Mysterious Death Uncovers Risk In Federal Oil Field Rules


On a cold night in January 2012, Dustin Bergsing climbed on top of a crude oil storage tank in North Dakota's Bakken oil field. His job was to open the hatch on top and drop a rope inside to measure the level of oil. But just after midnight, a co-worker found him dead, slumped next to the open hatch.

Even though an autopsy showed Bergsing had hydrocarbons in his blood — things like benzene and butane — the Occupational Safety and Health Administration's investigation found no safety violations. And it didn't fine the oil company.

Reporter Mike Soraghan came across Bergsing's case while researching oil field fatalities for EnergyWire, an online business publication.

"A 21-year-old kid just sort of dies out in the middle of nowhere and nothing happens?" Soraghan says. "I just remember reading through it and thinking, 'That's it?' "

With the help of Dr. Bob Harrison, who specializes in occupational and environmental medicine, and the National Institute for Occupational Safety and Health, a pattern was uncovered: nine oil workers found dead on oil pads in the past six years, many of them young and otherwise healthy.

Based on Bergsing's autopsy, Harrison believes they passed out after they opened oil-tank hatches and were engulfed in large amounts of petroleum gases.

"It was one of those aha moments that I have every so often in my career as a doctor treating patients with toxic-chemical exposures," he says.

Families of at least six of the deceased are suing their employers. Since last year, NIOSH has warned the industry about the hazard, but exposure continues — in part because another federal agency's rules make it difficult to use safer measurement methods.

The Bureau of Land Management is in charge of oil development on federal land, and critics say the agency is wary of technology that might not be as accurate as putting guys on top of tanks to measure oil by hand. There's public money at stake — royalties that are paid by the oil companies on the exact amount of oil coming out of the ground.

"If it's a public asset, then the taxpayer deserves to have their money, their assets protected," says Steve Wells, who oversees oil production for the agency.

And since 1989 — the last time the rules were updated — the industry practice for protecting those assets is to measure them manually by dropping a rope into the tank, as Dustin Bergsing did when he died.

The agency is updating those rules this year, but Wells won't say whether the new rules will allow automated oil measurement. One thing the rules definitely won't do is ban measuring oil levels by hand.

"You have some very old facilities, very simple tanks, so the idea is that we're trying to accommodate all the different operations," Wells said. And with 83,000 oil wells on federal land and a $2,000-per-tank cost for automatic measurement equipment, Wells said requiring such an upgrade would cause some companies to shut down.

Truck driver Ryan Ehlis makes his living hauling crude oil in North Dakota, and has some firsthand experience with the dangerous fumes. Like Dustin Bergsing, he spends a lot of time climbing atop large oil-storage tanks and opening their hatches to measure the oil.

He says he tries to avoid the gases, but just the day before, he'd had a dizzy spell after climbing back down from one of the tanks.

"If there's gas in your face, kind of hold your breath and then get your gauge and then step away and get into the fresh air and [take a deep breath] — and then go do something again," he says. "But you can't avoid it entirely."

That's needless, nonsensical exposure, says Dennis Schmitz, an oil and gas safety trainer. Automatic measurement is common in Canada and in the offshore oil and gas industry, which isn't regulated by the Bureau of Land Management. In fact, Schmitz used such equipment on tanker ships.

"And I never really questioned, 'Why is it in the offshore environment that I don't breathe the vapors there, and I do breathe them here?' " he says.

Ehlis says he has thought about getting a safer job — particularly after seeing a truck on an oil-well pad explode into "nothing but a huge orange fireball probably 50 feet in the air" — but that nothing in the area pays as well.

So Ehlis keeps driving, keeps climbing oil tanks and opening their hatches, keeps lowering a rope into the tank to measure the level.

This story was produced by Inside Energy, a public media collaboration focused on America's energy issues. Contact reporter Emily Guerin at eguerin@insideenergy.org.

Declining U.S. oil and gas rigs forecast job pain

Oil and gas prices remain at rock-bottom, and the job impacts are growing. Bureau of Labor Statistics data report that employment in oil and gas extraction and support activities in the country has contracted by 18 percent over the past year alone.

Oil and gas extraction alone has lost 15,700 jobs nationally while support activities for the mining subsector, which also includes establishments providing support services for the extraction of oil and gas, has lost close to 100,000 jobs since January 2015.

Now a more telling indicator, the number of oil and natural gas drilling rigs in active use across the country, is foretelling much worse employment carnage in energy states.

Lower prices mean oil and gas producers have less capital to invest in exploration and production, which means in turn that they employ fewer rigs. Since local employment in oil and gas states is more responsive to changes in rig counts than to oil prices directly, rig counts offer a revealing augury of employment trends.

