John Heft New Day Underwriters

John Heft, an SVP at New Day Underwriting Managers, speaks with during the 2015 IRMI Energy Risk and Insurance Conference about the use of new technologies, and risks they pose to oil and gas companies.

According to Mr. Heft, there are many types of environmental risks that are typically covered under a standard energy General Liability (GL) policy. For well operators, risks may include the wells themselves, well portfolios, pipelines, collection lines, tank batteries, waste lagoons and disposal wells.  For contractors, the risks could include virtually any potential contracting operation.

Mr. Heft explains that hydraulic fracturing uses directional drilling to turn the drill bit horizontally into a shale formation.  The rock is then fractured using an explosive device and water with trace chemicals is used to then extract the oil.  Mr. Heft says there could be pollution problems when contractors drill through the “aquifer layer. It is sealed with cement, but there remains potential for possible migration pathways created as a result of the directional drilling.”

Mr. Heft says environmental insurance currently available covers sudden and accidental occurrences.  With the new technologies that have been introduced, such as new disposal technologies, there is an increase in gradual pollution, which is not covered under existing policies.  He says there are carriers who are beginning to adapt their policies to meet these needs.

To mitigate environmental exposures, Mr. Heft recommends that Risk Managers “make sure the technologies they are employing are conducted and administrated properly.”

For more from the IRMI Energy Risk and Insurance Conference, visit the IRMI website, or the On Demand Library

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