18
American Oil & Gas Reporter - December 2011 - 19
American Oil & Gas Reporter - December 2011 - 20
American Oil & Gas Reporter - December 2011 - 21
American Oil & Gas Reporter - December 2011 - 22
American Oil & Gas Reporter - December 2011 - 23
American Oil & Gas Reporter - December 2011 - 24
American Oil & Gas Reporter - December 2011 - 25
American Oil & Gas Reporter - December 2011 - 26
American Oil & Gas Reporter - December 2011 - 27
American Oil & Gas Reporter - December 2011 - 28
American Oil & Gas Reporter - December 2011 - Tech Connections
American Oil & Gas Reporter - December 2011 - 30
American Oil & Gas Reporter - December 2011 - Washington Watch
American Oil & Gas Reporter - December 2011 - Keystone XL
American Oil & Gas Reporter - December 2011 - 33
American Oil & Gas Reporter - December 2011 - Liaison Committee
American Oil & Gas Reporter - December 2011 - 35
American Oil & Gas Reporter - December 2011 - 36
American Oil & Gas Reporter - December 2011 - 37
American Oil & Gas Reporter - December 2011 - Shale Gas Subcommittee
American Oil & Gas Reporter - December 2011 - 39
American Oil & Gas Reporter - December 2011 - Endangered Species
American Oil & Gas Reporter - December 2011 - 41
American Oil & Gas Reporter - December 2011 - Midstream Startups Emerging to Meet Booming Demand
American Oil & Gas Reporter - December 2011 - 43
American Oil & Gas Reporter - December 2011 - 44
American Oil & Gas Reporter - December 2011 - 45
American Oil & Gas Reporter - December 2011 - 46
American Oil & Gas Reporter - December 2011 - 47
American Oil & Gas Reporter - December 2011 - 48
American Oil & Gas Reporter - December 2011 - 49
American Oil & Gas Reporter - December 2011 - 50
American Oil & Gas Reporter - December 2011 - 51
American Oil & Gas Reporter - December 2011 - 52
American Oil & Gas Reporter - December 2011 - 53
American Oil & Gas Reporter - December 2011 - 54
American Oil & Gas Reporter - December 2011 - 55
American Oil & Gas Reporter - December 2011 - 56
American Oil & Gas Reporter - December 2011 - 57
American Oil & Gas Reporter - December 2011 - Liquids Resource Plays Have Oil Production Rising Again
American Oil & Gas Reporter - December 2011 - 59
American Oil & Gas Reporter - December 2011 - 60
American Oil & Gas Reporter - December 2011 - 61
American Oil & Gas Reporter - December 2011 - 62
American Oil & Gas Reporter - December 2011 - 63
American Oil & Gas Reporter - December 2011 - 64
American Oil & Gas Reporter - December 2011 - 65
American Oil & Gas Reporter - December 2011 - 66
American Oil & Gas Reporter - December 2011 - 67
American Oil & Gas Reporter - December 2011 - 68
American Oil & Gas Reporter - December 2011 - 69
American Oil & Gas Reporter - December 2011 - 70
American Oil & Gas Reporter - December 2011 - 71
American Oil & Gas Reporter - December 2011 - 72
American Oil & Gas Reporter - December 2011 - Organizers Anticipating Big Things for 2012 PBIOS
American Oil & Gas Reporter - December 2011 - Cover Story
American Oil & Gas Reporter - December 2011 - 75
American Oil & Gas Reporter - December 2011 - 76
American Oil & Gas Reporter - December 2011 - 77
American Oil & Gas Reporter - December 2011 - 78
American Oil & Gas Reporter - December 2011 - 79
American Oil & Gas Reporter - December 2011 - 80
American Oil & Gas Reporter - December 2011 - 81
American Oil & Gas Reporter - December 2011 - 82
American Oil & Gas Reporter - December 2011 - R&D Areas Key to Improving Fracturing
American Oil & Gas Reporter - December 2011 - 84
American Oil & Gas Reporter - December 2011 - 85
American Oil & Gas Reporter - December 2011 - 86
American Oil & Gas Reporter - December 2011 - 87
American Oil & Gas Reporter - December 2011 - 88
American Oil & Gas Reporter - December 2011 - 89
American Oil & Gas Reporter - December 2011 - 90
American Oil & Gas Reporter - December 2011 - Natural Gas Offers Solutions as Transportation Fuel
American Oil & Gas Reporter - December 2011 - 92
American Oil & Gas Reporter - December 2011 - 93
American Oil & Gas Reporter - December 2011 - 94
American Oil & Gas Reporter - December 2011 - 95
American Oil & Gas Reporter - December 2011 - Completion Design, Frac Modeling Optimize Eagle Ford Wells
American Oil & Gas Reporter - December 2011 - 97
American Oil & Gas Reporter - December 2011 - 98
American Oil & Gas Reporter - December 2011 - 99
American Oil & Gas Reporter - December 2011 - 100
American Oil & Gas Reporter - December 2011 - 101
American Oil & Gas Reporter - December 2011 - 102
American Oil & Gas Reporter - December 2011 - 103
American Oil & Gas Reporter - December 2011 - 104
American Oil & Gas Reporter - December 2011 - 105
American Oil & Gas Reporter - December 2011 - 106
American Oil & Gas Reporter - December 2011 - 107
American Oil & Gas Reporter - December 2011 - 108
