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By JARED SHELLY, senior editor/web editor at Risk & Insurance®

Opponents of hydraulic fracturing often vehemently declare that the natural gas drilling process leads to unsafe drinking water in homes around fracking sites -- sometimes the water is so gaseous it can be lit on fire.

Fracking involves blasting water, sand and chemicals into the earth to break up layers of rock underground, allowing for the extraction of the natural gas trapped in those layers. Much of the waste water from fracking in Pennsylvania is housed in injection wells in Ohio. In fact, the Wall Street Journal reported that Ohio has 194 wells, while Pennsylvania only has seven; the state's geology in large part won't allow for that method of storing waste water

But the environmental risks of that method of water storage could be dire. Youngstown, Ohio has been hit with 11 earthquakes since December 2010, when D&L Energy Inc. began drilling wastewater deep wells. The most recent was a 4.0 magnitude quake on Dec. 31, which came on the heels of a 2.7 magnitude earthquake on Christmas Eve.

Arkansas regulators declared their own moratorium after earthquakes last year. Youngstown Mayor Charles P. Sammarone even bought himself earthquake insurance, according to news reports.

While proponents of fracking cite it as a boon for the economy and say that there's no proof of a direct link between fracking and seismic activity, the insurance industry could and should be put on notice.

Recent developments may move the fracking debate away from the hazards of the fracking process and toward the hazards of storing waste water, said Jeffrey Hanneman director of the environmental practice at Aon Risk Solutions.

"There could be alternatives that have to be developed," he said, noting that perhaps drillers should put waste wells in places less susceptible to earthquakes or use trucks or rail lines to ship waste water to safer containment wells.

"But," he said, "the link between seismic activity and injection wells is still speculative at this point."

This development could have vast insurance implications. If earthquake damage could be tied to fracking wastewater disposal practices, the involved drilling company may have a lawsuit on its hands and rely on its liability insurance, said Hanneman.

"It's currently an insurable risk that has not gotten too much attention from the insurance marketplace right now," he said, "because we need more evidence that there's a link between seismic activity and fracking."

But the Ohio quakes have certainly raised some eyebrows.

January 10, 2012

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