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Michael Conley Quoted in Law360 article “Ohio OKs Fracking Bill Requiring More Insurance, Disclosures”

Ohio OKs Fracking Bill Requiring More Insurance, Disclosures

By Bibeka Shrestha Law360, New York (May 25, 2012, 8:20 PM ET) — The Ohio legislature gave final approval Thursday to legislation that calls for oil and gas companies to reveal chemicals used in hydraulic fracturing and requires horizontal well owners to obtain at least $5 million in insurance coverage. S.B. 315, which is expected to be signed into law by Ohio Gov. John Kasich, a Republican, would mandate water testing within 1,500 feet of proposed horizontal wells. It also calls for the disclosure of chemicals used in fracking, but includes protections for trade secrets, which environmentalists have decried. S.B. 315 would further require owners of horizontal wells to obtain liability insurance coverage of at least $5 million to pay for injuries or property damage caused by production operations in Ohio. Currently, most well owners must obtain a minimum of $1 million in bodily injury and property damage coverage, while those with wells in urban areas must have at least $3 million in liability insurance. Michael Conley, an Offit Kurman insurance attorney, said S.B. 315 appears to apply to all of an owner’s wells in the state. “As such, regardless as to one or 50 wells, the owner is only required to have $5 million in limits,” Conley said. While the bill requires $5 million in limits, it requires only that a “reasonable level of coverage” be available for environmental liability, but what’s “reasonable” can vary, he added. Moreover, S.B. 315 doesn’t state clearly whether the $5 million in insurance needs to be an occurrence or claims-made basis, Conley said. If the policies are claims made, they may not cover environmental liability that materializes years after drilling takes place, the attorney said. Jared Zola, a Dickstein Shapiro LLP insurance attorney, said he suspected that companies involved in horizontal drilling already maintain a significant amount of liability coverage. According to Zola, Ohio might have approved the measure in part to deter smaller companies from conducting horizontal drilling in the state. “In an area where there’s such high public scrutiny, where even baseless allegations could cost these companies involved in owning the well and drilling the well a significant amount to defend, $5 million in limits does not seem excessive,” Zola said Friday. The Ohio Senate greenlighted the legislation with a 27-6 vote on May 15, while the state House voted 75-20 on Thursday to approve the bill. The Ohio Environmental Council immediately attacked the House’s inclusion of the so-called Halliburton amendment in the bill, which the group said unnecessarily restricted the public’s ability to challenge industry’s claims that chemicals used in fracking constitute trade secrets that cannot be disclosed. The amendment forces those who are not well property owners or residents who live adjacent to wells to prove injury before they can bring these challenges. “Practically speaking, it will be impossible to prove that some unnamed chemical is making you sick,” Jack Shaner, a spokesman for the Ohio Environmental Council, said Friday. “The bill bends over backwards to accommodate the industry at the expense of the public.” But Stephen Davis, an energy attorney in Akin Gump Strauss Hauer & Feld LLP’s Houston office, said Ohio legislators had taken a measured approach to regulating drillers. S.B. 315 would provide information that’s necessary to regulators while respecting the rights of oil field service companies, Davis said. “The manufacturers of these frack fluids are spending money,” Davis said. “They don’t want people to be able to reverse-engineer it.” According to Shaner, S.B. 315 would also block the public from appealing the terms and conditions of drilling permits issued by the Ohio Department of Natural Resources to the Ohio Oil and Gas Commission. –Edited by Cara Salvatore. The full article can be read on the Law360 website here.


Michael Conley is a Principal at Offit Kurman and Chair of the firm’s Insurance Recovery practice. Mr. Conley is a frequent speaker on insurance recovery and fracking issues. He can be reached at 267.338.1317 or mconley@offitkurman.com.