New oilfield risk management manual author hopes to inform operators, insurers and lawyers

by Paul Wiseman Midland Reporter-Telegram

Through 40 years of selling insurance in the oil patch Robert Carson Jr., has learned a tremendous amount about the nature of insurance and about allocation of risk. Beyond just getting the facts in his mind, Carson says he has been told “it clicks with me.” In other words, he sees the “big picture” of how interests of insurance companies and operators fit together in managing risk.

At the suggestion of many in the industry, Carson has now put all that information into a book slated for release in mid-September. Entitled PRIMER Risk Management Manual, it is approximately 100,000 words with four sections: Contracts, Coverages, Costs and Claims. PRIMER stands for Petroleum Risk and Insurance Manager’s Educational Reference.

“I’m not an attorney,” Carson stated, “but I do spend a lot of time reading the contracts and realizing how important they are for an oil and gas operator.”

Under the “Coverages” section, Carson said his focus was to show insurance writers the differences in how a policy should be written for the oil and gas industry as compared to a policy for “main street business.”

He spends more time on well control insurance in the book, noting that, “I’ve never read a book of any kind that tells you how to do oil and gas well control insurance, and that’s sort of been my specialty.”

Carson said he does not know of there having been a book exactly like this one, although one in the early 1980s covered just blowouts and the control of well coverage. Another book in the early 1990s, written by a London broker, “was mainly for offshore and was pretty technical,” Carson recalled. He said neither was of the scope of this book.

Contracts are at the base of much of the book because that is where risk is assigned and, Carson noted, a properly and clearly worded contract can avoid much confusion and litigation later.

There are three main contracts that operators use in the drilling and production process: the joint operating agreement, the drilling contract and the master service agreement. The book contains recommendations for all three categories on how to make them clear and thereby to reduce opportunities for expensive litigation.

He notes that the contract that worked fine for one well may be totally inappropriate for another, and that often the signers do not thoroughly read the contract before signing it.

The book’s target market is threefold: operators, insurance agents selling to the oil industry, and lawyers that help write contracts and handle litigation. It “clicked” with Carson that each of these parties had something to offer but also needed to know more about the other’s part. Operators needed to know how to write a good contract, insurance salesmen needed to know the unique needs of the oil industry and lawyers needed to know both.

“One attorney, who knew more than most, told me that there were attorneys who knew oil and gas, those who knew insurance and those who knew contracts, but they were all in their own universe – nobody brings them together,”” said Carson. “I hope this book does this. Everything will go smoothly if you follow the rules.”

Carson first gauged the potential market for the book as small, since it dealt mainly with one industry. “But then I realized that there are 300 million people in the United States, and it seems like 250 million of them are lawyers,” he joked.

The PRIMER book, five years in the making, actually came about as the result of an oilfield novel Carson wrote a year before starting on this one. The first book was called “Blowout” and drew on Carson’s experience in dealing with over 300 blowouts. While the plot was fiction, the novel drew on several actual cases with which he was involved.

Several people told Carson they looked on the book as a textbook on the subject. One insurance competitor told Carson he planned to buy several copies of the book to use in training his salesmen.

This and other requests for an actual textbook led Carson to start working on PRIMER because there was not a book that had all those answers. “I’ve talked to insurance agents who’ve been doing this for 20 or 30 years and I’ll mention something and they’ll say, ‘I didn’t know that.'”

“It’s kind of like a girl that’s voted Miss Universe and she says, ‘Well, I knew I was kind of attractive, but I didn’t know I was the prettiest girl in the world.’ It’s hard to realize that you know that much,” he said.