Insurance Need for Workers and Citizens within the Drilling Zone - Term Paper Example

Environmental Liability: Insurance Coverage Environmental Liability: Insurance Coverage Fracking refers to the process of drilling and introducing fluid at high pressure into the ground surface to fracture shale rocks in order to release the natural gas inside. Oil drilling and natural gas fracking in Texas has been on the increase, bringing about expansion in the economic activities in the city accompanied by economic growth. However, this expansion is accompanied by increased risks both to the drilling firms, the workers within the firms and also the citizens within the drilling environs. Increased risk presents a need for development of appropriate insurance coverage for companies, workers and citizens within the drilling environment. The Texas Bureau of Labor Statistics shows that the death of oil workers increased by 3.2 percent for the period between 2008-2012, to a total of 545. The Houston Chronicle reported that Texas had the highest deaths at 216. The oil and natural gas industry in Texas faces challenges where insurance partners and energy companies will be forced to adapt for them to benefit from emerging opportunities, as well as the changing landscape (Burrough, 2009). Recently, changing relationships, technological advances and global demand have turned natural gas and oil resources that were previously inaccessible into lucrative opportunities. However, it is evident that opportunities bring about risks that have to be prevented or accounted for by the companies. The companies exploiting these new opportunities increase the potential risks for incurring heavy losses. The subsequent strategic, reputational and financial consequences for the companies involved can be significant. As a result, natural gas and oil companies should focus on the price as well as the quality of their insurance cover. Insurance is an efficient tool for mitigating loss and transferring risk. There are various risks that Texas oil exploration industries face which should be covered with insurances (Burrough, 2009). Insurance need for workers and citizens within the drilling zone Health Insurance According to Amirbekyan & Stylianos (2014), oil and natural gas fracking activities pose risks to human health. During the fracking process, approximately 600 chemicals are used to drill out natural gas including known carcinogens and toxicants such as radium, methanol, lead, uranium, mercury, formaldehyde and hydrochloric acid. Natural gas producers engage in activities that have a negative effect on the health of the people and drinking water. The extraction and production of natural gas contaminates water and releases poisonous gases into the atmosphere. During the process of fracking, toxic chemicals and methane gas leach out and contaminate nearby groundwater. Methane concentrations are seventeen times higher in water drinking-wells near the fracturing sites than that in normal wells (Hutton, 2013). The contaminated water is used as drinking water in nearby towns and cities. There have been over one thousand documented water cases of contamination near areas of gas drilling and cases of respiratory, sensory and neurological damage because of ingestion of contaminated water. During the process, only 30-50% of the fluid is recovered but the rest of the non-biodegradable toxic fluid is left in the ground. It is left to evaporate, hence creating acid rain, releasing dangerous biological compounds into the atmosphere and contaminated air. Hydrogen sulphide gas is an example of a poisonous gas which is found in natural gas deposits and in some mineral rock. It is a very toxic gas, has a pungent smell and is colorless. It is a very toxic gas that has no color and smells like rotten eggs. Hydrogen sulphide can irritate the lungs, throat and eyes. Workers in the plant without Personal Protective Equipment may pass out quickly when they inhale the gas. If prompt first aid is not administered to the worker, they may die within a short period of time. Naturally occurring radioactive materials also pose risks to the health of people within the surrounding of the natural gas and oil plants. They are found in the earth’s crust and are found naturally in the environment. They include radium, radon, thorium and uranium and may be present in the gases and liquids from geological formations. Drilling fluids and sludge may contain elevated levels of naturally occurring radioactive materials. Precautions are needed for handling, transportation and disposal of these materials (Amirbekyan & Stylianos, 2014). Fracking produces around 300,000 barrels of natural gas on a daily basis but at the price of various safety, environmental and health hazards. Health risks within the working environments of oil and natural gas plants should be covered by the health insurance. Workers should get health insurance against the risk of incurring medical expenses. Health insurance includes insurances for medical expenses, dismemberment and losses from accidents. The employers in these plants should offer health insurance to their employees. For example, the Texas family was recently granted $2.95 million for their problems that they claimed resulted from fracking operations nearby their places of residence. The Parr family from Wise County in Texas claimed in 2011 that Aruba