Dangers of gas fracking overstated, says broker

ENVIRONMENTAL DANGERS due to shale gas fracking – the technology proposed for use in drilling for gas in Leitrim and Fermanagh – have been blown “somewhat out of proportion”, according to a global insurance broker.

Australian company Tamboran is hoping to use fracking, or hydraulic fracturing – where underground rock formations are subjected to high pressure, releasing gas – to exploit 2.2 trillion cubic feet of gas in north Leitrim over more than 30 years.

Some US insurers have become more reluctant to cover the eventuality of pollution due to fracking, with some observers “becoming concerned that this particular form of cover might not become available in the future”, according to the broker, Willis.

It can hardly be said that the Environmental Impairment Liability market is now hungry for business relating to hydraulic fracking operations. Indeed, some insurers have started to exclude fracking activities from their policies,” it said. Drillers could get insurance “for a price” if they could show they had “completely bought into the highest standards of the industry”, said Willis, adding “the contrast” between those which do and those which do not “is already very pronounced”.

The broker dismissed the danger of earthquakes related to fracking. Last year’s Lancashire tremors registering 2.3 on the Richter scale caused by exploratory drilling were “by no means uncommon” and were just two of the 1.3 billion such tremors felt on the Earth’s crust every year.

The risk faced by insurers came not during the drilling of the well but during fracking, when large quantities of water, salt, sand and a variety of chemicals were injected into the bore to force rocks apart and release gas.

Some US insurance claims have been taken because of equipment failure “that may or may not be compounded by human error, while many losses involve burst casing or other casing failures, or surface pressure control systems failing”, Willis added.

“The issue that most concerns the market is therefore whether the contractor’s equipment can tolerate the pressures that will be generated by the fracking process,” the company said in its report, All Fracked Up? Just How Concerned Should Energy Insurers be About Hydraulic Fracturing?

Regardless of the opposition to fracking, Willis said “one thing is crystal clear – this is an industry that is here to stay, with risks that will need to be managed and/or insured in the usual manner”.

Companies that “have the right risk profile, the right experience with a successful track record, utilise best industry practices and operate in specific geographic regions” will get the cover required, Anthony Wagar of Willis’s Environmental Practice said.

Shale gas exploration will become an increasingly important part of energy supplies, said Willis, pointing to US president Barack Obama’s having said US shale gas reserves could make the country “the Saudi Arabia of natural gas”.

Environmentalists had painted “an alarming picture of millions of gallons of water being mixed with what are described as ‘toxic’ chemicals which are then sent down the well at high pressure”. Best practice recommended an impermeable layer of plastic should be laid at the head of well sites to ensure chemicals did not spill, even though they were not used at toxic levels, it said.

Despite publicity, US insurers did not believe contamination of aquifers “is really so much of a risk”, though they did have concerns over waste water and storage of drilling chemicals.