Over the past five years, North American oil and gas operators have increasingly implemented technology and best practices to improve their environmental credentials. Environmental responsibility is no longer a political decision – it’s business. For example, differentiated gas with credentials attached to specific molecules has been sold for a premium to downstream buyers. Other industries, including timber, diamonds, fish, coffee, and precious metals, have also seen additional value from environmental responsibility.
Beyond business decisions, operators should consider ESG strategies to improve their risk management and insurability. Here are three examples:
- Every step an operator takes to reduce their impact on the environment (air, land, water, community) reduces potential liability for incidents that cause environmental harm. Diligence reduces negligence.
- Third-Party Environmental Risk Assessments for environmental management of wells are gaining traction in the utilities and LNG industries. These assessments require a comprehensive look at the well site, as they gather immense amounts of information that is directly usable for underwriting, such as the condition of equipment, installed leak prevention systems, and risk mitigation strategies.
- Using multi-scale measurement technologies to understand true emissions profiles is critical to understanding site-level emissions inventories for oil and gas sites. Moreover, continuous emissions monitoring offers immediate detection so operators can act swiftly to resolve a leak event, large or small. Speed to action minimizes potential liability.
Any of the above strategies can improve an operator’s insurability by providing risk engineers and underwriters with more granular and specific data by reducing the potential of a loss and limiting potential damage if a leak event does occur.
Recent actions by companies like Chubb have shown that insurers are beginning to understand how environmental responsibility can improve their business. If energy underwriters insist upon similar standards from their insureds, insurers and insureds alike can benefit from better risk underwriting and cheaper/more comprehensive policies.