Nationwide Insurance Makes It Official: Fracking is a Bad Risk

After circulating on citizen group blogs in upstate New York for a day or two, Nationwide Mutual Insurance Company confirmed that an internal memo outlining new prohibitions on insuring individuals or businesses who lease land for natural gas fracking was authentic and reflected company policy. With the disclosure Nationwide becomes the first insurance company to say it won't cover damages caused by horizontal fracturing.

According to the memo,

“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.”

This prohibition applies 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. That's a lot of the gas fuel cycle suddenly not covered.

Nationwide is the first to de-couple itself from fracking, but we bet it isn't the last. Some analysts were suggesting that negative publicity surrounding the fracking process influenced Nationwide's decision. Given the discovery rate of new hazards associated with fracking over the last two years, that's not a factor likely to get better with time.

It may be that at by the time all the dust settles, the gas industry will have to depend on some kind of massive government bailout to even be able to get fracking insurance. This is the same problem the nuclear power industry faced 50 years ago. No sane insurance company would offer coverage for a nuclear power plant, so the federal government stepped in and subsidized it in the form of the Price-Anderson Act. Without this literal Act of Congress, there wouldn't even be one nuclear power plant in the U.S.

Insurance companies aren't politically bias. They aren't partisan. They aren't treehuggers. They operate according to cold hard stats. And now those stats say fracking is a very bad risk. So bad that at least one major carrier has stopped even offering policies that cover damage from it.

If, like the City of Dallas, you were hoping to lease your land for natural gas drilling, this is something that should concern you.