The EPA sued an oil and gas company the other day for alleged Clean Air Act violations, proving two things:
1. The Trump administration’s EPA, while seemingly more business-friendly today than it might have been under President Barrack Obama, nonetheless remains resolute in its pursuit of purported polluters.
2. The need for the right kind of environmental insurance coverage is just as great as ever, if not more so considering indications that the EPA’s case is the first of many more to come against oil and gas companies working in Colorado and elsewhere.
At the center of the case are storage tanks that, according to the EPA, emitted excess levels of volatile organic compounds, or VOCs, which form ground-level ozone. Air pollution, in other words.
According to the Denver Business Journal, the state health department in 2015 sent warning letters to 10 oil and gas companies about equipment at 152 sites leaking VOCs and methane gas.
Insurance policies that cover “sudden and accidental” events or an oil or gas well blowout don’t cover the sort of issues that the company sued by the EPA is facing.
There are policies that do, however, kicking in to help operators pay for and recover from events that are gradual in nature, including the emission of hazardous waste materials.
Such policies come with a separate claims limit so that your general liability policy is untouched.
Perhaps most importantly, insurers selling these policies also typically offer coverage for civil fines and penalties. Be aware, however, that some insurers will pay those penalties only if there’s been bodily injury or property damage, while others will cover only the remediation or cleanup costs, but not punitive damages.
These policies may also include a risk-engineering review of spill prevention plans before an emergency arises.
Environmental policies also can pay the cost of responding to some of the negative publicity that often accompanies oil and gas industry accidents. That includes the ability to recover the cost of hiring a public relations or crisis communications firm.
The oil and gas business has long involved high-risk exposures, including those found in transportation and storage. That’s why the industry works so hard to minimize potential losses, and why with the right insurance policy in place, companies can breathe a bit easier.
That said, there are many different environmental insurance policy forms available in the marketplace. That means the coverage offered can vary a great deal, so, as we’ve said before, premiums, deductibles and limits alone are no way to judge a policy. And, of course, make sure you’re working with an insurance broker you can trust.
Jeff Parent is an Insurance Advisor at CCIG who has worked with oil and gas clients since 1999. He can be reached at email@example.com or at 720-330-7918.Back to Resources