What does the rig tally say? Oil field services company Baker Hughes reports that the number of U.S. oil and gas rigs plummeted from 1,811 in January 2015 to just 489 at the beginning of March—down by 73 percent. North Dakota’s March count was 80 percent lower than in January 2015, while Texas was down 73 percent.



By themselves, these figures are stark, but what makes them truly revealing is recent research that teases out the full short- and long-term employment impacts of rig operation and removal.

A study from Rice University has estimated that the employment impact of putting a drilling rig into service creates 37 jobs immediately and 224 jobs in the long run, once all the relevant multipliers are factored in beginning with oil service company hiring, machinery and fabricated metal work, engineering, and management employment and ending with grocery store and pharmacy spending. Another study has found that the removal of an active rig eliminates 28 jobs in the near-term and 171 jobs in the long run. If this holds true, then the loss of 1,322 working rigs since January 2015 has the potential to lead to the loss of anywhere between 226,000 to 296,000 drilling-related jobs over the long term.

However, the reduction in rig counts will impact oil and gas states differently, depending on the timing and pace of the drilling bust in each place. Of course, states with the largest rig decreases—Texas, Oklahoma, North Dakota—will have the largest predicted declines in employment. Likewise, states with less diversified economies will feel the impact of rig declines most significantly. The table below shows the employment response (taking the average short- and long-term response from both studies) from the decline in rig counts from January 2015 up till now. The table also reports the long-term job losses as a percentage of total private sector employment in each state at the end of 2015.

Although Texas shows the largest decline in jobs, the employment impact is more intense in states like North Dakota, Wyoming, and New Mexico where the oil and gas industry is a larger share of the economy (see map). By contrast, the employment impact of the declining rigs is muted by a more diversified economic base in Colorado, Ohio, and Pennsylvania.




These data and the varied impacts they depict underscore the volatility of resource economies and the importance of states pursuing policies that prioritize economic diversification. Diversification—and good management—are critical when states play in the boom-and-bust dynamics of resource extraction. Next month we’ll release a report from Metro that advances one idea through which states can manage unconventional oil and gas development through strategic management of fracking-related revenues.

Osborne Supports Oil, Gas Industry with Tax Cuts


UK Chancellor of the Exchequer George Osborne has announced significant tax cuts to help “one of the most important and valued industries” in the country in his Budget speech Wednesday. The measures include halving the Supplementary Charge on oil and gas and the effective scrapping of Petroleum Revenue Tax.

“The oil and gas industry employs hundreds of thousands of people in Scotland and around our country. In my Budget a year ago I made major reductions to their taxes but the oil price has continued to fall so we need to act now for the long term,” he said.

“I am today cutting in half the Supplementary Charge on oil and gas from 20 percent to 10 percent, and I am effectively abolishing Petroleum Revenue Tax too, backing this key Scottish industry and supporting jobs right across Britain.”

Taking a swipe at Scottish Nationalists in his speech, Osborne said that the tax cuts, which will be backdated to be effective from Jan. 1, were only possible due to the fact that Scotland decided to stay in the UK.

“We are only able to provide this kind of support to our oil and gas industry because of the broad shoulders of the United Kingdom. None of this support would have been remotely affordable if in just eight days' time Scotland had broken away from the rest of the UK as the Nationalists wanted,” he said.

“Their own audit of Scotland's public finances confirmed that they would have struggled from the start with a fiscal crisis under the burden of the highest budget deficit in the Western World. Thankfully the Scottish people decided that we are better together in one United Kingdom."

Osborne’s tax relief for the oil and gas industry follows calls from the Aberdeen & Grampian Chamber of Commerce to make further tax cuts to lengthen the lifespan of the North Sea oil sector. Industry trade body Oil & Gas UK had also called for fiscal reform before the Budget and claimed that the UK oil and gas sector needed urgent tax reform in order to boost the industry’s competitiveness and investors’ confidence in the UK continental shelf. Osborne also provided a boost to businesses in general in the UK, including oilfield services firms, by cutting corporation tax by one percentage point to 17 percent.

Following Osborne’s comments, shares in British oil firms, including Cairn Energy plc, John Wood Group and Tullow Oil plc, extended gains and were up 2.7 to 3.6 percent.