had exposed them to toxic gases, industrial wastes and chemicals that caused health complications. Symptoms of health problems included irregular heartbeat, muscle spasms, open sores and nose bleeds. Life insurance The gas and oil industry death rate is about eight times that of the average industry rate. A number of reasons are behind that, and many of them suggest the deaths are preventable. In Texas, seventy eight percent of fatal accidents were violations of safety. The idea of being safety violations implies that they have been prevented with tougher oversight. Other gas and natural gas sites of increasing deaths are all situated in states that had drilling booms. It was reported that two people died and nine got injured from an oil well explosion in West Texas on Wednesday, 30th April, 2014. Those were two more workers to add to the rising number of deaths in Texas’ oil fields. There has been rise in the number of deaths from accidents within Texas’ natural gas and oil exploration companies. The Houston Chronicle reported that Texas was highest among all the states with 216 deaths in the period between 2008-2012. Employees working in oil and gas sites face potential risks to their life. Due to the risks they face, they should be covered by a health insurance. A comprehensive life insurance benefits in would benefit employees working in Texas high-risk oil and gas sites. A life insurance protects one’s family and the loved ones especially for parents with young children or those whose partners will not be able to provide for the family after their death. In addition, it helps to provide protection for uncertainties that are in life thereby bringing a peace of mind to one’s family. Insurance need for the companies Legal Expense Insurance The increasing regulatory or legal risks also call for the need to adopt liability insurance to help comply with existing regulations. Climate change is leading to new regulatory and litigation risk factors for insurers and companies ranging from the ongoing litigation that is against natural gas companies to the ever evolving greenhouse gas laws and regulations. The increasing regulatory pressure implies that gas and oil companies have to comply. Compliance is not the only challenge since industries also face the damage risk to their image and brand if found to be associated with environmental incidents (The Telegraph). Texas oil and gas companies need to be covered by the legal expense insurance to reduce uncertainty and stress associated with lack of conformity to the legal requirements. It shall provide the company owners and consumers an affordable way to access the system of justice. The consumers and the companies shall be able to exercise their legal rights knowing that their legal expenses are covered for by the insurances. Legal expense insurance also covers for the expenses related to pursuing a company’s or consumer’s legal rights. It is literally more than a mere policy and is viewed as a form of empowerment because one knows that he or she has full access to expense coverage and professional legal counsel when he or she needs it (The Telegraph). Property damage insurance Drilling companies operating within Texas are expanding at a very high rate owing to the increased level of operation. As they acquire more and more assets there is a growing risk of loss that can arise as a result of machine breakdown and destruction of machines out of varied reasons. Most of the machines bought by these companies are heavy capital consumers and this implies that breakdown of these machines would cause massive losses to the companies in a situation where the company has no one to turn to incase of breakdown. This creates a great opportunity for insurance companies to offer their product insurance to the firms. Concentration of very many firms in one area also makes provision of this type of insurance possible since there are many firms affected by this risk. Property destruction may be occasioned by perils such as fire, attacks, burglary among others. The insurance firms should offer coverage that cover all these range of perils. Insurance against workers liability As firms grow bigger is size and employ more workers, the risk of loss arising from malpractices in the firms has increased risk due to employee – employer conflicts. Expansion of workforce to such huge levels usually leads to formation of labor unions which may steer conflicts between the workers and their employees. Moreover, in such large firms a mistake by a worker may lead to such huge losses. This increase in workforce within drilling firms calls for insurance of the firms against losses that may arise from the workers activities. The availability of so many firms in the area make this type of insurance very viable. Environmental Pollution Insurance The other risk associated with activities of natural gas and oil drilling companies is the environmental risk. An insurance cover is needed to offer advice for plant construction and maintenance. During natural gas and oil exploration, traces of fracking fluid remain underground. It has a potential of polluting groundwater in the future and much of it comes back to the surface as wastewater. This wastewater contains hazardous chemicals, naturally occurring radioactive materials as well as metals found in the surrounding soil. The wastewater is pumped into