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View Diary: Should New York State Require Frackers to Buy Watershed Insurance? (78 comments)

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  •  It's not about the money (1+ / 0-)
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    Amber6541

    The problem with pollution, especially water-borne pollution, is that its impact ripples out ad infinitum, and is very hard to prove. (Fukushima is perhaps the most dramatic example.)

    Insurance compensates people with money, the only currency it knows. But money doesn't solve the problem of a chemically polluted planet, aquifer, whatever.

    I've been waiting for insurance on coastal properties (likely to be underwater within 30 years, or maybe 50) to become so expensive that no one buys those mansions. It hasn't happened yet, and I doubt it will, because the actuaries aren't going to include worst-case scenarios in their calculations knowing it would make their product too expensive to market.

    •  Water is what the policy should provide (0+ / 0-)

      Not money.

      If the watershed is damaged forever, then what the insurer would have to provide water forever.  They and the drillers will then have strong incentive to be careful.
      And they will have incentives to fix problems that occur.

      And since we shift the burden of proof - we assume all damage comes from a fracking operation - then we don't have to prove it, only rebut attempts to prove something else caused it.  

      We just need to show polluted samples.

      Flood insurance is and isn't a good example. That market is subsidized. There is even a Federal Flood Insurance Program that presumably sells Flood Insurance at an economically (but not politically) irrationally low price.

      And the insurance companies must assume that some governmental help will occur in a major disaster.  But I also think the market will trend in the direction you suggest, gradually making beach front properties too expensive.

      Now - with fracking - we have a generally poorly regulated industry that tries to escape liability through any means possible.  This means they would rather spend $1 on lawyers to obfuscate (I'm sorry, defend) than $2 on extra precautions making their operation sound.

      So the drillers' insurance for damages from fracking is also subsidized - but mostly (and unknowingly) by people who live nearby or downstream whose water supply is at risk and who will have to sue to get it back if its destroyed.  And it is implicitly further subsidized by all of us if there is some really huge disaster.

      So in both cases the cost is 'externalized' - meaning the people who ought to be paying more for insurance are passing the bill onto us.  In Flood Insurance, its more formally subsidized by US Gov.  With fracking, a huge disaster might, eventually, end up in the care of Federal Government (a-la Love Canal, etc.).  

      But as it stands, it's really the neighbors who bear the risk.

      •  But how? (0+ / 0-)
        If the watershed is damaged forever, then what the insurer would have to provide water forever.
        If someone ruins our water supply, how is it physically possible for the insurer to start supplying us with safe water?

        I guess I'm not sure what you mean by this.  Do you mean that we'd get deliveries of free bottled water for drinking and never use our faucets or our showers again?  Or have any hope of selling our houses for even a fifth of their current value?  That would not seem like a fair proposal.

        Economically, I suspect the main problem with this proposal is that insurance only really works as a business model if you can spread risk.  Everyone pays home insurance and a random subset of houses burn down, and the insurance company can pay claims and not go bankrupt.  You're talking about a watershed contamination, where a lot of people would need a claim at the same time; how does the insurance company acquire enough capital in time for that, and stay in business long enough to pay out indefinitely?

        Taking jokes seriously is the exact mirror activity of laughing if someone says they have cancer. --jbou

        by Caj on Sat Aug 24, 2013 at 12:53:50 PM PDT

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