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Insurance giant pulls rug from under farmers over coal seam gas risks

Statewide

Australia’s largest insurance company says it will no longer cover farmers for public liability if they have coal seam gas (CSG) infrastructure on their property.

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The development has made farmers fearful they will have to cease farming altogether if they cannot get cover.

Insurance Australia Group (IAG) has confirmed its major rural and regional insurer, WFI, will join its other subsidiary, CGU, in no longer providing the coverage if there is “unconventional gas” operations on properties.

IAG said for customers who “have operational CSG or shale gas activities or infrastructure on their property, such as a coal seam gas well, we will be unable to provide liability cover as part of their insurance policy”.

IAG said the company does not specialise in mining and resources operations and the change will affect existing customers when their policies come up for renewal.

AgForce Queensland said that is as soon as the end of this month.

Queensland farmers said they were fearful the change could expose them to liability risks and could extend to other risks associated with CSG, such as the potential for groundwater contamination.

It is understood the Queensland Government has been holding talks with insurers, mining industry representatives and AgForce, in an attempt to resolve the problem.

‘Inadequate insurance for groundwater contamination’

ABC News has obtained legal advice provided to the New South Wales Government in 2014, warning that insurance for CSG in Australia was “inadequate” and measures were needed to address the potential cost of contamination risks.

AgForce’s Queensland chief executive Michael Guerin said farmers were deeply concerned.

“Producers, like any business, can’t operate without insurance,” Guerin said.

He said while some other insurers were providing cover for now, there was a risk they would pull out of the sector or jack up prices.

“All of those dangers are there,” he said.

“There’s a danger that insurance premiums will go up [and] there’s a danger insurance will be harder to get.”

AgForce Queensland said insurance being withdrawn threatened the coexistence of unconventional gas and agriculture.

He said there had been a lot of hard work in devising complicated agreements to allow the two industries to work together over the years.

“If part of the insurance industry starts withdrawing cover, it puts that at risk, and that’s the core of the concern at the moment,” Guerin said.

‘New laws need to force miners to foot the bill’

Anti-mining, pro-agriculture group Lock the Gate said the gas industry should be made to compensate farmers.

Spokesman for Lock the Gate and former mining consultant, Rick Humphries, said farmers should not be the ones facing the risk.

“The onus is on the gas industry to get insurance products that cover their assets and protect the farmer,” Humphries said.

“The farmer shouldn’t have to run around and look for insurance products.

“But the way that the system has worked is that the Government has knowingly allowed gas industry to enter into contracts with farmers that expose farmers to a whole range of business and natural resource risks around water and land contamination.”

He said laws needed to be changed to force the companies to act.

“The whole mining and gas model is all about transferring as much risk away from the shareholder,” he said.

“The companies won’t willingly step up and do this because it’s an additional expense, and they have to take on the risk.

“Governments have to intervene to force mining and gas companies to take out insurance products, or demonstrate they [have] adequate coverage that will compensate landholders.”

‘We’re aware of the problem’

The legal advice commissioned by and provided to the New South Wales Government in 2014 said there were parts of the CSG industry that were not covered by insurance.

Commercial lawyer with Hicksons Lawyers, Professor Bernard Evans, advised the Government to set up financial assurance funds and consider levies to pay for the anticipated risks of CSG, including environmental damage.

“CSG risk in New South Wales [and Australia generally] is under-insured and in some cases not insured at all,” Professor Evans said.

The Queensland Government said the issue had been referred to Queensland’s Independent GasFields Commission.

In a statement, the commission said it was aware of an issue with one insurer.

“The commission has been working with key landholders and industry stakeholders and that work is ongoing,” the statement read.

“If landholders have any concerns regarding their coverage they should contact their broker to check the circumstances of their particular situation.”

The Australian Petroleum Production and Exploration Association (APPEA) said the change to coverage was a decision made by only one company and landholders would be able to get public liability coverage from competitors.

“We are confident any concerns in relation to gas activities can be resolved,” a statement from the organisation said.

“This issue only relates to very unlikely scenario where farming activities impact gas facilities.”

– ABC / Exclusive by George Roberts

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