Atlantic Richfield Co. v. Underwriters at Lloyd's London

398 F. Supp. 708
CourtDistrict Court, S.D. Texas
DecidedApril 28, 1975
DocketCiv. A. No. 72-H-1638
StatusPublished

This text of 398 F. Supp. 708 (Atlantic Richfield Co. v. Underwriters at Lloyd's London) is published on Counsel Stack Legal Research, covering District Court, S.D. Texas primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Atlantic Richfield Co. v. Underwriters at Lloyd's London, 398 F. Supp. 708 (S.D. Tex. 1975).

Opinion

MEMORANDUM AND OPINION

CARL O. BUE, Jr., District Judge.

An offshore gas well “blew out” on January 13, 1970. Plaintiff, the well owner, filed claims with the defendant [709]*709insurance underwriters under policies m force at the time to recover $262,613.19, which constituted the total expenses allegedly incurred by plaintiff to bring the well under control, in the amount of $1,262,613.19, less an applicable deductible of $1,000,000.00. On demand, the defendants refused to honor plaintiff’s claim, and plaintiff has sued to recover this amount. Jurisdiction is proper in this Court pursuant to 28 U.S.C. § 1332.

Plaintiff has moved for summary judgment. In their pleadings, both sides acknowledge that the case presents one central question: at what date was the well which “blew out” brought under control ?1 To plaintiff, this is a question of law; to defendants, this question is factual, and defendants additionally allege that the facts are in dispute as to when control was regained, and as to what expenses were properly incurred in bringing the well under control.

The Court has reviewed the extensive memoranda of authorities submitted by the parties, the depositions and other evidence submitted, and applicable case law. The Court concludes that the question presented is a question of law, Sutton Drilling Co., Inc. v. Universal Ins. Co., supra, 335 F.2d at 823, and that summary treatment is appropriate. The , Court further concludes that on the issue of liability, plaintiff’s motion for summary judgment should be, and it hereby is granted. The well in question was not “brought under control,” as that term is used in the instant insurance policies and as it has been interpreted by the United States Court of Appeals for the Fifth Circuit and the Louisiana Supreme Court, until after March 1, 1970.

However on the information now available to the Court, the Court is unable to ascertain precisely which expenses incurred by plaintiff to regain control of the well were properly compensable under defendants’ policies. Accordingly, appropriate affidavits will have to be submitted to resolve the damage issue.

I. FACTS2

A. The Blowout on January IS, 1970

Effective July 26, 1969, the defendants —Underwriters at Lloyd’s London; the Institute of London Underwriters; and Travelers Indemnity Company — issued policies of insurance to plaintiff to reimburse plaintiff for risks and for expenses incurred when there occurred loss of control at the well. All policies were issued subject to terms and conditions described in detail below. See [710]*710paragraph II Coverage of the Subject Insurance Policy Clauses, infra.

Plaintiff commenced drilling operations on Well No. C-3 in Block 24-L SE/ 4, State Lease 59456, in December, 1969. The well was located approximately 7 miles offshore from the Texas Coast and 20 miles southwest of Sabine Pass, Texas. Plaintiff’s employees were supervising the drilling, which was being performed by Storm Drilling Company using its offshore mobile drilling rig “Storm-drill III”.

Trouble began to develop at the well in the early morning hours of January 13, 1970. Drilling operations prior to this time had been conducted to a depth of 11,165 feet. While employees of the contractor attempted to remove the drilling pipe, they experienced an increase in the volume of mud returning to the surface from the bottom of the hole, indicating that gas was being circulated up the hole. The blowout preventer (BOP) was then closed around the drill pipe, and the well was put on “choke” to increase the rate of flow of drilling fluid out of the well in the “annular” space, i. e., the space in the well between the casing (9%" in diameter) and the drill pipe (5" in diameter).

Drilling mud and gas began blowing out of the annulus at the wellhead and, at about 5:00 a.m., January 13, 1970, the well “blew out,” caught fire and burned from the annular area.3 The fire burned for about 39 hours, until late afternoon, on January 14, 1970. During this time, the fire subsided somewhat, but continued to burn until it went out on the 14th. Subsidence of the fire was caused by the well’s “bridging over”, i. e., materials from the formation in which the drilling column was located had blown into the hole and partially blocked all or part of it, restricting the flow to the surface of gas from the high pressure formation. The drill bit located at the bottom of the hole had closed that part of the hole. After 8:00 p.m., on January 14th, the fire subsided, but continued to burn from gas blowing out of the annular space at the choke manifold, the valve manually used to regulate pressure. The drill pipe was apparently completely bridged over.

B. Commencement of Clean-Up Operations; Debris Removal

All persons present recognized the need to increase the density of mud being inserted into the well to counteract the “down-hole” pressure that was exerted upward by the gas. The wellhead and platform first had to be “cleaned up” before this counteractive operation could proceed. This cleanup included clearing off drilling platform debris, the derrick, draw works and engine house located on the drilling platform — all of which had collapsed during the fire. Such damaged equipment had to be removed to permit a new rig to be installed on the platform.

The wellhead was not approachable until January 23, 1970, because of the intense heat generated by the fire on the platform and in and around the wellhead. Between January 14 and January 23, spraying operations were conducted by a boat spraying the rig with water to reduce the extreme heat around the platform.

Gas was continuously flowing through the choke manifold on January 23, when two barges — the McDermott barge and the Brown & Root barge — arrived to be used for debris removal and well control. Fires were still occurring on board [711]*711the platform while men were placed there to commence recovery work. All work was being performed only during daylight hours, and boats continued to spray the rig.

C. Commencement of Blowout Control Procedures

On January 27, mud began to be pumped into the hole. The BOP’s were still in place and being used, and this pumping continued until February 18. The pumping procedure was designed to reduce the “down-hole pressure” which was generating gas upward, and reduction was accomplished by the following cyclical technique: (a) pump mud in; (b) bleed gas off by permitting it to escape in a controlled fashion through the choke manifold; (c) let pressure build; (d) bleed gas off; and (e) pump mud in. By applying this technique, plaintiff successfully reduced pressure at the wellhead for short periods of time, but did not' another blowout. Failure to achieve completely eliminate the possibility of long-term results was caused by the “bridging over” of the drill pipe; i. e., material had been “plugged” within the well so as to prevent mud from circulating downward to counteract the upward gas pressure.

D. Insertion of New Drilling Rig to Clean Out Underground “Bridge”

On February 8, equipment had been sufficiently positioned to permit removal of the “Stormdrill III”.

Free access — add to your briefcase to read the full text and ask questions with AI

Related

Cite This Page — Counsel Stack

Bluebook (online)
398 F. Supp. 708, Counsel Stack Legal Research, https://law.counselstack.com/opinion/atlantic-richfield-co-v-underwriters-at-lloyds-london-txsd-1975.