Oklahoma Sets New Earthquake Record

Last year Oklahoma recorded 857 quakes.  That’s more than all the remaining states (excluding Alaska) combined.

The previous year (2014) Oklahoma had a record-setting year logging in 585 quakes, after the 2013 record-setting year with 106 quakes. 

To end the year, a series of 2.9 or greater earthquakes shook the Edmond area, the northeast part of the Oklahoma City metropolitan area. Those quakes have at least one state legislator up in arms. “This has been going on for five years,” says State Rep. Richard Morrissette (D. 92). “At what point are we, the policy makers, going to address this issue and take it seriously? We need to shut these wells down.”

Morrissette claims the state’s Corporation Commission has the authority to act, but is doing nothing. "This is a preventable disaster that our policy makers at 23 and Lincoln and the Corporation Commission refuse to address, because they're afraid politically to act," he told local news reporters.

Or it could be that the energy companies are refusing to comply with the Commission’s directives. On December 2, the state sent out letters to six energy companies ordering them to reduce waste water disposal or shut their wells down all together. One company, Sandridge Energy, has refused to close the six problem wells.

letter to policy holder re: earthquakes

Residents left with cracked foundations and other damage wonder who’s going to pay. Some insurance companies have already said they will not offer coverage for man-made earthquakes, such as those caused by injection or fracking. Others will, but require their clients to buy endorsements to their homeowner’s policies.

You can read more about fracking-related earthquakes here and here.

NY Landowners Denied Homeowners Insurance because of Gas Well

Back on July 9 Greg May, senior vice president of Tompkins Trust Company Residential Mortgage lending, warned residents in Berkshire, NY that gas drilling can bring high costs to landowners. One of his biggest concerns: that “homeowners insurance normally excludes coverage if there are active commercial operations occurring on the property.” Gas drilling falls into that category.

Now, barely a month later, a landowner in the town of Lebanon (Madison County, NY) is facing just that situation. According to Jim Goldstein, town supervisor, the landowner was surprised when his insurance company denied the renewal on his homeowner's insurance policy covering their home and farm because there is a gas well on their property.

There are no problems regarding royalty payments, nor have there been any incidents on the property. The gas royalties go to the previous owner, but the current property owner holds the lease and royalty rights for future wells.

So Goldstein checked out the situation with the insurance agent, who writes a lot of policies in the county. Apparently this is a “new trend that will come up as property owners fill out renewal applications,” writes Goldstein.

So far this seems to be limited to property owners who have gas wells, and so far it hasn’t extended to gas leases or to property owners whose land was pooled into drilling units through compulsory integration.

But, continues Goldstein, “we will have to see how this develops. Initially, we thought it was limited to one company but it turns out it is a trend, and given how many property owners in Lebanon have gas wells on their property, some dating back to the 1960s, this present a tremendous potential problem as those individuals would not have insurance liability coverage and will be exposed, not to mention have great difficulty persuading others to buy their property when they are ready to sell.”

The case in question is on a property where the buyers inherited the gas well and lease from the previous owner. Goldstein worries that other farmers and homeowners may be facing similar insurance problems. Of further concern, he notes, is that the state Department of Environmental Conservation – which oversees and regulates gas drilling – is not aware of this trend. And, says Goldstein, state officials know of no “high risk pool” available to homeowners should they lose their insurance because of gas wells on their property.

“This appears to be directly related to perceived liability of having a gas well on one’s property,” says Goldstein. “And we are talking about Medina and Herkimer Sandstone formation wells, not the new proposed high volume hydraulic fracturing process.” He estimates that 25 percent of Madison County is leased, with about 60 wells in his town of Lebanon.

“If this becomes a widespread practice, this will change the discussion significantly in the upstate region about gas drilling and development,” says Goldstein. He doesn’t know whether insurance companies will respond in a similar fashion to homeowners with gas infrastructure, like pipelines or gathering systems on their properties. But, he says, “this could have significant and profound implications for property owners and municipal governments where gas wells currently exist or are anticipated.”

Read more on insurance and drilling here.

Fracking not Healthy for Real Estate

According to the New York Times, people looking for second homes don't want to buy property in the Marcellus region. Leased properties are a "tough sell", and even those that aren't leased aren't getting many bites. That's because people are concerned about potential contamination and lowered property values.

The same day this article appeared, the League of Women Voters and Vestal Residents for Safe Energy (VERSE) hosted a meeting on the impacts of gas leasing on home ownership. Some of the concerns: homeowners insurance won't cover industrial accidents such as brine spills; mortgages don't allow oil and gas leasing; and declining property values where there are problems with drilling impacts.
Read more about how gas leases conflict with mortgage rules here and here.

