A single joint of defective casing can cost an operator millions. Fortunately, there are steps an operator can take to mitigate this risk and maximize the chance for full compensation if the casing fails. An operator can protect itself by implementing procedures for purchasing, record keeping, and the inspection of casing.

Purchasing procedures

An operator may place an order by email or over the phone with a supplier, which then typically sends the operator an invoice containing one-sided “standard terms.” The seller’s terms often attempt to rely on provisions in the Uniform Commercial Code, the governing law in most states that permits a seller to disclaim warranties and limit the buyer’s remedies. Operators should avoid accepting one-sided terms by rejecting quotations and invoices that contain such provisions or, alternatively, responding with a purchase order that expressly rejects limits on warranties or damages and conditions the purchase on acceptance of the operator’s terms. In addition to one-sided seller terms, the seller may also dispute what casing qualities constitute a defect. To avoid such disputes, the astute operator should consider requiring the seller to:

  • Represent that all casing complies with recognized standards, in particular those provided by the American Petroleum Institute as well as any other special performance criteria specified by the operator;
  • Provide mill certificates from the casing’s manufacturer, which typically include a variety of specific representations including chemical composition and inspection results; and
  • Provide the results of any third-party inspections and testing of the casing. The third-party inspector may be liable to the operator if casing defects are not detected during the third party’s inspections.

Although under no duty to do so, an operator should consider hiring its own inspection company to test the casing before use in a well. Various inspection techniques are available to detect casing defects, including ultrasound, wet and dry magnetic particle, hydrostatic pressure, visual, camera, dye penetrant, thread gauging, and hardness testing. Compared to the costs of a failed well, the costs associated with these tests are often relatively low. Consistent with any record retention policy, the operator should keep records of its purchase of casing and associated evidence.

What to do if a casing failure occurs

The operator’s actions following a casing failure can be crucial to its ability to recover damages. After a casing failure, an operator should consider the following actions.

Notify interested parties. The operator should promptly inform its insurer and the casing’s seller, manufacturer, and any company that inspected the casing. All notifications are best put in writing, and the operator should demand that any assurances or requests made by other parties be put in writing as well.

Attempt to retrieve the failed casing. The failed casing itself can be a crucial piece of evidence if any litigation is necessary to vindicate the operator’s rights. However, retrieving failed casing can be a difficult and expensive process. Bringing in an independent expert to assist with fishing operations adds an additional layer of protection to avoid subsequent criticisms about the operational choices. If retrieval operations prove fruitless, the operator will be faced with the choice of when to stop “throwing good money after bad” and abandon all or part of the hole, whether or not all of the casing has been retrieved. If part of the casing string is abandoned, the potentially responsible parties may argue that evidence was “spoliated.” To rebut such an argument, the operator should consider making reasonable attempts to retrieve the failed pieces of casing and keep the other interested parties on notice of the attempts as well as any plans to abandon the hole or the casing.

Perform post-failure analysis. If some or all of the failed casing is successfully removed from the well, the operator and interested parties should consider using an independent laboratory to determine possible causes of the failure. The laboratory should develop a testing protocol that is acceptable to all parties. Casing tests fall into two general categories: nondestructive examination (NDE) and destructive examination. Common NDE techniques for new, used, and failed casing include:

  • Ultrasonic testing to determine wall thickness and defects such as cracks in the body of the casing; Special end-area examinations including wet or dry magnetic particle inspection to detect cracks and other defects near the end of the casing or coupling. “Quench” cracks formed during casing manufacturing may be detectable by this method;
  • Hydrostatic pressure testing to determine if there are deficiencies in the pipe, the coupling, or the threaded seal between the coupling and pipe; and
  • Thread gauging to determine if the casing’s thread machining is defective.

In contrast to NDE, destructive examination methods are mainly employed after the casing has failed and the cause of the failure is at issue. Destructive examination techniques include:

  • Tensile testing to determine the yield stress (the stress at which the steel becomes plastically deformed) and the ultimate stress (the stress at which the steel breaks in two);
  • Charpy impact testing to determine the impact toughness of the steel;
  • Chemical analysis to determine the elemental composition of the casing’s steel;
  • Metallurgical examinations to determine the microstructure of the steel, which can reveal the heat treatment and casing grade and quality; and
  • Fractography examination of any fractured or cracked surfaces to aid in determining the cause of failure.

Preserve evidence

To avoid evidence disputes, the operator should keep a chain of custody record for all casing retrieved from the well. In addition to a log of the casing retrieved, its location, and the person having custody at various times, retrieved casing should be stored so that it will not be lost, damaged, or intermingled with other casing. Photographs or video of any identifiable markings on the casing can be taken as the casing is removed from the well to aid in later identification and can be persuasive if there are challenges to the chain of custody. Markings can deteriorate during prolonged storage. To help prevent this problem, the casing can be stored, where practical, in an indoor or covered facility, which may also help preserve the condition of the evidence.

Legal demands

If the casing failure was the result of defects in the casing, the operator should consider making a demand on the seller, manufacturer, and any inspector that tested the casing for all damages sustained from the failure. If unsatisfied with the response, the operator should consider filing a lawsuit against the responsible parties. Because the time period in which the operator may bring a lawsuit varies by state and the applicable law, the operator should promptly consult with counsel following a casing failure.

While a well failure caused by defective casing might be beyond an operator’s control, an operator can use relatively inexpensive protocols to minimize that risk. In addition, the operator’s investment in savvy purchasing methods and post-failure evidence preservation could be the key to reimbursement.

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