The Hidden Risks In Oil & Gas: Why NM Operators Need Specialized Insurance
In New Mexico, the NM oil and gas insurance sector plays a vital role, contributing significantly to the economy and employment. As the industry grows, the need for New Mexico oil field insurance and Hobbs, NM, oil and gas insurance becomes increasingly important.
The oil and gas industry faces unique challenges, including operational hazards, environmental risks, and liability concerns that require specialized insurance. Daniels Insurance offers deep expertise in oil and gas insurance, helping meet the needs of this sector.
Industry-Specific Risks in New Mexico
New Mexico businesses in the oil and gas sector face many industry-specific challenges that require specialized attention.
Environmental Hazards and Regulatory Compliance
Environmental hazards such as oil spills, gas leaks, and groundwater contamination pose significant risks to the oil and gas industry.
For example, the Deepwater Horizon disaster resulted in severe financial damage, with BP facing billions of dollars in cleanup costs, fines, and legal settlements. The incident also caused significant reputational harm.
Specialized pollution liability insurance helps protect businesses by covering regulatory fines, environmental damages, and the costs associated with remediation efforts.
Equipment Failures and Operational Downtime
Oil and gas operations incur significant costs for repairing or replacing damaged equipment, such as drilling rigs, pumps, and pipelines. Equipment failures also result in lost productivity and revenue.
Several insurance solutions are available to provide financial support for repairs, replacements, and downtime recovery in the event of equipment failures. These include:
- Equipment breakdown insurance: Covers the costs of repairing or replacing damaged equipment, minimizing operational disruptions
- Business interruption insurance: Compensates for lost revenue during periods of downtime caused by equipment breakdowns, helping businesses maintain financial stability
- Contingent business interruption insurance: Provides coverage for financial losses when a key supplier or contractor’s equipment failure impacts the overall business operations
Liability Issues, Including Third-Party Claims
Accidents causing property damage or injuries to third parties can result in costly lawsuits or settlements.
A 2018 explosion on the Revolution Pipeline in Pennsylvania destroyed a home and led to a civil penalty of $30.6 million. In June 2024, Valeura Energy suspended production at its Wassana oilfield offshore Thailand after discovering a crack in one of the steel jack-up legs of its mobile offshore production unit.
Robust liability insurance is essential to mitigate these risks and protect business assets from potential legal and financial consequences.
Worker Health and Safety Risks
Worker health and safety risks in the oil and gas industry are critical concerns that require careful management. These include:
- Health hazards: Workers may be exposed to toxic chemicals and gases, such as hydrogen sulfide or silica dust, during drilling and production.
- Safety hazards: The high-risk job environment presents dangers such as falls, burns, explosions, and injuries from equipment.
Between 2013 and 2017, 489 oil and gas extraction workers lost their lives on the job. Numerous safety and health hazards contribute to the high fatality risk for workers in the oil and gas industries.
What Specialized Insurance Covers
Specialized insurance provides essential coverage for various risks in the oil and gas industry. These include:
- Pollution liability and environmental cleanup: Provides financial protection for spills, contamination, and environmental cleanup
- Property damage: Covers high-value assets such as rigs, equipment, storage tanks, and pipelines against natural disasters and accidents
- Employee protection and workers’ compensation: Offers coverage for work-related injuries or illnesses, including medical expenses, rehabilitation, and lost wages
Protect Your Oil & Gas Business Today
Waiting until after an incident to secure coverage can lead to costly financial setbacks and operational disruption. Proactive risk management not only saves costs but also protects businesses.
With in-depth knowledge of the state’s environmental and workplace safety laws, Daniels Insurance offers customized policies covering the specific risks of New Mexico’s oil and gas industry. Contact us today to learn how specialized oil and gas insurance can protect your business.
About Daniels Insurance, Inc.
At Daniels Insurance, Inc., we have a unique understanding of the risks that businesses like yours face on a regular basis. With the backing of our comprehensive coverages and our dedication to customer service and quick claims resolution, your business will be fully protected. For more information, contact us today at (855) 565-7616.