Control of Well Insurance Coverage
Protecting Your Drilling Investments with Crescenta Valley Insurance
U.S. Oil & Gas Industry by the Numbers
918,068
Total Producing Wells (2023)
589
Active Drilling Rigs (Dec 2024)
9,779
Drilling Permits Approved (2021-2024)
12.9M
Barrels/Day Production (2023)
What is Control of Well Coverage?
Control of Well insurance (also known as “Operators Extra Expense” or “Energy Exploration and Development” insurance) provides critical protection for drilling investments when wells go out of control due to blowouts, leaks, or other catastrophic incidents.
Without this specialized coverage, a single well blowout could leave your company facing millions of dollars in unexpected, unbudgeted, and unrecoverable expenses. In an industry where the average drilling contractor can face claims ranging from $3 million to $13 million per incident, having adequate Control of Well coverage isn’t just smart business—it’s essential.
Why Your Operation Needs Control of Well Coverage
- High-Risk Environment: Oil and gas drilling operations face inherent risks including blowouts, equipment failure, and environmental hazards
- Catastrophic Financial Exposure: A single incident can cost millions in control efforts, cleanup, and restoration
- Regulatory Requirements: Many state agencies and drilling contractors require specific coverage levels and endorsements
- Business Continuity: Protects your ability to continue operations after a major incident
Core Coverage Components
Coverage A: Cost of Well Control
Covers expenses to bring an out-of-control well under control, including:
- Specialized control services (Wild Well Control, Cudd services)
- Equipment and materials for control efforts
- Emergency response and evacuation costs
- Well capping or plugging expenses
Coverage B: Redrilling & Restoration
Covers costs to restore or replace the well:
- Well bore restoration expenses
- Redrilling costs (up to specified percentages)
- Replacement well drilling
- Site preparation and cleanup
Coverage C: Seepage & Pollution
Covers third-party pollution cleanup and containment:
- Surface contamination cleanup
- Third-party property damage
- Prevention and containment costs
- Above-ground seepage remediation
Care, Custody & Control (CCC)
Covers third-party contractor equipment and supplies:
- Contractors’ on-site equipment (owned or rented)
- Surface and downhole supplies
- Pipes, tools, and drilling materials
- Rig replacement costs (when transferred via contract)
Coverage Nuances & Important Distinctions
Key Coverage Limitations to Understand
What’s Typically Excluded:
- Underground Reservoirs: Damage to oil and gas reservoirs and reservoir pressure
- Property Damage: First-party property losses (covered by separate property insurance)
- Business Interruption: Lost production and delayed development costs
- Bodily Injury: Employee injuries (covered by workers’ compensation and general liability)
- Subsurface Water/Minerals: Underground contamination damage
Critical Policy Triggers:
- “Out of Control” Definition: Insurers may dispute whether a well was actually “out of control”
- Time Limitations: Coverage may terminate if recovery efforts don’t commence within specified timeframes
- “Most Prudent and Economical Methods”: Insurers may challenge reimbursable costs if not deemed necessary
- Policy Period: Incidents must occur during the active policy period
Typical Coverage Limits & Pricing
Standard Coverage Limits
- Small Operations: $1M – $5M total limits
- Mid-Size Operations: $5M – $15M total limits
- Large Operations: $15M – $35M total limits
- Major Offshore: $35M+ total limits
Limits typically calculated as 3-5 times the dry-hole AFE (Authority for Expenditure)
Typical Premium Ranges
- Small Wells: $97-$159/month
- Standard Policies: $5,500+ annual premium
- Large Operations: $50K-$500K+ per well
- CCC Sublimits: $500K-$1M typical
Pricing varies by location, depth, well type, and risk factors
Average Claim Scenarios
- Well Control Efforts: $3M-$6M (1-2x dry-hole costs)
- Redrilling/Restoration: $4.5M (for $3M dry-hole well)
- Seepage & Pollution: $1M-$2M additional coverage needed
- Total Exposure: $9M-$13M for 13,500′ well
The Remarkable Growth of U.S. Oil Production
A Century of American Energy Independence
Early Era (1859-1970)
- 1859: First successful U.S. oil well drilled in Titusville, Pennsylvania
- 1901: Spindletop gusher in Texas produces over 17 million barrels in its first year
- 1970: U.S. production peaked at 9.6 million barrels/day
- Key Impact: Permian Basin supplied 50% of world’s oil during WWII, fueling Allied victory
Decline Period (1970-2008)
- Trend: Production generally declined for decades
- 2008: Production hit low of 5.0 million barrels/day
- Challenge: Increasing dependence on imports
- Import Peak: 2005 marked highest petroleum import levels
Shale Revolution (2009-Present)
- 2009: Production began increasing again due to fracking and horizontal drilling
- 2019: Set previous record at 12.3 million barrels/day
- 2023: New all-time record of 12.9 million barrels/day
- 2020: U.S. became net petroleum exporter
The United States now produces more crude oil than any nation at any time in history!
