10 January 2016
In terms of household insurance the Association of British Insurers has consistently made the following statements
· Damage as a result of earthquake, subsidence, heave and landslip are all covered, in general, under buildings insurance;
· There is, at present, little evidence to show a link between fracking and seismic activity that could cause damage to a well-maintained property, however, insurers will continue to monitor the potential for fracking, or similar explorations, to cause damage.
· We are not aware of any claims, to date, where seismic activity as a result of fracking has been mooted as a cause for damage;
· As in all locations, a reported history of subsidence (or indeed any other type of loss) in a location will be taken into account when offering and pricing insurance.
The industry is heavily regulated by 4 separate regulators. In the unlikely if a company causes damage, harm or pollution to the environment, they can be required under these regimes to remediate the effects and prevent further damage or pollution. This is the same approach that applies to other industries.
The risk of water contamination is prevented by making well integrity a high priority and this is heavily regulated by the Health and Safety Executive. According to a Royal Society and the Royal Academy of Engineering (in the UK) report, at the time the report was produced, if a well is designed, constructed and abandoned according to best practice, the probability of well failure is low.
The industry under its licences with the Oil and Gas Authority must ensure that they are adequately insured for such things as loss of well control and third party liability including environmental liability.
In terms of flooding and contamination. Any application involving hydraulic fracturing involves the production of an environmental risk assessment which includes assessing the risk of flooding. The Environment Agency through the permitting process also assess flooding risk. Chemicals used and stored on site have to be disclosed and assessed by the Environment agency as non – hazardous where they would or might enter groundwater. Chemicals stored on site as with other industries have to be sealed and bunded.
Jason Nisse/Ian Schofield
0207 680 6550
UKOOG is the representative body for the UK onshore oil and gas industry, including exploration, production and storage. The organisation's objectives are to enhance the profile of the onshore industry, promote better and more open dialogue with key stakeholders, deliver industry wide initiatives and programmes and to ensure standards in safety, the environment and operations are maintained to the highest possible level. Membership is open to all companies active in the onshore industry including those involved in the supply chain.