‘Big on the spin, light on the details’ coal seam insurance clause, says lawyer, in attempt to protect farmers
A new insurance clause is touted by the coal gas industry as a solution to uncertainty over risk and liability, but landowners and lawyers say farmers are worse off.
- Queensland GasFields Commission publishes insurance indemnity clause to help protect farmers from CSG risk
- It follows a major insurer who announced last year that it would no longer offer liability insurance to property owners who host wells and infrastructure.
- Landowners and lawyers say it’s not even the playground for farmers forced to negotiate with gas companies yet
Last year Australia’s largest insurer, IAG, owner of leading rural insurer WFI, announced that it will no longer provide liability insurance for property owners which hosted coal seam gas (CSG) wells and infrastructure.
This week, the Queensland Independent GasFields Commission (GFCQ) announced a new indemnity clause to help clarify concerns about insurance.
“What this means is that landowners who host gas activities, including infrastructure on their properties, will be able to continue to access general insurance policies for agricultural risks,” said the interim CEO. from GFCQ, Warwick Squire.
Mr Squire said the clause could be inserted as an amendment to existing agreements between farmers and gas companies.
He said this would protect landowners from any risk of liability exposure related to CSG’s business, but would not always be required by insurers.
Jason Johnston, Toowoomba’s insurance broker, participated in the negotiation of the new clause.
“The current indemnity clause is a good document,” said Mr. Johnston.
But he said there would be additional legal fees that could fall on the landowner.
The GFCQ said state laws require gas companies to cover costs to landowners associated with resource activity.
“The landowner should not be disbursed as a result of any further negotiation associated with this clause,” Squire said.
The Australian Petroleum Production and Exploration Association, a leading industry body, said landowners should speak to their insurer if they have concerns.
“Gas companies must reimburse landowners for reasonable and necessary costs of legal advice incurred in negotiating land access agreements,” said APPEA CEO Andrew McConville.
The future risk of the CSG still uncertain
Zena Ronnfeldt, who farms west of Dalby in southern Queensland, said the indemnity clause was only effective when the gas companies were up and running.
“It really does nothing to resolve the accountability crisis we all face when gas business ends,” Ms. Ronnfeldt said.
Ms. Ronnfeldt recently proposed a national levy ensure adequate long-term protection for farmers.
The GFCQ acknowledged the concerns and said it continues to work on a long-term risk solution after gas development ends.
APPEA said there was a range of regulatory options available to deal with future risks.
“We are working with leading agricultural organizations, insurers and the Queensland government to clarify arrangements after gas development,” said APPEA’s McConville.
Dalby’s landowner attorney and special counsel for Shine Lawyers, Peter Shannon, was more scathing when the new compensation was announced.
“We don’t know which companies have accepted which coverage.
“We do not know under what circumstances this proposed indemnity clause will be accepted.”
APPEA said the clause had the support of the Insurance Council of Australia on behalf of the industry at large.
“The clause is being used by some members of APPEA for new land access agreements,” McConville said.
“The clause can also be applied to existing agreements if the insurer so requires and with the agreement of the landowner and the developer.”
Mr Shannon said landowners had “one hand on the back”, forced to enter into trade deals with the gas companies that held the rights to the resource beneath their lands.
The only recourse for farmers is to file a complaint with the land court at their own expense.
‘In 20 years we may not have coverage’
Mr Shannon also said gas companies are structured to protect their parent companies.
In order to level the playing field for farmers, Shannon said there needs to be a business incentive.
“You have to have the same business interest as the other party to achieve mutually beneficial results,” he said.
“If we’re not 100% compensated, we have to have the money to make us take the risk with it.
“The risk [is] that in 20 years we may not have coverage. “