When the CO2 pipeline is too risky for insurance companies what should that tell all? Letters are going to landowners now.

State Farm 

S.D 

Dear ——————

Thank you for your liability coverage inquiry into the Navigator CO2 pipeline that is expected to run through your property. There is specific exclusions for liability protection involving the release of any contaminants per the following policy language: 

Coverage L (liability) does not apply to: 

Bodily injury or property damage arising out of the actual, alleged, or threatened presence, discharge, dispersal, seepage, migration, release, escape of, or exposure to contaminants or pollutants at or from any source or location. 

We also do not cover: 

Any loss, cost, or expense arising out of any request, demand, order, or statutory or regulatory requirement that any insured or others test for, monitor, clean up, remove, contain, treat, detoxify, neutralize, remediate, dispose of, or in any way respond to or assess the effects of contaminants or pollutants; 

Any loss, cost, or expense arising out of any claim or suit by or on behalf of a governmental authority of damages because of testing for, monitoring, cleaning up, removing, containing, treating, detoxifying, neutralizing, remediating, disposing of, or in any way responding to or assessing the effects of contaminants or pollutants; 

While I am personally not privy to any proposed hold harmless agreements or the contract between the pipeline owners and yourselves; regardless of any agreements in place, there is significant personal liability exposure for yourselves while using your land for farming operations, for your own enjoyment and for your benefit renting the land out for others to do the same. 

For example, if you or your tenants or even someone without permission attempts to dig, plow, crench and pierces the pipeline causing a leak, the resulting damage may be argued to be your responsibility. 

As time passes, nearby landowners may change hands, the pipeline owners and operators may change, future technology may render the pipeline useless or ineffective. All of these factors among others, increase the potential that you may be held personally liable in the future for cleanup, removal and other activities that could cause damage as a result of this pipeline being installed. 

As history has proved, any pipeline has a chance to fail, leak and seep resulting in significant damage to life and property. To place this type of risk or burden upon unwilling landowners, like yourselves, is tantamount to placing a risk to your livelihood without your permission. 

In summary, having a pipeline running through your property, carrying CO2, a pollutant, subjects you to substantial uninsurable exposure. 

Sincerely, 

Letter number 2

Northwest GF 

May 9, 2023 

Insured: MA

Dear Mr. —————

Your agent Todd Newton has asked that we provide you with an assessment of the likely impact that a CO2 pipeline on your property might have on the insurability of your property with Northwest GF. First off, let me make the disclaimer that our assessments represent our analytical opinions only and are not purported to represent established science or fact. However, like all insurers, we group together homogeneous risks, meaning those having similar characteristics, in order that loss experience can be somewhat accurately predicted and adequate rates set accordingly. When risk characteristics become present that are not typically germane to a line of business, we must attempt to analyze and determine if these additional elements of risk would still be deemed insurable. 

From an underwriting perspective, our research would indicate that CO2 pipelines likely present risk attributes that would not be present on other Farmowner accounts that we insure. Information that we have reviewed suggests that CO2 is an odorless, colorless asphyxiant, which can cause injury and death in sufficient concentrations. Additional literature indicated that pressurization on CO2 pipelines can be as high as 2800 psi, which is nearly double the pressurization of natural gas pipelines. Further articles suggested that it is difficult to eliminate moisture entirely from CO2, bringing the light the possibility of carbonic acid buildup (purported to have a ferocious appetite for carbon steel) thus making it possible/more probable that these pipelines may be susceptible to ductal fractures which could lead to the release of enormous amounts of CO2 as well as explosions which could entail the ejecting of large sections of pipe and shrapnel. In summary, an extensive release of CO2 could be reasonably interpreted to entail the risk of injury or death and damage to cropland, and adjacent structures. 

Our concerns as an insurer would be that a policyholder could inadvertently damage an existing pipe or could be named in a lawsuit simply via the rupture/leak/explosion of a portion of the pipeline that would traverse under the insured premise. Concerns would be present that payment received for the existence of an easement could potentially make our policyholder a valid party to a lawsuit. Although your Northwest GF Farmowner policy does include pollution exclusions, there would be some ambiguity/uncertainty as to how these might apply in circumstances of injury and death. It is also never a good underwriting practice for insurers to accept risk with known significant non-covered liability exposures. 

Additionally, from a first party perspective Northwest GF would likely have no coverage for CO2 damage to your owned and insured property. 

We additionally are unaware if you or other policyholders with this exposure would be consulting with an attorney to explore unilateral Broad Form Indemnity Agreements in which the pipeline companies would agree to indemnify and hold policyholders harmless for any and all damage that might occur to third parties stemming from the operation of the pipeline. 

In view of the analysis and uncertainties expressed above, Northwest GF would likely elect to non- renew your policy if at the time of the renewal we were made aware of the introduction of a CO2 pipeline across your property. Until there is more experience and information available for us to analyze regarding how these arrangements are being executed and the degree of insulation protection being afforded to landowners by the pipeline companies, it would be difficult for us to intermix this exposure with other dissimilar farm accounts. 

Mr. ————-, we value your business and appreciate your loyalty to Northwest GF. I do hope you understand the concerns presented to us by this exposure. 

Regards, 

Bun Bawbe 

Brian Bowker, Pres/CEO 

Northwest GF Mutual Insurance Company