Chief Scientist & Engineer calls for tougher insurance regime for CSG industry

30 May 2014

NSW Chief Scientist & Engineer Mary O'Kane has recommended the State Government strengthen industry insurance requirements to guard against possible environmental damage from CSG activities.

She has also recommended the NSW Government consider establishing an environmental rehabilitation fund to address unforeseen or long-term environmental impacts and remediation. 

Professor O'Kane, who is continuing her independent review of CSG activities in NSW, says stricter insurance requirements are needed.

"CSG extraction is a relatively new industry in NSW and it is one that is largely under-protected," Professor O'Kane said.

"There is no standard approach to insurance coverage within the CSG industry, and the take-up of coverage by operators is uneven at best.

"There is also presently no mechanism to address unforeseen and/or long-term environmental impacts attributed to gas extraction – and that is why I have recommended the Government consider establishing an environmental rehabilitation fund, similar to that set up by the WA Government for its mining industry," she said.

The research – undertaken for the Review by Hicksons Lawyers and Piper Alderman – raised other issues, including:

  • a lack of strict insurance requirements on the relatively new but fast-growing industry has left it under-insured
  • third party insurance taken up by companies does not protect the insured, nor does it extend to natural resource damage
  • there is no legislative requirement for companies to take out insurance
  • the requirement for companies to provide financial assurance is at the discretion of NSW Trade & Investment
  • security deposits typically only cover the cost of on-site rehabilitation at the cessation of operations, not beyond the tenement or any long-term impacts
  • comprehensive pollution legal liability insurance is now available in the market which covers pollution and natural resource damage on and off site
  • the Western Australia's Mining Rehabilitation Fund  would be a good model for government to pursue in the form of a CSG rehabilitation fund to maximise coverage for long term and unforeseen environmental impacts
  • strengthening the environmental risk assessment of projects at application stage should be given appropriate consideration

Professor O'Kane's report to Government, "Environmental risk & responsibility and insurance arrangements for the NSW CSG industry", can be downloaded here.

The papers by Hicksons Lawyers and Piper Alderman can be viewed here.