Nick Grealy
Administrator of NaturalGas2.0, NoHotAir and ShaleGasInfo Blogs

Why isn’t the message getting across that almost no damage at all and little of any consequence is actually associated with fracking?  

Back in 2012 I wrote a piece on a report by Willis Group on insurance and shale gas noting:

The evil twin of US lawyers are UK insurers. These are the guys who pay out the cash. Follow the money: Someone in the US gets poisoned by water, they find a lawyer, they win the case, the driller pays out and the buck stops at the driller’s insurance company.But what if the insurance company isn’t worried?

Smith said: “The issues are of a political nature and a lot are born out of ignorance of what the operations are.” He expects that with more information, and “greater insistence on best practice being adopted” – possibly through legislation – the concerns around fracking will diminish over time..

The report from April 2012 can be found here.  But what about today? If shale gas damage is cumulative as well as accidental as the “controversial” school allege, then the intervening three years should now start to really turn up in court. During the past three years  the number of US shale wells has increased exponentially. But, not it appears, any damages.

Lloyd’s of London Building

As the April 2015 Willis Natural Resources Market Review points out, or to be exact, doesn’t point out, ain’t nothing going on but the rent, or in this case, the premiums. There certainly haven’t been any payouts.

Meanwhile, an absence of natural catastrophes has contributed to a generally profitable year for Natural Resources insurers. Another Gulf of Mexico hurricane season has come and gone with zero damage to energy industry infrastructure, while very few other losses of any note have had any meaningful impact on our markets. As a result, the Upstream portfolio in particular has had an outstanding underwriting year in 2014, with at least reasonable results recorded in most other Natural Resources market sectors.

This is shale economics 101: If there is damage, someone, sooner or later will pay. If they keep on paying or paying too much, the risk becomes uninsurable and so does the industry. A key meme of some activists is that the actual damages are all hushed up. That exaggeration stems from the Hallowich case in Pennsylvania covered in detail at the link. Despite the paranoia, companies can’t just dish out hundreds of thousands of dollars without it showing up in the accounts. That’s why they have insurance and in a daisy chain of reinsurance, someone finally has to write a check. Ultimately, damages from “controversial” fracking, like anything else down to the broken window level, end up in London’s insurance market

For those who haven’t heard of Willis, they are a $3BN plus company based not at Lloyds, but at a 26 floor building across the street. They are the third largest insurance broker in the world measured by revenues. So if they haven’t been able to find any payouts to victims of shale damage, a reasonable assumption is that the damage doesn’t exist. If you don’t believe that, try and get a lawyer. But since lawyers work on a no-win, no-fee basis, and companies like Willis or number one in the industry, Marsh haven’t paid out, even the most aggressive damage claim lawyers are giving up.

Using Google News on  “Fracking Damage Awards”, the only results are from the Parr’s case in Denton Texas:

Frustrated and angry, the Parrs decided to sue. Their attorney warned them that lawsuits against the oil and gas industry rarely, if ever, succeed. But the Parrs persisted and last month won what appears to be the first successful U.S. lawsuit alleging that toxic air emissions from oil and gas production sickened people living nearby. A Dallas County jury found that Aruba Petroleum, a privately owned company based in Plano, Texas, “intentionally created a private nuisance” that affected the family’s health and awarded the Parrs almost $3 million in damages.

“When you don’t have a strong regulatory system, a system to prevent what happened to this family, the only place left to turn for help is the courts,” said Robert Percival, director of the University of Maryland’s Environmental Law Program.

That was then last May. But in July

The media characterization of the trial as a “fracking case,” however, is misleading. The plaintiffs’ claims did not focus on “typical” fracking-related concerns, such as seismic activity, water use and contamination of water supplies or appropriate disposal of flowback/produced water.

While the number of cases alleging damages from hydraulic fracturing is increasing, few have resulted in jury verdicts. In fact, many such cases are being settled or otherwise dismissed. For example, Scoma v. Chesapeake Energy Corp., never went before a jury — the parties reached a settlement agreement and the case was dismissed. In another recent case, Harris v. Devon Energy Prod. Co. LP, the plaintiffs originally complained of groundwater contamination from nearby fracking activity. That case, however, was dismissed without prejudice after plaintiffs’ groundwater “apparently purged itself of elevated levels of toxic substances.” In yet another example, the plaintiffs in Heinkel-Wolfe v. Williams Prod. Co. LLC, dropped allegations of water contamination and reached a settlement agreement at mediation.

Returning to Weitz and Luxenberg I especially liked the link to this damages claim. Someone must have been chasing the ambulance.

Pedestrians are the largest at-risk group related to car accidents, comprising one half of all roadway fatalities, according to New York State highway statistics. Weitz & Luxenberg P.C. is an ardent defender of those victimized by such accidents and who suffer catastrophic injuries as a result.

On Monday, December 17, 2007, the firm secured a $1.4 million settlement for a woman who was struck down by an ambulance on the streets of Manhattan. The settlement was reached during a trial before the Hon. Nicholas Figueroa in New York County Supreme Court.

Nicholas Wise, a senior trial attorney with Weitz & Luxenberg, who represented the injured pedestrian said, “Throughout the case, the defense took the position that our client had had a very good recovery from the injuries she sustained in the accident. Although it took a trial, by paying the settlement, we believe the defense has finally acknowledged the severity of our client’s injuries.”

What we need is to have the court of public opinion to finally acknowledge the lack of any injuries more than those that happen every day in any industry.  Bad luck happens, and when it does the US legal industry can monetize it and companies like Willis and Marsh find that the bucks ultimately stop with them. But in the meanwhile, Willis seems perfectly happy to have enjoyed another catastrophe lite year.

Meanwhile, an absence of natural catastrophes has contributed to a generally profitable year for Natural Resources insurers. Another Gulf of Mexico hurricane season has come and gone with zero damage to energy industry infrastructure, while very few other losses of any note have had any meaningful impact on our markets. As a result, the Upstream portfolio in particular has had an outstanding underwriting year in 2014, with at least reasonable results recorded in most other Natural Resources market sectors.