Fracking: Ensure You Are Insured As energy sourcing enters new territory, what are the implications for the real estate development sector? The highly contentious, but very lucrative, process of Hydraulic Fracturing (fracking) has been an increasingly common feature in the media over recent years; opinion has been divided since the issue came to the fore in early 2007, and even though fracking has been used at on-shore gas wells since the 1980s, it is the use of the process in accessing shale gas wells in the UK that has created huge controversy. By drilling into the ground and injecting high powered jets of water based solution, the pockets of shale gas can be fractured allowing the gas to escape through minute cracks in the shale rock, whereby the gas is collected and used as an energy source. Despite widespread environmental concerns regarding pollution, earthquakes and tremors, Government officials have stated that there is huge potential in harvesting this energy across the UK; in particular, rural areas will be the most likely target, with several energy companies already carrying out exploratory drilling nationwide.
Fracking Rights 
All reserves of gas and oil are the property of the Crown, unless the rights to mine them are transferred to another party
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Currently, it is the norm for mines and minerals to be excepted from titles held at the Land Registry
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It is likely that obtaining gas from the process of fracking will be excepted in the same way
Should fracking become a politically endorsed method of sourcing energy, what will the legislative impact be? For the commercial or residential property developer, the consequences could be far reaching; currently, the legal indemnity insurance sector can offer solutions that provide protection for
land/property assets in the form of mines and minerals policies – these policies will cover any losses incurred, should a third party attempt to enforce their rights to access and mine the minerals under the land. With the evident similarities between underground mining and fracking, it is not illogical to presume that the two will be categorised under the same umbrella in insurance terms.
An emerging market on the UK economic landscape, fracking is currently considered a safe method by which to obtain an untapped energy resource; however, the uncertainty around the environmental consequences, conflicting scientific evidence, and ongoing parliamentary debate do not provide much information or comfort to underwriters if they are to consider covering such a risk.
Emerging Market Risks
Thomas Carroll Legal Indemnities understand the complexities of the insurance markets, and can use our expertise to obtain the most suitable solution for your clients
It is important that the insurance industry keep up to date with topical issues, and amend their policy wordings to maintain relevance in a rapidly changing socio-economic field; each policy is provided on circumstances specific to the site in particular – planned developments, objections, developed values, and covenant/easement issues, are all materially important for an underwriter when they assess the inherent risk of a third party claim. The present stance with regard to mines and mineral risks is that, alongside the standard heads of cover available, most policies exclude cover for losses incurred from the mining of minerals under the land where entry has occurred on a neighbouring site, i.e. the minerals on adjacent land have been accessed and mined, and this in some way has caused loss at the client’s property. Understandably, fracking has been included under the same exclusion; but essentially, it is the insurer’s appetite for fracking activity at the site itself that is key.
Each insurer takes a different view as to whether fracking is an acceptable risk to insure; that view may evolve over time, as further scientific evidence and environmental developments come to light. It is essential for Real Estate professionals to remain informed on the appetite of insurers who provide insurance solutions for the fracking process and the variances of the policies that are available. If you would like any assistance in obtaining insurance policies for your clients, please contact:
Louise Jones LLB (Hons) Dip CII Business Development Executive Thomas Carroll Legal Indemnity team e
louise.jones@thomas-carroll.co.uk
t
(029) 2085 8602
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(078) 9664 8866