1 By: Hank Mittelhauser, PH.D. 3 Brief overview of the growth of - - PDF document
August 2 gust 28, 2 2013 13 Surdy Surdyk & & Baker Baker 1 Intro and Speaker ID (Hopp) Environmental Concerns and Requirements of HFRA (Mittelhauser) Permit and Hearing Procedures Established by HFRA (Kurfirst)
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August 2 gust 28, 2 2013 13
Surdy Surdyk & & Baker Baker
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Intro and Speaker ID (Hopp) Environmental Concerns and Requirements of HFRA
(Mittelhauser)
Permit and Hearing Procedures Established by HFRA
(Kurfirst)
Insurance Trends and Coverage Issues in General
(DiUbaldo)
Insurance Requirements Mandated by HFRA and
Products Presently Available (Jung)
Q & A Session (Hopp and Speakers)
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By: Hank Mittelhauser, PH.D.
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Brief overview of the growth of hydraulic
Environmental concerns and requirements of
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Source: http://cnx.org/content/m41725/latest/graphics7.png
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Source: Energy Information Administration based on data from various published studies. Updated: May 9, 2011
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Support Public Opposition
Addressed in HFRA
Permitting - Section I-30 through Section I-65 Chemical disclosure – Section I-77 Protection of water supply wells – Section I-25(a)(3)
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Methane
Source: http://media.salon.com/2012/04/fracking_rectangle.jpgWater Quality Addressed in HFRA
Fueling tank releases – Section I-70(e)(1)
Casing integrity – Section I-70(d) and Sections (1-18)
Failure during operations – Section I-75(a)
Produced water storage – Section I-75(c)
Water testing – Sections I-80, 1-83, I-5
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Earthquake Damage (Invalid for Fracturing process)
Air Quality (Potential Issue)
Source: http://www.nyelectedofficials.org/wp-content/uploads/2012/05/Fracking- Site1.pngAddressed in HFRA
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Diminished Property Values (Potential Issue)
Source: http://static.guim.co.uk/sys-images/Environment/Pix/columnists/2011/11/2/1320259785691/Fracking-for-shale- gas-in-006.jpgTraffic (Valid)
http://switchboard.nrdc.org/blogs/rhammer/fracking-1.jpg95(b)
Addressed in HFRA
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This is good legislation with widespread support from
industry, unions, and prominent environmental
The legislation is particularly strong in the
requirements to follow API Guidelines, permitting, and pre-fracturing baseline testing.
The IDNR needs to develop more specific regulations
in many areas including minimizing traffic impacts, development of seismic guidelines with the Illinois Geological Society, and specifications of analytical methods, detection limits and sampling protocols.
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By Leonard S. Kurfirst Surdyk & Baker
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Every permit applicant shall first register with the
IDNR at least 30 days before applying for a permit.
Registrants must disclosure all “serious violations”
within the previous 5 years.
Proof of “at least” $5,000,000 in insurance
coverage must be provided.
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Application fee is $13,500 with most going to IDNR
for funding of personnel and resources necessary to administer HFRA.
A severance tax between 3% and 6% of the value of
the oil and gas produced will be applied.
A tax reduction of .25% will be given when a
minimum of 50% of the total workforce hours at a site are performed by Illinois construction workers.
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Conventional oil and gas production is exempt. Required Permit Information
within the fracking fluid
An operator must obtain a separate permit for each
well at a well site or pad.
Each permit shall have a $50,000 bond or a blanket
bond of $500,000 for all permits.
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Handling and storage of flowback Well site safety procedures Containment Well casings and cementing Traffic management
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HFRA expressly states that if a proposed fracking
site is located within the limits of any city, village
consent before a permit can be issued.
It is not necessary to obtain consent from a county
the public hearing.
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Within 3 days of permit application filing, notice must
be provided to all owners of real property within 1500 feet of well site and to county.
Public comment period begins 7 days after IDNR
receives permit application and lasts for 30 days if no hearing and up to 45 days with a hearing.
Anyone may file a comment and the IDNR may
request applicant to respond.
Hearing can only be requested by a person,
government agency or county which might be “adversely affected.” No frivolous complaints.
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All parties who might be adversely affected can
Contested case provisions of the Illinois
Administrative Procedures Act apply. There will be a hearing officer and a transcript.
Expert testimony is permitted, as is “reasonable
cross examination of witnesses.
IDNR’s approval or denial of permit considered to
be a “final administrative decision subject to judicial review.”
