26 Jul 2011

Fracking update

Seems that my suggestion that frackers self-regulate is becoming more viable.

Bloomberg agrees with me, but there's more!Do you see (hysteric) national regulation coming? I see it coming...

In the meantime, Marsh & McLennan offers insurance against water contamination. There's a market solution (or the beginning of one) here, folks, so let's not be too hasty to over-regulate!

H/T to MH


  1. Two points:

    - Yours and the Bloomberg article seem merely to invite frackers to welcome government oversight rather than to fight it. To be clear, that's distinct from "self-regulation" (where the industry oversees itself), although in the case of regulatory capture there's not much of a difference...
    - The insurance seems marketed to water producers, but the frackers are the ones taking the risk. And in any case, should there be a catastrophic incident — contamination of the water supply of the New York City metropolitan area, say — I worry about any insurer's ability to settle claims (see also AIG).

  2. I guess I don't see much benefit in the insurance market. Do the frackers bear any liablity if they are following current regulations? I don't think so, so my purchase of clean water insurance will depend on the intermediary's actuarial requirements in terms of premiums and likelihood*loss of harm. It sounds like a "victim pays" allocation of property rights and I'm not sure I like that. What other expected ecosystem benefit beside clean groundwater can you take away from me without bearing any cost (except to the extent that you need clean groundwater, too)? My life suddenly starts looking more expensive. Why don't we just head it off at the pass with a requirement that using these methods requires actuarial bonds to indemnify the ecosystem (in this case, ground water) by way of the society that depends on it. And then specify how those bonds will be priced. First, you get twelve wise men and women...


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