Environmental liability risk legislation has become more stringent for coal seam gas (CSG) operators, placing increasing pressure to manage any contamination arising at the exploration sites as well as any possible escape of harmful substances from them. Experience also shows that any amendments to environmental legislation typically apply more restrictive conditions, adding to the operating constraints already in place for CSG operators.

In the environmental sector, there is a high risk associated with the compensation that will have to be paid for losses suffered by third parties as a result of environmental impairment. The CSG operator is therefore responsible for the consequences of new pollution conditions which affect others (environmental liability).

Traditionally CSG exploration operators have relied on a basic Public Liability policy which only provides very limited third party (off-site) sudden and accidental pollution cover. However, there is no cover provided for gradual or on-site pollution conditions which are the two main exposures for this type of activities.

It is now possible to move this environmental risk into a more focussed environmental liability policy, which is briefly outlined below.