Leading global production for six consecutive years (2018-2023)
Contractor Limits & Required Endorsements
Typical Contractor Requirements
- General Liability: $1M per occurrence / $2M aggregate minimum
- Control of Well: Varies by project size and depth
- Joint Operating Agreements: Often require $1M+ coverage with shared excess costs
- Umbrella Coverage: Additional protection above policy limits
- Equipment Coverage: Including rig replacement cost endorsements
Important: Some drilling contractors may transfer rig liability to operators via “unsound location” clauses—ensure your CCC endorsement covers full replacement costs!
State Agency & Regulatory Endorsements
- Gradual Pollution Coverage: Often required for environmental compliance
- Additional Insured Status: For state agencies and surface owners
- Primary and Non-Contributory: Ensuring primary coverage responsibility
- Waiver of Subrogation: Protecting contractual relationships
- Notice Requirements: Specific notification procedures for claims
Requirements vary by state and specific project locations. Always consult with your insurance professional for current regulatory requirements.
Fascinating Oil Well Facts
🛢️ Historical Milestones
- Ancient Origins: Oil has been used for over 5,000 years, originally for medicine
- First Oil Wells: Drilled nearly 2,500 years ago in China using bamboo
- Whale Oil Replacement: Kerosene production ended the whale hunting era by the 1800s
- Richest Man Ever: Oil tycoon John D. Rockefeller would be worth $1.4 trillion today
🌊 Drilling Extremes
- Deep Drilling: Some offshore rigs extract oil from over 30,000 feet below the ocean floor
- Horizontal Reach: Modern wells can drill horizontally for 2+ miles
- Drilling Mud: A mixture of clay and water carries rock cuttings to the surface
- Well Lifespan: Production from a completed well can last 50+ years
🎯 Mind-Blowing Stats
- Ocean Cargo: 40% of the world’s ocean cargo is oil
- Pipeline Network: The U.S. has 190,000 miles of oil pipelines
- Not Underground Lakes: Oil reservoirs aren’t giant pools—oil fills tiny pores in rock
- Natural Seeps: Most ocean oil comes from natural seepage, not spills
⚡ Modern Marvels
- Satellite Detection: Natural oil seeps are visible from space
- Chemical Fingerprinting: Each oil source has a unique chemical signature
- Offshore Ecosystems: Oil platforms create habitats for marine life
- Rough Wages: Oil rig workers earn premium salaries despite no college requirement
Protect Your Drilling Investments Today
Don’t let a well control incident devastate your operation. Crescenta Valley Insurance specializes in comprehensive Control of Well coverage tailored to your specific needs.
Expert Underwriting
Specialized knowledge of oil & gas risks
Custom Coverage
Policies tailored to your operations
Claims Support
Expert guidance when you need it most
Ready to discuss your Control of Well insurance needs?
Contact Crescenta Valley Insurance today for a comprehensive risk assessment and competitive quote.
