Repost from Business Insurance

Thoughtful well placement could mitigate property risks from fracking quakes

Fracking activities are contributing to the rising number of earthquakes in Oklahoma and other states, but the risks to property can be reduced, according to a geological expert.

Hydraulic fracturing, commonly known as fracking, is an oil and gas production technique that involves injecting water under high pressure into a bedrock formation to increase the flow of oil and gas to a well from petroleum-bearing rock formations.

The injection of fluids in fracking and other activities is one of the contributing causes to increased seismicity, Bill Leith, senior science advisor for the U.S. Geological Survey based in Reston, Virginia, said at the National Association of Insurance Commissioners 2015 fall meeting in National Harbor, Maryland on Thursday.

“The phenomena of earthquake triggering is well-established,” he said. “And there have been many cases in which earthquakes have been turned on and turned off by beginning and ending injection.”

Risk management concepts that can be implemented to minimize the risk posed by fracking-induced quakes includes avoiding fluid injection in known fault areas and locating injection wells away from population centers and critical facilities, Mr. Leith said.

“The risk from earthquakes can be minimized by taking various actions and by thoughtful decisions about permitting,” he said. “Risk is the thing that we can control by our own actions, by taking steps to mitigate the hazard.”

Fracking is rarely the cause of “felt” earthquakes, but fracking activities have been found responsible for quakes up to magnitude 4.5 in Canada during shale gas recovery, Mr. Leith said. The Richter scale assigns a number to quantify the magnitude of energy released by an earthquake.

About 150 million Americans live in areas exposed to natural quake hazards — double the number of Americans who lived in quake-vulnerable areas in 1990, according to the U.S. Geological Survey.

Oklahoma has experienced a “remarkable” increase in the number of quakes in the 3.0 or greater range, he said, with recorded quakes at this level soaring from 109 in 2013 to 585 quakes in 2014.

“The increase in the seismicity implies that larger earthquakes are possible,” Mr. Leith said. “That is increasing the hazard. The construction in Oklahoma is at a higher risk, and we’ve seen a higher risk of damage to houses in the suburbs of Oklahoma City and up in the northern part of the state as a result of these small to moderate earthquakes.”

In October, Oklahoma Insurance Department Commissioner John Doak required insurers to notify their policyholders about their coverage of earthquakes arguably or actually resulting from fracking activities. Some insurers in the state have amended their policy forms to cover damages resulting from fracking, others have waived the man-made earthquake exclusion and a third group still excludes fracking-induced quakes, creating significant confusion in the marketplace, according to the bulletin.