The controversy surrounding the extraction process known ashydraulic fracturing (or “fracking”) continues to incite fiercedebate and some rather odd behavior, including Colorado Gov.John Hickenlooper's confession to the Senate Committee on Energyand Natural Resources that he drank fracking fluid produced byHalliburton.

Dubbed by some as our “road to energy independence,”fracking has been a major job creator in several states in thewestern U.S. (including North Dakota) these past fewyears. Though the practice has existed for over 60 years,the frenetic media attention in recent memorycan partly be attributed to this westward expansion. Itsallure is understandable, its promise somewhat mind-boggling;the U.S. has an estimated 482 trillion cubic feet (Tcf) oftechnically recoverable shale gas, according to currentfigures released by the U.S. Energy Information Administration(EIA). Some of the major shale plays that carry the potentialfor natural gas extraction through fracking are located inColorado, Kansas, Montana, North Dakota, Pennsylvania, Texas andNew York.

In New York, disturbing claims aboutfracking have peppered media coverage foryears. Last week, a mid-level appeals court ruledthat New York municipalities can use local zoning laws to banthe practice of fracking to drill for natural gas. The same week,California followed in the footsteps of New York State lawmakerswhen it endorsed a moratorium on fracking.

What does this mean for U.S. insurers and how theydetermine liability and coverage? California'scurrent legislative session may provide someclues. The most populous state in the U.S. ranks fourth in oilproduction. Arguably the oil and gas industry representsone of the few potentially lucrative resources theeconomically anemic state has left. However, a hostof health and environmental concerns have lawmakers and laypeopleanxious, as evidenced by the nine fracking-relatedbills that have been introduced in the currentlegislative session. Although the majority of proposals focuson regulating the hotly contested drilling practice(relative to baseline water testing, permits and so on), three ofthe bills seek to halt fracking altogether, at least forthe foreseeable future pending further scientific study.

Last week a California Assembly Panel pushed forward the threeanti-fracking bills, including AdrinNazarian's AB-649, which would ban all frackingoperations within California “until the state government has anopportunity to weigh any potential threats to public health or theenvironment.” Under Nazarian's bill, the study on potentialfracking risks would be spearheaded by the secretary of theCalifornia Natural Resources Agency and the secretary of theCalifornia Environmental Protection Agency (EPA). Anotherbill introduced by Calif. Sen. Fran Pavley (D-AgouraHills) would prohibit the state from issuing new frackingpermits only if a study was not completed by Jan. 1, 2015.

The Environmental Protection Agency (EPA) is currentlyconducting research under its Plan to Study the PotentialImpacts of Hydraulic Fracturing on Drinking Water Resources,which is slated for completion in 2014. Whilethe scope of the study is admittedly broad, theEPA is focusing on five stages of the hydraulicfracturing water cycle: water acquisition, chemical mixing, wellinjection, flowback and produced water, and wastewater treatmentand waste disposal.

On December 18, 2012, a branch of the California Departmentof Conservation released a “discussion draft” of regulations togovern fracking. The “discussion draft” published bythe Division of Oil, Gas and Geothermal Resources (DOGGR)includes provisions for pre-fracturing well testing; advancenotification; monitoring during and after fracturing operations;disclosure of materials used in fracturing fluid; trade secrets;and storage and handling of hydraulic fracturing fluids. The draftwas primarily intended to pave the way for a more formalregulatory framework, but had a negligible impact onquelling fracking concerns. Moreover, several environmentalorganizations have filed lawsuits against the DOGGR, fuelingthe argument for instating a moratorium.

When it comes to fracking, there is clearly noshortage of drama or political mudslinging. Some Calif. Democratshave seemingly appointed themselves gatekeepers of public healthand safety, whereas Republicans in the state accuse them of tryingto “regulate [fracking] out of existence.”

No one knows how it will play out, just that we're allin for a bumpy ride.