American Oil & Gas Reporter - December 2011 - 109
American Oil & Gas Reporter - December 2011 - 110
American Oil & Gas Reporter - December 2011 - Novel Drill-In Fluid Excels in Horizontal ERD Wells
American Oil & Gas Reporter - December 2011 - 112
American Oil & Gas Reporter - December 2011 - 113
American Oil & Gas Reporter - December 2011 - 114
American Oil & Gas Reporter - December 2011 - 115
American Oil & Gas Reporter - December 2011 - 116
American Oil & Gas Reporter - December 2011 - Technologies Optimize Sand Control
American Oil & Gas Reporter - December 2011 - 118
American Oil & Gas Reporter - December 2011 - 119
American Oil & Gas Reporter - December 2011 - 120
American Oil & Gas Reporter - December 2011 - 121
American Oil & Gas Reporter - December 2011 - Operators Must Manage Risk Before, During and After Drilling
American Oil & Gas Reporter - December 2011 - 123
American Oil & Gas Reporter - December 2011 - 124
American Oil & Gas Reporter - December 2011 - 125
American Oil & Gas Reporter - December 2011 - 126
American Oil & Gas Reporter - December 2011 - 127
American Oil & Gas Reporter - December 2011 - 128
American Oil & Gas Reporter - December 2011 - OCS Access: BOEM Offers Business-as-Usual OCS Leasing Plan
American Oil & Gas Reporter - December 2011 - Court Finds for Insurers in Gulf Spill Ruling
American Oil & Gas Reporter - December 2011 - 131
American Oil & Gas Reporter - December 2011 - 132
American Oil & Gas Reporter - December 2011 - OIPA
American Oil & Gas Reporter - December 2011 - 134
American Oil & Gas Reporter - December 2011 - 135
American Oil & Gas Reporter - December 2011 - Clean Air Act
American Oil & Gas Reporter - December 2011 - 137
American Oil & Gas Reporter - December 2011 - IOGA NY
American Oil & Gas Reporter - December 2011 - 139
American Oil & Gas Reporter - December 2011 - 140
American Oil & Gas Reporter - December 2011 - 141
American Oil & Gas Reporter - December 2011 - 142
American Oil & Gas Reporter - December 2011 - 143
American Oil & Gas Reporter - December 2011 - COGA
American Oil & Gas Reporter - December 2011 - 145
American Oil & Gas Reporter - December 2011 - 146
American Oil & Gas Reporter - December 2011 - IPAA Annual
American Oil & Gas Reporter - December 2011 - 148
American Oil & Gas Reporter - December 2011 - 149
American Oil & Gas Reporter - December 2011 - 150
American Oil & Gas Reporter - December 2011 - 151
American Oil & Gas Reporter - December 2011 - Louisiana
American Oil & Gas Reporter - December 2011 - 153
American Oil & Gas Reporter - December 2011 - 154
American Oil & Gas Reporter - December 2011 - 155
American Oil & Gas Reporter - December 2011 - West Virginia
American Oil & Gas Reporter - December 2011 - 157
American Oil & Gas Reporter - December 2011 - Pennsylvania
American Oil & Gas Reporter - December 2011 - Texas
American Oil & Gas Reporter - December 2011 - 160
American Oil & Gas Reporter - December 2011 - The American Well Servicing Directory, Winter 2011
American Oil & Gas Reporter - December 2011 - 162
American Oil & Gas Reporter - December 2011 - 163
American Oil & Gas Reporter - December 2011 - 164
American Oil & Gas Reporter - December 2011 - 165
American Oil & Gas Reporter - December 2011 - 166
American Oil & Gas Reporter - December 2011 - 167
American Oil & Gas Reporter - December 2011 - 168
American Oil & Gas Reporter - December 2011 - 169
American Oil & Gas Reporter - December 2011 - 170
American Oil & Gas Reporter - December 2011 - 171
American Oil & Gas Reporter - December 2011 - 172
American Oil & Gas Reporter - December 2011 - 173
American Oil & Gas Reporter - December 2011 - 174
American Oil & Gas Reporter - December 2011 - 175
American Oil & Gas Reporter - December 2011 - 176
American Oil & Gas Reporter - December 2011 - 177
American Oil & Gas Reporter - December 2011 - 178
American Oil & Gas Reporter - December 2011 - 179
American Oil & Gas Reporter - December 2011 - 180
American Oil & Gas Reporter - December 2011 - 181
American Oil & Gas Reporter - December 2011 - 182
American Oil & Gas Reporter - December 2011 - 183
American Oil & Gas Reporter - December 2011 - 184
American Oil & Gas Reporter - December 2011 - 185
American Oil & Gas Reporter - December 2011 - Industry Focus
American Oil & Gas Reporter - December 2011 - 187
American Oil & Gas Reporter - December 2011 - 188
American Oil & Gas Reporter - December 2011 - 189
American Oil & Gas Reporter - December 2011 - 190
American Oil & Gas Reporter - December 2011 - 191
American Oil & Gas Reporter - December 2011 - Classified Advertising
American Oil & Gas Reporter - December 2011 - 193
American Oil & Gas Reporter - December 2011 - Advertisers Index
American Oil & Gas Reporter - December 2011 - Cover3
American Oil & Gas Reporter - December 2011 - Cover4
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