A number of organizations associated with the oil and gas industry responded in the following ways to the latest tax cuts:  

“Today’s announcement does indeed mark further progress in modernising the tax regime for an increasingly mature basin. We welcome these measures as they will build on the industry’s achievements in improving efficiency in the face of low oil prices, boosting the sector’s competitiveness and helping to restore investor confidence. We will continue to work with the Treasury to complete its ‘Driving Investment’ plan to ensure that the fiscal regime reflects the business needs of a maturing basin and signals to global investors that the UK is truly open for business.” -Oil & Gas UK Chief Executive Deirdre Michie​​

“We asked the Chancellor for a minimum of 10 percent percentage point cut in the headline corporate tax rate for the oil and gas sector, as well as the zero-rating of Petroleum Revenue Tax. Today’s Budget announcement show that the Chancellor has listened to our members and made changes to the fiscal conditions to build confidence in a world class industry. We still have to examine the detail but it seems that our hard work has been successful in persuading the Government to deliver reforms that reflect the basin’s mature status. The first step is where all journeys begin, and the Government has made that step as part of what is hopefully a long-term strategy to ensuring that we have the most competitive tax environment in the world.” -Aberdeen & Grampian Chamber of Commerce Research & Policy Director James Bream

“I’m pleased the Chancellor has caved to SNP pressure and has revised the level of tax for oil and gas companies but he has only cut the total amount of tax from 50 percent to 40 percent while cutting corporation tax for other companies to 17 percent. This is a missed opportunity and shows the Chancellor lacks the vision to bring forward a long-term strategy for the North Sea Oil and Gas industry and he has failed once again to introduce measures that would encourage exploration. The Chancellor has failed yet again to bring forward any proposals on non-fiscal support such as loan guarantees which would help sustain investment in the sector and help companies to protect jobs. The SNP government is committed to doing everything within its power to support the oil and gas industry during these challenging times through the Energy Jobs Taskforce - which includes £12 million ($16.9 million) in funding to help oil workers retrain in other fields - and an additional £379 million ($534 million) investment in the north east of Scotland. But while the Scottish Government has taken action the Chancellor has simply sat back and rested on his laurels so if there is one thing that is clear from today’s Budget, it’s that far more could have been done.” -Scottish National Party spokesperson for Energy and Climate Change Callum McCaig MP

“The reductions in headline tax rates for the oil and gas industry announced by the Chancellor, backdated to the start of 2016, are welcome and will help to create a more attractive fiscal framework for this strategically significant industry. In the medium to long term, this should make a positive contribution to the maximising economic recovery agenda for the UKCS. However the headline GBP 1 billion ($1.4 billion) of tax impact is the total over five years, with the relatively modest annual impact being a direct result of relatively low tax take... However, tax reductions in themselves can only ever be part of the solution, particularly in the short term when the prevailing market conditions are forcing the industry to address its operating models and cost base with significant collateral damage. Maximising production from UK oil and gas fields will only be achieved by reducing unit cost of production and driving through operator and supply chain efficiencies, no matter how painful these are. The industry must therefore continue to pursue sustainable cost reduction measures and new ways of working and collaborating, which will better position it to maximise the North Sea opportunity when the commodity price recovers.” -KPMG Aberdeen Senior Tax Partner Martin Findlay


"The tax cuts are a welcome development for the industry but the government's action may be a case of too little, too late for some companies. There is an ongoing need for the government to engage with industry on a proactive basis to mitigate the effects of a 'lower for longer' oil price." -Law firm Ashurst’s Energy Partner Michael Burns

"Oil and gas companies operating in the North Sea have been lobbying for substantial tax cuts to support their activities. It remains to be seen whether the reduction in the supplementary charge to 10 percent and the effective abolition of petroleum revenue tax with effect from 1 January 2016 will be enough." -Ashurt’s Tax Partner Nicholas Gardner

“Today’s announcement will go some way to support the North Sea oil and gas industry and reverse some of the cost challenges the government had previously levied. However, there is still a major risk that the industry will continue to lose talent, skills and expertise to other sectors. It remains to be seen if these tax cuts will protect or create jobs for the North Sea.” -Recruitment company Airswift’s CEO Peter Searle

“We welcome the Chancellor’s tax incentives for the North Sea announced in today’s Budget, which show a continued dedication to the viability of the region. Changes to the Petroleum Revenue Tax are welcome, though we see them as only benefitting the industry’s larger oil companies who are still operating the larger, more mature fields. The supplementary charge reduction will be more encompassing and while we would have rather seen it fully reduced to zero, we wholeheartedly welcome the decrease. The investment in further seismic surveys shows a confidence in the UKCS, although this will only have a longer-term impact on exploration and will not support the sector in the short term…At IO, we combine consulting and engineering expertise to take a holistic view of projects to ensure a positive FID. We look forward to working with the industry to provide certainty in the upstream sector and act as a catalyst for operators and contractors to collaborate for a brighter industry future. IO is working hard technically, commercially and financially to accelerate further developments in the North Sea.” -Chris Freeman, Director of Field Development, IO Oil & Gas Consulting Field Development Director Christ Freeman

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