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Baseline water testing must be performed as part
and 30 months.
Three baseline water samples for each source
within 1500 of well site.
Baseline sampling includes wells, surface and
groundwater sources.
7 Days to Report Evidence of Pollution
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Presumed Liability for Polluted Water If:
30 months later.
Standard for Rebuttal
Investigations
water source has been contaminated.
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Remedies
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Civil Sanctions
$50,000 for the violation and an additional $10,000 for each day it continues.
setback is subject to a fine not to exceed $100,000 for the violation and an additional $20,000 for each day it continues.
Actions may be initiated by IDNR, Attorney General,
State’s Attorney, Citizen Suits.
Criminal Sanctions Can Also Apply.
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Most data will be online at IDNR website being
built.
IDNR registration forms within 90 days of HFRA
enactment.
Permit application form expected from IDNR
around January 2014.
Joint Committee on Administrative Rules (JCAR) –
Final Rules unlikely before April.
IDNR permit decisions within 60 days of filing.
First set June of 2014?
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2 years after first permit issued, and every 3 years
thereafter, IDNR must prepare a report re: impact
The IDNR will also chair a task force with
representation from industry, government and environmentalists.
Task force must recommend by September of 2016
whether more regulations are needed.
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By Robert W. DiUbaldo Edwards Wildman
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Leasehold Owners, Energy Companies, Landowner Operator and Drilling Sub-Contractors Company Performing Hydraulic Fracturing Well loggers Construction Contractors Electricians Geophysical Consultants Rigs and equipment rental/leasing companies Waste Management Companies Pipeline contractors Truckers (water delivery and waste hauling) Chemical suppliers for fracking fluids
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Property/Environmental damage Bodily injury/Medical monitoring Nuisance and trespass claims Diminution in nearby property value Putative class actions Alleged regulatory or administrative violations Securities class actions Citizen Actions “Disclosure” litigation
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CGL Commercial property Environmental/pollution Operators’ extra expense (control of well) Workers’ compensation Homeowners Commercial trucking/auto/cargo E&O D&O
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Trigger and causation Aggregation and allocation Indemnification and other insurance Pollution exclusions Compliance with notice requirements Coverage for injunctive relief, governmental
remedial directives, civil fines and penalties
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Willis report: Certain U.S. insurers are now including exclusions
for fracking activities in their policies, in light of pricing difficulties.
Milliman actuarial study: Analyzed various disaster scenarios
and concluded that a fracking-related accident would far exceed liability limits. Urged regulators to require companies to have sufficient insurance in place to respond to claims.
July 2012 Advisen Report – Major U.S. insurer won’t cover
cover” risks arising from the drilling process.
Demand, however, is very much present and policies are being
written, as will be addressed by Dave Jung.
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Warren Drilling Co. v. Ace American Ins. Co., et al.,
Warren Drilling was sued by property owners who
lived near a fracking well.
Plaintiffs alleged that fracking fluids and chemicals
contaminated their water supply.
Lawsuit settled, and Warren Drilling brought suit
seeking defense costs and indemnity under a CGL policy issued by ACE, and also sought indemnification from EQT, the well owner.
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Policy excluded coverage for BI/PD caused by pollutants, but
insured argues that Energy Pollution Liability Extension (EPLE) and Underground Resources and Equipment Coverage (UREC) provide coverage.
EPLE endorsement reinstates coverage for a pollution incident,
but only if the discharge was:
discharge and reported within 60 days.
Did insured expect/intend the fracking fluid to be discharged
into the ground water?
Was discharge of the pollutants abrupt and instantaneous?
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By David Jung Catlin Insurance
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Requires Pollution Insurance
Pollution or Diminution includes:
III groundwater Significance of Rebuttal Presumption
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Bodily Injury, Property Damage and Cleanup Costs
satisfied for notice, prior Insurer approval, etc.
Reimbursement of the IEPA for costs associated with investigation and
cleanup
Costs to temporarily or permanently replace a drinking water source
Costs for well abandonment, plugging or replacement
Civil or Regulatory Fines / Penalties ($50,000 + $10,000 / day)
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Review pollution insurance coverage terms and
conditions carefully:
Request enhanced coverage
Require subcontractors to maintain pollution
insurance
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Policy is for the drilling site - typically purchased by
property owner or lease operator.
Coverage can include“pre-existing”and/or newly
created “operational” pollution.
Covers Bodily Injury, Property Damage and Cleanup
Costs caused by the pollution.