What... no "Fracking Insurance"?

On Monday (July 9) the Tioga County Landowners Group presented a panel discussion and screening of the gas industry’s newest flick. During discussion before the film Lindsay Wickham, NY Farm Bureau’s Region 4 field advisor, talked about how Farm Bureau views shale gas drilling. Farm Bureau is unapologetically pro-drilling, said Wickham, and they’ve got more than 50 policies addressing the issue in their policy book.

While Wickham (and the Farm Bureau) are eager to see drilling happen – as long as farmers are paid fairly for leases and royalties – he emphasized that the Farm Bureau remains “committed to preserving the quality of water and land.” After all, farmers depend on healthy soil and clean water to raise their crops and livestock.

The risks of hydro-fracking are very low, said Wickham. It’s drilling that’s risky. He mentioned surface spills, cement casing problems and human errors.

Three days later, Nationwide Mutual Insurance Co – the very company that insures farmers – announced that its policies do not cover damage related to fracking. The company’s commercial and personal insurance policies “were not designed to cover” that sort of risk, said Nationwide spokeswoman Nancy Smeltzer. It seems that the risks involved in fracking operations “are too great to ignore” and “are now prohibited for General Liability, Commercial Auto, Motor Truck Cargo, Auto Physical Damage and Public Auto coverage.”

That prohibition applies to folks who haul water to and from drill sites, people who operate equipment on the well site, contractors involved in fracking operations, and landowners who lease their property for drilling.

Around here, the biggest landowners are farmers. They belong to the NY Farm Bureau which, six months ago, teamed up with Nationwide to offer special “members-only” insurance rates on farm insurance, auto insurance and everything in between. But not Fracking Insurance. Nationwide doesn’t offer that – nor do other insurance agencies. Mine doesn’t; I called and asked.

This leaves farmers – and other landowners – in a sticky wicket, as my dad would say.

Gas Leases & Legal Issues for Landowners

It was standing room only (or close to it) in the James Law Auditorium at Cornell's Vet School last Thursday (Oct 29) when more than 200 people showed up for a forum on "Legal Issues for Landowners. The forum was co-sponsored by Shaleshock Citizen Action Coalition, Cornell Cooperative Extension, and a host of others including local Assemblywoman Barbara Lifton.

Four attorneys addressed issues of gas leases, property law, pipeline easements, compulsory integration, and landowner coalitions. One of the things that still seems to stymie landowners is that when they sign a lease with a gas company they could be creating a "title defect".

"The severity of the defect depends on what you ultimately want to do with your land," said attorney Randy Marcus. A typical gas lease goes far beyond allowing the gas company to drill; they can build access roads to their well pad, take trees (timber), erect fences, put up buildings, and construct pipelines if you don't negotiate limits to these rights, Marcus said. He pointed out that most banks won't put a mortgage on a property with a lease. If a family purchases country acreage for their dream home, and the previous owner had leased the mineral and surface rights to a gas company, the home-in-the-country dream may not get financed.

Another issue Marcus raised is homeowner liability and insurance. "Accidents happen," he said, and noted that a number of insurance companies will not insure properties with a lease. Others have substantially increased their premiums.

While DEC's new draft rules for drilling the Marcellus (dSGEIS) takes up a lot of pages (809) it does "virtually nothing to protect the value of your property," said Marcus. Right now the gas companies can drill a well as close as 100 feet from your home. "That's five pick-up trucks parked end-to-end," Marcus said. "Not what the average homeowner expects in their backyard."

Attorney Jane Welsh agreed with Marcus. Later in the evening she said that DEC "doesn't really have protection at heart" of their dSGEIS. She feels the environment is getting the short end of the stick and urged landowners to submit comments on the dSGEIS. She also emphasized the importance of conducting baseline water testing, in case well water becomes contaminated through drilling or spills.

Attorney Helen Slottje addressed the issue of pipeline right-of-ways. The message of the night: there will be a lot of them, and nobody is coordinating where they go. Without some sort of oversight the pipeline right-of-ways will slice through forest and farmland. clarification: the discussion was in reference to gathering pipelines that go from wells to compressor stations and the large pipelines, such as Millennium, that transport gas to market.

Slottje also raised the question: what would happen if landowners got together to create a coalition of folks who refuse to lease their land? To form a drilling unit a gas company must have 60% of the land under lease - they can incorporate any hold-outs through "compulsory integration" - more on that tomorrow.

But, said Slottje, what if landowners joined in solidarity to keep acreage unleased? If they got enough acres they could effectively stop the drilling in their area.