Environmental and economic issues have so far dominated New York’s discussion of high-volume hydraulic fracturing. But there are other issues to consider if state officials decide to green-light fracking, including the complex question of insurance.
The State Assembly’s Insurance Committee has been studying the implications of fracking on homeowner, mortgage, and title insurance policies for about a year, says Assembly member Joe Morelle, who chairs the committee. The informal work has included conversations with people in the insurance, banking, and legal professions, Morelle says. And he says he plans to convene a roundtable discussion in December with Assembly members, attorneys, and banking and insurance industry representatives. It will be held in New York City.
Morelle says he sees many questions and few definitive answers around the insurance question. Liability is one key issue, he says. If a homeowner leases land to a drilling company and there’s an accident, would the insurance company cover the damages or is the property owner responsible?
In July, Nationwide Mutual Insurance Company issued a statement clarifying that its policies have never covered homeowner losses related to gas or oil drilling.
“From an underwriting standpoint, we do not have a comfort level with the unique risks associated with the fracking process to provide coverage at a reasonable price,” the statement said.
Morelle says he also wants to clarify whether homeowners could potentially invalidate their policies by signing gas leases. And could that be avoided by informing insurance companies so they can adequately calculate their risk?
“I’m sure most of this can be worked out,” he says.
Morelle says he’s also asked the Assembly Banking Committee to look at fracking-related issues. Among them: whether homeowners could violate their mortgage terms if they sign gas leases. Mortgages may have stipulations prohibiting certain uses on a property, he says.
This article appears in Oct 31 – Nov 6, 2012.
“I’m sure most of this can be worked out,” he says. Brilliant Mr. Morelle. Think about the money issues and work them out so the state can collect some money and the environment can die.
Whatever happened to Democrats being the environmentally concerned party? Shove enough money in front of them and it’s drill baby drill.
The fact that Morelle is looking into insurance and mortgage issues is just another smoke screen. Gov. Patterson signed the moratorium and since then, we’ve been studying this and examining that. However, everything being done is meant to ensure fracking takes place in NY. The studies and reviews aren’t meant to answer the most basic of questions: Can we afford to continue to burn more fossil fuel? No one wants that answer, so no one asks the question.
Earth Day was first held in 1970. We had vital information about fossil fuels and what they were doing to the environment. We can continue to ignore the important questions and we can obviously ignore lessons of our past. And we are certainly free to repeat the mistakes from our past.
Thanks, Joe. Now let’s all get ready for the next super storm.
Great article, Jeremy! One matter to be pointed out is that New York has the nation’s worst, and most abusive, Compulsory Integration law, whereby people who do not want their land fracked can be forced to do so if enough people in their “unit” have signed leases. I believe it has been used at least once in the past.
This Compulsory Integration action amounts to a state-mandated violation of a mortgage holder’s mortgage terms, as well as violating home owner’s insurance policy (turning a home property into a heavy industrial site, to name just one violation) – subjecting the policy holder to re-evaluation of their policies and higher premiums – or no premiums at all.
Another point: as current law stands, if the fracking driller or any of its sub-contractors lack sufficient insurance to cover damages, accidents, personal injury or death, the leaseholder is then liable to have the risk transferred to his insurance company. Nobody in their right mind would write a policy in such a situation.
Dwain Wilder
Liability issues go well beyond insurance coverage and mortgage agreements. As those items “can be worked out” other liability issues arise. How will property values be affected? If they increase who will pay the additional taxes calculated. If they decrease , how will the local town governments make up the lost revenue.
The fracking industry has a poor safety track record. When or if water supplies get containminated how would that affect the values of these communities? Local roads ,bridges must be improved to handle the hundreds of trucks needed to transport water and wastewater to and from a drill site. That quiet country setting would become an industrial site with generators, compressors and other assorted neccesary equipment.
Liability? Who would be liable, and at what cost. So Joe, try to work all of this out, focus on the people not just the insurance industry.
For G-d’s sake, get on with it. We need the damn gas. Drill, baby, drill!
“We need the damn gas. Drill, baby, drill!”
Hi Anonymous, actually we don’t need the gas. There is a glut of natural gas, gas prices are depressed. And Chesapeake Energy, Exxon, Cabot and other drillers are not drilling to get you more gas. They are hoping to create pipelines to coastal ports where the gas will be liquified and shipped overseas. Just like oil, gas goes to the highest bidder. And if they can get the gas to Asia, where the price is about $13/bcf, your gas price will go up.
So for this, you want to industrialize the American rural landscape? Baby, don’t drill.
We need the damn jobs too. If we can put Americans to work and improve trade imbalances by meeting demand in Asia, great! But the reality also is that if domestic energy users can be confident that we’re committed as a nation to developing this incredible resource, they will respond rationally to market realities.
Enough with the Luddism and environmentalist fanaticism. To coin a phrase — forward!
Yeah, baby. Because we LOVE to be able to set our tap water on fire!
Mr. Morelle was among those who voted for New York State’s 2005 compulsory integration law — written by the gas/oil industry and passed without a public hearing. As the DEC website reveals, those landowners who are forced into a drilling unit under this law are treated punitively. The “landowner options” must be read to be believed. Even the New York Farm Bureau, which supports what it calls “responsible drilling” is opposed to this punitive treatment of landowners. Today, in light of the shale gas/oil “gold rush,” the taking of private property rights by energy companies amounts to a government entitlement where the private property owner does not stand on a level playing field. Speaking as someone who was sued, along with other property owners under eminent domain laws, by a Texas gas company backed by the Federal Energy Regulatory Commission, I can tell you it is a nasty experience.