Claims Made coverage only. Cleanup Costs include investigation, monitoring,
remediation, containment, treatment, neutralization
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Sought by those who are actually performing the
work.
Provides coverage for Bodily Injury, Property Damage
and Environmental Damage to 3rd parties.
Cleanup Costs include investigation, monitoring,
remediation, containment, treatment, neutralization
Can be either Claims Made or Occurrence Coverage.
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The opinions expressed by the speakers are their own and do not reflect the opinions of the companies or firms with which they are affiliated. None of the speakers is giving legal advice specific to any website participant. If you have any questions regarding circumstances that you may be experiencing, you should consult with a qualified attorney, consultant or insurance professional.
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an engineering firm, developing environmental data acquisition programs, supervising analytical testing, providing hazardous waste management consulting, and management of large scale remediation projects. In 1974, Dr. Mittelhauser founded Mittelhauser Corporation. The Corporation focused on environmental control processes for the synthetic fuels industry, primarily extraction of gases and liquids from shale and coal gasification. Since 1980, Mittelhauser Corporation and subsequent entities he has worked with, have specialized in helping private industries minimize the financial impact of implementing requirements of the Resource Conservation and Recovery Act (RCRA), the Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA), the Superfund Amendments and Reauthorization Act (SARA), and state lead remediation projects. Hank provides expert witness testimony
disposal practices that have led to soil and water contamination, and alleged human health impacts. He also advises buyers and sellers of real estate on potential environmental liabilities associated with real estate transfers. Hank is currently the co-chairman of the ASTM Focus Group charged with developing Standards for Site Monitoring during hydraulic fracturing.
Ph.D., Chemical Engineering, 1966 Northwestern University, Evanston, Illinois M.S., Chemical Engineering, 1963 Northwestern University, Evanston, Illinois B.S., Chemical Engineering, 1962 Notre Dame University, South Bend, Indiana HankM@st-ma.com www.st-ma.com 47
Len Kurfirst is a partner at Surdyk & Baker. As counsel for class action, toxic tort, environmental, product liability and commercial litigation, Len has represented a wide variety of clients including chemical corporations, manufacturers and trade organizations. He has over 25 years of experience litigating complex cases in numerous jurisdictions throughout the United States. Len is listed in “Chicago’s Top Rated Lawyers” for Environmental Law, Product Liability and Litigation. He is an author and frequent speaker on issues related to his practice and has been quoted in both print and internet publications
Len’s article “Fracking Comes to Illinois,” co-written with Colin O’Donovan of Edwards Wildman, can be found in the August 2013 edition of the Illinois Bar Journal.
lkurfirst@sbchicago-law.com www.surdyk-baker.com 312-924-2836
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Rob is an attorney at Edwards Wildman Palmer, whose practice areas include insurance, reinsurance and commercial litigation and arbitration. He regularly counsels and represents U.S. and international insurers, ceding companies, reinsurers, and retrocessionaires on matters involving complex claims, coverage and regulatory issues, and has litigated and arbitrated a wide variety of insurance and reinsurance disputes involving many different products and lines
business. He also represents third-party administrators, brokers, and managing general agents and underwriters in various matters related to their business. Rob has been recognized the past three years as a "Rising Star" in the areas of insurance, civil litigation and alternative dispute resolution by New York's and New Jersey's Super Lawyers' publication.
rdiubaldo@edwardswildman.com www.edwardswildman.com
212.912.2881
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David Jung is currently the Assistant Director of Catlin Group’s Environmental underwriting department for U.S. operations. He has 26 years of experience in the Environmental Insurance Industry and has held various positions in all underwriting and management aspects of environmental underwriting operations for 4 major insurance companies, including all casualty and environmental insurance products.
Masters degree in Geology and from Illinois State University with a Bachelors degree in Geology. He is a certified Continuing Education instructor in four states for environmental liability insurance and has taught courses in Ohio, Minnesota, Missouri and Texas.
David.Jung@catlin.com www.catlinus.com
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Tony Hopp is a partner in Litigation Department of Edwards Wildman Palmer, LLP and Co-Chair of the firm's Product Liability/Mass Tort Practice Group. He represents clients in complex commercial, environmental and mass tort matters. Tony has been named a Leading Lawyer for Real Estate, Construction & Environmental work by the Leading Lawyers Network. Tony has been named a 2013 Top Rated Lawyer in Commercial Litigation by the ALM.
ahopp@edwardswildman.com www.edwardswildman.com 312-201-2537
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