Offshore Drilling Giant Says “Not Guilty” in Drilling Mud Lawsuit

Houston, TXA leading force in the drilling industry and operator of both fixed drilling rigs and drilling ships is currently defending itself against a drilling mud lawsuit, according to its annual filing with the US Securities and Exchange Commission (SEC) in June. Diamond Offshore Drilling Inc. (Diamond Offshore) maintains that much of the litigation centers on entities that may have employed drilling mud before Diamond offshore purchased the platforms.

“We are one of several unrelated defendants in lawsuits filed in state courts alleging that defendants manufactured, distributed or utilized drilling mud containing asbestos and, in our case, allowed such drilling mud to have been utilized aboard our offshore drilling rigs,” states Diamond Offshore, in its filing dated June 30, 2013. “The plaintiffs seek, among other things, an award of unspecified compensatory and punitive damages.”

Asbestos drilling mud is a product used in the tricky process of mining oil reserves from beneath the ocean floor. The mud is pumped in to prevent the drilling apparatus from overheating, among other uses.

Asbestos lay at the foundation of many a drilling mud lawsuit given its previous use in the manufacture of oil drilling mud. This has been a problem for the mud engineer, whose job is to mix the drilling mud from its original, powdered form.

Many a mud engineer had no clue as to the composition of drilling mud and took no precautions as asbestos fibers were allowed to drift through the air and, according to plaintiffs, into the lungs of the unsuspecting mud engineer. Years, and sometimes decades later, following a diagnosis of asbestosis or mesothelioma, the stricken drilling mud engineer traces the disease back to drilling mud chemicals.

In its SEC filing, Diamond Offshore states that it should be indemnified from liability “with respect to a majority of the lawsuits from Murphy Exploration & Production Company pursuant to the terms of our 1992 asset purchase agreement with them. We also believe that we are not liable for the damages asserted in the remaining lawsuits pursuant to the terms of our 1989 asset purchase agreement with Diamond M Corporation, and we filed a declaratory judgment action in Texas state court against NuStar Energy LP, or NuStar, the successor to Diamond M Corporation, seeking a judicial determination that we did not assume liability for these claims.”

Diamond Offshore noted that it successfully petitioned for summary judgment in the case against NuStar. However, NuStar appealed and the appellate court remanded the case to trial.

In its filing, Diamond Offshore stated that it could not know what its liability, if any, might be stemming from the outcome of the drilling mud lawsuit, and further stated it would defend itself vigorously.

However, the corporation, in its filing, acknowledged that asbestos was used in the process of manufacturing drilling mud. “The manufacture and use of asbestos-containing drilling mud had already ceased before we acquired any of the drilling rigs addressed in these lawsuits.”

On its website, Diamond Offshore boasts a fleet of 30 semisubmersibles, seven jack-ups, and one drillship. “In addition, four ultra-deepwater drillships and two deepwater semisubmersibles are currently under construction,” for delivery in 2013 and 2014.

Bloomberg Business Week reported on September 24 that longtime President and CEO of Diamond Offshore, Lawrence Dickerson, has announced plans to retire early next year. The company, based in Houston, has launched an effort to find a successor who will eventually stickhandle the company’s defense in the drilling mud lawsuit.