Insurance challenge: Farmers and coal seam gas mining

Insurance challenge: Farmers and coal seam gas mining | Insurance Business Australia

Environmental

Insurance challenge: Farmers and coal seam gas mining

“Be more proactive,” says farmer to insurance industry

Environmental

By
Daniel Wood

In recent years, the issue of coal seam gas (CSG) mining, its threat to farmland and concerns around the possible lack of adequate public liability insurance have received increasing attention from industry stakeholders.

Insurance Business has covered these issues from time to time but, in September, EOS Data Analytics (EOSDA) and a Queensland farmer brought these concerns back into focus.

In an email to IB, the California headquartered global firm that provides satellite imagery said it was helping farmer Zena Ronnfeldt (pictured above) investigate any links between CSG mining, soil subsidence and changes in soil moisture on her land.

Farmers like Ronnfeldt have raised concerns about the impact of CSG mining on their land and crops. Some industry sources suggest this is a legal grey area where farmers face insufficient protection, including an absence of insurance covers, despite the possibility of serious damage to their land and livelihoods.

IB consulted with Ronnfeldt, Arrow Energy and Kylie Stephens, an agriculture sector specialist with PSC Insurance Brokers, to try and build a picture of some of the risk management and insurance issues.

CSG and soil moisture

Soil moisture and drainage are key issues for farmers and can dramatically impact profitability.

EOSDA said their investigation (see video below) using satellite images found that since the arrival of CSG mining to the area, “soil drainage was taking longer each year, forcing Zena to dig drainage channels.” The firm’s scientists, said a release, also noticed “a change in moisture accumulation due to soil subsidence.” 

The firm said that while its satellite imagery “most likely” established changes in soil moisture data, this data wouldn’t be sufficient proof in court for a direct link to CSG mining.

What insurance coverage is available?

IB asked Ronnfeldt if there are currently any insurance offerings that cover these impacts to a farmer’s land?

She said, to the best of her knowledge, “there is no insurance available from any source that would cover damage resulting from land subsidence.”

Ronnfeldt said Arrow Energy does actually facilitate “insurance like indemnity.” However, she had no confidence in this coverage and said “there is a significant insurance issue with the Arrow Energy CSG project in relation to legal liability insurance.”

“It would be appropriate for the insurance industry to be more proactive in educating its clients as to the rights they may be signing away regarding [this] legal liability insurance,” said Ronnfeldt.

What’s the view of Arrow Energy?

IB consulted with Arrow Energy to find out more about any coverage. A spokesperson provided a link to a public liability insurance agreement:

The release – and the Arrow spokesperson – said that this liability insurance agreement was developed by the energy industry together with the government and other stakeholders, including the Insurance Council of Australia (ICA), when a “major insurer” withdrew its third-party liability coverage for farmers with CSG mining on their properties.

In June 2020, IB covered IAG’s decision to no longer offer liability protection in the policies of customers with operational CSG or shale gas activities on their properties.

Time for the insurance industry “to join the dots”?

However, some farmers, like Ronnfeldt, don’t think the industry response to this coverage issue is adequate.

“I respectfully suggest that now may be time for the insurance industry to join the dots on subsidence and the possibility of sinkholes,” she said to IB.

Ronnfeldt said there are also implications for farmers who don’t have mining infrastructure on their land but are still potentially impacted by “deviated wells agreements.” These are wells drilled at angles away from vertical.

In 2021, Ronnfeldt alleged that Arrow Energy, without her agreement, drilled diagonally underneath her land from a neighbouring farm. After many months of investigation, the Queensland government fined Arrow Energy $1 million for breaches of land access rules.

Moment of truth: how many insurance claims?

Insurance claims are regarded by many insurance brokers and industry professionals as the true test of any coverage.

IB asked the Arrow spokesperson if they knew of any claims under the new indemnity clause?

“I can confirm that we haven’t received any claims or requests for compensation under the clause,” said the spokesperson. “Additionally, to the best of our knowledge, other CSG companies haven’t received any such claims either.”

He said the indemnity clause “simply provides added assurance to both landholders and their insurers, allowing landholders to maintain their third-party public liability insurance coverage for their properties without concern.”

Ronnfeldt also said she didn’t know of any claims.

She also doubted that any landholders bound by signed agreements with CSG mining companies would be able to talk publicly about any claims if they had made them.

“No claims yet is not evidence that there won’t be a problem at some stage,” she said.

Ronnfeldt was sceptical about protections provided under the Mineral and Energy Resources Act and didn’t see how the indemnity clause would leave landholders “without concern” regarding their third-party liability coverage.

She said, to the best of her knowledge, “farm third-party legal liability insurance policies effectively exclude all legal liability relating to CSG mining activities.”

She said this approach, limiting legal liability, also applies to wind and solar activities on farmland.

Ronfeldt said farmers like herself are now exposed to large legal costs and third party risks they didn’t have before CSG mining. 

The Commission said that landholders in this “intensively farmed land” were raising concerns about legislative protections if CSG subsidence issues financially impacted their farming businesses.

“The potential for impairment of farm drainage is the key concern for landholders,” said the report. “If effective drainage is impaired through landform change resulting from CSG-induced subsidence there will be some (potentially high) reduction of productivity.”

In the coming days, IB will publish the view of insurance broker Kylie Stephens, an agriculture sector specialist, on the possible insurance and risk implications of CSG mining.

Are you a broker working with farmers or energy companies? Please tell us your views on any CSG insurance issues below

Related Stories

Keep up with the latest news and events

Join our mailing list, it’s free!