holding ponds where it can leak, settle into the near groundwater, and impact negatively on wildlife. Groundwater contamination poses a risk to the people who live near natural gas and oil drilling operations and depend on drinking water wells. Additionally, contamination of watersheds that provide drinking water for many people in towns and cities far away from natural gas drills poses a significant threat to the health of the people (Hurley, Brannon and Taber, 2014). Fracking has a potential harm to water resources and this endangers the existing economy of Texas. Most drilling activities are done in the rural areas. These are areas where water is used for agricultural production that serves as a main source of livelihood. Water also supports tourism, manufacturing and sport fishing industries. Drilling accidents can occur and they have an impact on these industries (Zuckerman, 2013). The pollution liabilities insurance can cover the pollution risks. It is an environmental pollution insurance that covers all costs related to environmental pollution. They include the costs of cleanup, deaths caused by pollution and liability for injuries. These insurance companies shall help to ensure that in case the companies that cause environmental pollution are deemed bankrupt, the victims of pollution can still be compensated. It shall also help to ensure against changes in regulations that may increase the cost of cleanup (Hutton, 2013). Pollution insurance shall provide funding in case an oil spill that requires a lot of money for cleanup leaks into the environment. The liability policy would provide funds for the cleanup process. It also provides third party coverage when there are allegations that a company released a pollutant. If the pollution contaminates the air supply or public water and affects others, the third party protects the company. Environmental risks posed by the companies can be covered by the environmental insurance. This insurance provides a perfect way of dealing with costly environmental issues. It is a cost-effective approach that gives property owners, contractors and financial organizations the ability to transfer risks of environmental exposures. It serves as a crucial financial asset by enhancing investor confidence, securing a seller’s or owner’s indemnity and providing balance sheet protection (Lang, 2013). An environmental insurance policy provides coverage for body injury and property damage. Damages may include the personal injuries such as medical costs sickness, or damages to natural resources such as groundwater and fish habitat. Damages can also be costs that are incurred to repair or replace another person’s property or for the decrease in the value of the property. It can also provide coverage for the cleanup costs and pay for costs such as removal, investigation, monitoring and treatment of pollution conditions (Lang, 2013). Environmental insurance policies also cover environmental professional liability, contractors’ liability, pollution liability, storage tank pollution liability and transporter insurance. When the companies have appropriate pollution coverage, they are protected against environmental claims such as cleanup costs, pollution abatement and claims of property damage or bodily injury. Environmental pollution insurance, lastly, protects the company in any cases of faulty design or if there is an injury to someone due to an oil spill. Environmental pollution is a risk that has to be covered by insurance (Hurley, Brannon and Taber, 2014) In conclusion, the insurance industry has had a long history working with businesses to help them understand and adapt to the emerging risks. Insurers can be valuable assets in helping natural gas and oil companies to take a successful path that prevents or minimizes the risk. They help reduce risks associated with the natural gas and oil exploration and this would be very beneficial to the Texas natural gas and oil exploration companies. These companies have a number of risks that can be covered with respective insurances. Generally speaking, Texas should be covered with insurances in its booming natural gas and oil sectors to speed up the growth of these companies. It is because insurances cover for costs, damages and enhance environmental stewardship. References Amirbekyan, D., Stylianos, N. (2014). Natural gas odorization monitoring for safety and consistency. Pipeline and Gas Journal. 240 (12). Burrough, B. (2009). The Big Rich: The Rise and Fall of the Greatest Texas Oil Fortunes. New York, NY. Penguin Publishers. Hurley, B., Brannon, R. & Taber, E. (2014). Hydraulic fracturing verdict in Texas state court — Texas family recovers $3 million based on nuisance theory. Retrieved from http://www.lexology.com/library/detail.aspx?g=8116d0e0-c818-46d2-937f-ad7ab98b4f44. Hutton, W. (2013). Natural gas demand, the upcoming knowledge and experience gap. The Intelligence/Human Capital Hurdle. Pipeline and Gas Journal. 240 (4). Lang, J. (2013). Unitization of Oil and Gas Fields in Texas: A Study of Legislative, Administrative, and Judicial Policies. Washington, DC: RFF Press. The Telegraph. (n.d). Share pledge for survival. Retrieved from http://www.telegraphindia.com/1140226/jsp/business/story_18021963.jsp Zuckerman. G. (2013). The Frackers: The Outrageous Inside Story of the New Energy Revolution. New York, NY: Penguin Putnam. Read More