Broker view: How to help farmers with coal seam gas risks

Broker view: How to help farmers with coal seam gas risks

Broker view: How to help farmers with coal seam gas risks | Insurance Business Australia


Broker view: How to help farmers with coal seam gas risks

Who would compensate farmers for a catastrophic event?


Daniel Wood

“I often wonder if a catastrophic event was to occur, or the gas company goes broke, where is the farmer left in that scenario?” said Kylie Stephens (pictured above).

Stephens is a senior account manager with PSC Insurance Brokers (PSC). The Darwin-based broker specialises in coverages for the agriculture sector and agreed to answer questions about the farming risk and insurance implications of coal seam gas (CSG) mining.

Farmers like Ronnfeldt have raised issues about the impact of CSG mining on their land and what they say is the lack of adequate insurance cover or alternative channels for compensation.

A new indemnity clause

This agreement, said the spokesperson, was a response to insurers refusing to provide public liability coverage for farms with CSG infrastructure on their land. The indemnity clause allows these farmers to get public liability cover for farming activities with insurers but leaves compensation for any land damage from CSG mining to the energy industry.

However, some farmers, like Ronnfeldt, say they are already seeing negative impacts of CSG mining on their land but have not received compensation.

Stephens from PSC said she didn’t “yet” have any farming clients with CSG mining issues but was broadly across this issue.

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Her responses suggest serious issues for farmers around the possible legal uncertainty of the industry’s CSG indemnity clause. Stephens was also worried about the legal costs that could be imposed on farmers who pursue compensation.

A stronger commitment from CSG energy companies

She suggested that a solution would be a commitment from gas companies “that they will support and indemnify the farmers in terms of their legal liability connected to CSG.”

Stephens also thought the government could support farmers who are lobbying for a gas industry levy. She said that would provide a pool of funds for possible compensation to farmers for land damage if the energy company concerned went bust.

Farming insurance was already hard to get

Stephens started by explaining some background to today’s CSG mining risks issues impacting Queensland’s farmers.

“When IAG pulled cover for public liability for farmers back in 2020, if farmers had CSG infrastructure on their property it was rather alarming,” said Stephens. “It had the potential to cease farmers from operating all together if they were unable to gain liability cover for their farm.”

She said farming- and agriculture-related risks are in a far more saturated market than general business risks. Even without the added complication of CSG mining, Stephens suggested that it was already tough for farmers to get quality public liability coverage for their businesses.

“As soon you mention a farming or ag related risk insurers will likely comment that they don’t have appetite for the risk,” she said. “While this frustrates brokers and our clients, we need to understand insurers who offer cover for liability farming risks do not specialise in underwriting CSG, mining and resources liability.”

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Stephens said when insurers pulled out of covering CSG risks they acted ethically “and in the best interest of those who were or thinking of engaging in CSG projects.”

 “You don’t want to be paying an insurer premiums when the policy they are selling you is not equipped to protect you when you need it most,” she said. “No-one wins in that scenario.”

More pressure on farmers

However, she noted some of the issues connected to the indemnity clause designed to help farmers deal with this insurance gap.

“As I understand it there was still uncertainty, even with the new clause, and it was putting additional expense pressures on farmers as they also need legal advice on this clause,” said Stephens.

She also said, for farmers with CSG infrastructure on their land, getting the necessary public liability coverage for their standard farm operations is now dependent on the contract between them and the energy company.

“From what I have heard, the gas company needs to be taking on a level of indemnification for insurers to even consider quoting,” said Stephens.

She said farmers have to invest considerable time and money around any CSG-related decisions.

“The bottom line is that any decisions the farmer makes surrounding the future of their land needs a lot of research and also quality legal advice by experts in this field,” said Stephens. “Once a farmer has committed to signing that piece of paper the impacts could be there for the rest of their lives, not to mention future generations taking on the family farm.”

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Any issues, she said, could continue well beyond the life of the mining operation.

“Even after the gas company leaves there is still the infrastructure there under the ground,” said Stephens. “Aside from insurance worries the farmer needs to consider environmental risks, including potential contamination of soil and ground water, emissions and infrastructure impacts.”

Diversification: “A wonderful idea”

The broker said there could be major positives for farmers if CSG mining is conducted on their properties responsibly.

“Giving our farmers options to diversify is a wonderful idea, however it just needs to be done in a way that puts our farmers first,” said Stephens. “There needs to be clear education surrounding the pros and cons in a way that allows the landholder to make an informed, consensual decision.”

She said one way to do this would be to encourage farmers to get legal advice and compensate them for it. This advice, she said, would need to cover relevant legislation, landholder rights, environmental and land value impacts and any effects on health and safety.

Are you a broker working with energy companies or farmers? Please tell us your views on CSG insurance issues and risks below.

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