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.
The environmental impairment liability market was “hungry for business relating to hydraulic fracking operations”, it said, and some insurers had started to “exclude fracking activities from their policies”. 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”.