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CEA Says It’s Seen No Fracking-Related Earthquake Claims

By | April 8, 2015

The California Earthquake Authority, the state-run insurance pool that is the primary source of residential earthquake coverage in the Golden State, says it hasn’t received any claims that assert human-caused activity like hydraulic fracturing or deep-well injection were the cause.

That statement was offered in response to a letter from Assemblyman Scott Wilk, R-Santa Clarita, echoing local concerns about a plan approved by the Santa Clarita Valley Sanitation District 18 months ago to inject a series of deep wells with excess chloride brine extracted from the Santa Clara River. The plan, which would allow the district to comply with orders from the Los Angeles Regional Water Quality Board, has raised a number of local concerns, including whether it would make local properties ineligible for earthquake coverage.

The simple answer, according to CEA Chief Executive Officer Glenn Pomeroy, is no.

The presence of a deep-well-injection site near a property does not affect the property’s eligibility to or insurability under a CEA earthquake policy. In addition, the presence or absence of DWI sites is not a factor in determining the premium rate for a CEA policy.

Because human-activity-caused ground movement is not an insured peril under a CEA earthquake insurance policy, DWI activities do not affect the risk of loss for the sole peril that is insured against under a CEA policy and hence do not affect eligibility or price.

Though the deep-well injection project that prompted the letter is not related to hydraulic fracturing processes for oil and gas extraction, concerns about potential links between fracking and earthquakes have grown in recent years. In an FAQ on the U.S. Geological Survey’s website, the USGS notes:

To produce natural gas from shale formations, it is necessary to increase the interconnectedness of the pore space (permeability) of the shale so that the gas can flow through the rock mass and be extracted through production wells. This is usually done by hydraulic fracturing (“fracking”). Fracking causes small earthquakes, but they are almost always too small to be a safety concern. In addition to natural gas, fracking fluids and formation waters are returned to the surface. These wastewaters are frequently disposed of by injection into deep wells. The injection of wastewater into the subsurface can cause earthquakes that are large enough to be felt and may cause damage.

Pomeroy said there are any number of other potential “human activities” that could be implicated in a destructive tremor, including blasting tunnels and mineshafts, accidental explosions or even terrorism. But to date, the CEA is “not aware of any claims having been submitted…in which human activity (including, but not limited to, DWI) are thought to have caused or to have contributed to damaging ground movement.”

Where human activity is considered a viable proximate cause of earth movement, he noted that “the injured party can seek legal recourse against the person or entity that caused that loss.” Such claims would not be covered under a CEA policy, because they would fail to meet the policy’s definition of an “earthquake,” Pomeroy wrote.

The CEA writes more than 80 percent of the residential earthquake policies in California, which is estimated to hold more than two-thirds of U.S. earthquake risk.

Topics Catastrophe Natural Disasters Claims

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