In a startling first, Nationwide Mutual Insurance Co. has declared that it will not extend coverage to any damage that is caused by, or related to, the controversial gas-drilling process known as fracking.
Fracking, as you may already know, involves high-pressure blasts of chemical-laced water into shale deposits deep underground in an attempt to release oil and gas reserves.
The recent “shale boom” across North America is in large part reliant on the success of the hydraulic fracture drilling processes, or fracking. Pennsylvania, New York, Ohio, and West Virginia all boast extensive shale prospects.
As usual, the issue is contentious. Big Oil claims fracking is quite safe when done properly; health and green groups argue that the risk of fracking’s high-energy processes contaminating drinking water reservoirs is too high. There’s also the risk of seismic disturbances as a result of the highly pressurized water jets underground.
Bloomberg quotes the Nationwide memo, which was leaked onto an upstate New York anti-fracking group’s website and spread quickly across the Internet:
"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."
Nationwide’s decision will include both commercial contractors as well as anyone who leases land to oil and gas companies.
What’s interesting about Nationwide’s thinking on this issue is that the actual risks related to fracking aren't clear. No official study has connected fracking with drinking water contamination or seismic activity, despite the controversy it carries around itself.
However, that controversy is exactly what gives it a bad reputation, and Nationwide seems to want to steer clear of it. Of course, various oil and gas folks were quick to lash out against Nationwide’s alleged recklessness and lack of firm reliance on facts.
Many are concerned about what this move might mean for other insurance companies. If others follow suit, it could slow down the fracking industry as a whole.