US insurer won't cover gas drill fracking exposure
By Mary Esch on July 12, 2012
ALBANY, N.Y. (AP) — Nationwide Mutual Insurance Co. has become the first major insurance company to say it won't cover damage related to a gas drilling process that blasts chemical-laden water deep into the ground.
The Columbus, Ohio-based company's personal and commercial policies "were not designed to cover" risk from the drilling process, called hydraulic fracturing, or fracking, Nationwide spokeswoman Nancy Smeltzer said Thursday.
The process injects chemically treated water into wells to fracture shale thousands of feet underground and release trapped gas or oil. There are rich shale deposits in parts of Pennsylvania, New York, Ohio, West Virginia and elsewhere.
Health and environmental groups claim fracking can contaminate drinking water. The gas industry says it's safe if done properly. Nationwide said risks involved in fracking operations "are too great to ignore" and apply to policies of commercial contractors and landowners who lease property to gas companies.
The Nationwide policy first came to light when an internal memo detailing underwriting guidelines was posted on websites of upstate New York anti-fracking groups and landowner coalitions seeking gas leases. Smeltzer confirmed that the memo was genuine but said it wasn't intended for public dissemination.
The memo reads: "After months of research and discussion, we have determined that the exposures presented by hydraulic fracturing are too great to ignore. Risks involved with hydraulic fracturing are now prohibited for General Liability, Commercial Auto, Motor Truck Cargo, Auto Physical Damage and Public Auto (insurance) coverage."
It said "prohibited risks" apply to landowners who lease land for shale gas drilling and contractors involved in fracking operations, including those who haul water to and from drill sites; pipe and lumber haulers; and operators of bulldozers, dump trucks and other vehicles used in drill site preparation.