The practice of drilling for natural gas, known as fracturing or “fracking,” has come under the insurance industry's microscope, says Matt Pateidl, vice president of environmental risk for Lockton Inc. in New York. The brokerage has several clients involved in fracking: from those who manufacture the pipelines to those who tend, maintain and clean retention ponds.
While fracking supports economic growth, many people are wary of the “secret sauce” that is used in the process, Pateidl says. In addition to water and sand, which make up 98 percent of the fluids injected into deep shale formations, the fracking process also includes small amounts of some 200 chemicals like benzene, formaldehyde, kerosene, toluene and isopropyl alcohol, according to the web site of the New York State Department of Environmental Conservation. That mixture can vary from state to state.
In December, the Environmental Protection Agency released a report saying that fracking “probably” contaminated well water in Wyoming with dangerous amounts of the chemical benzene. Comprehensive results are due late this year.
Pateidl has not seen fracking exclusions on insurance policies yet, but says, “It has the attention of the underwriters. Carriers are very much scrutinizing that exposure right now.”
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