Aon’s Climate Risk Advisory and environmental risk solutions teams have developed a new specialty insurance product to cover liabilities and mitigate the risk associated with the plugging of abandoned oil and gas wells in the US.
The new Plug and Well Exit Liability product, created in collaboration with U.S. environmental firm Tradewater, provides liability coverage for well-plugging operations, with the option for the associated state regulatory agency to be included as an insured.
In addition to mitigating financial risk in well-plugging projects, the solution also offers some security to buyers and investors in carbon credits arising from such projects.
The sale of carbon credits from well-plugging helps to finance certain projects and is essential to the continuing viability of the sector and its role in mitigating climate risk.
John Minor, national practice leader for structured credit and political risk at Aon, commented: “Our new customized solution will help to drive growth and build resilience in both the carbon credit and well plugging sectors.
“Specialist firms such as Tradewater can now operate with comfort that many resultant liabilities will be addressed by insurance carriers.”
According to data, the well-plugging sector is poised for significant growth, Aon stated, with the number of abandoned wells having increased 5.4 percent between 2021 to 2022, and documented orphaned wells having increased 53 percent from the prior three-year reporting period.
Tim Brown, Tradewater CEO, said: “We are excited to work with Aon and develop this important new product. As Tradewater is committed to creating high integrity carbon credits with the least risk and the most impact, we approached Aon to help create an additional layer of assurance for our methane credits from orphaned gas well plugging projects, and they delivered.”
