Who’s Getting Stuck with the Check: Roux Insurance Update

To help keep you up to date on current developments, Roux is providing this email to summarize topics pertinent to the insurance industry that you may find useful.

Pass the Tab?
A recent ruling from a federal judge may have set a precedent in the transfer of environmental liabilities when one company goes bankrupt, based on a recent article published by the Wall Street Journal. The article noted that Fieldwood Energy LLC, a company that controlled old wells in the Gulf of Mexico and sought bankruptcy protection, may potentially be passing the buck (or millions of dollars in environmental liability) to prior owners. Owners that may get “stuck with the check” included major oil corporations, along with their associated insurance companies. While these companies could still appeal the ruling, oil companies are estimating their potential liabilities could be up to $373 million. A group of insurers have estimated the exposure could be more than $1 billion.

Unlike onshore wells, offshore wells can become the responsibility of previous operators by the Department of the Interior, given the current operator is unable to cover expenses. It is also likely in the foreseeable future that arguments of ownership and environmental liability will become more common as companies aim to reduce carbon output and environmental impacts. Columbia University’s Center for Global Energy Policy speculates that decommissioning the oil and gas infrastructure across the globe could cost trillions.

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