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POWERING AMERICA’S ENERGY
RESILIENCE
Stephen E. Flynn, Ph.D.
Sean P. Burke, J.D.
May 2012
Center for National Policy
2
CONTENTS
I.
II.
III.
Introduction
1
Findings
5
1. The American people must frankly acknowledge that we
will remain dependent on imported oil for the foreseeable
future and that this brings with it ongoing exposure to
external political and market forces
5
2. Policymakers must adequately plan for the continued
expansion of domestically produced natural gas as a
significant source of meeting America’s future energy
needs
7
3. Policymakers and industry leaders must candidly acknowledge
that there are risks to the environment and to local communities
associated with developing natural gas resources and that there
are appropriate roles for both the public and private sectors in
mitigating those risks
9
4. Policymakers must not overlook the critical role that
energy efficiency can play in advancing energy resilience
10
5. Policymakers must develop a better understanding,
mitigate the risk, and plan for the potential disruption
to energy supplies that result from changing U.S. refinery
capacity
12
6. Upgrading the electric grid is critical to building a more
secure and resilient U.S. energy sector
16
Recommendations
21
1. Develop and maintain a comprehensive North
American Energy Resilience Plan
22
2. Identify new incentives for consumers and
businesses to embrace energy efficiencies and to
reduce energy consumption
22
3. Prepare a formal assessment of the national security
and homeland security implications associated with
increasing the development of North American and
Arctic oil and gas resources
23
4. Reduce the vulnerability of U.S. refinery capacity
to catastrophic disasters
24
5. Task the U.S. national research laboratories to undertake
a cyber-security initiative to develop a detailed profile of
the physical cyber risk to the electric grid and to work with
major research universities in developing options for
mitigating that risk
24
6. Encourage natural gas development with national standards
supported by appropriate monitoring and enforcement
capabilities
25
7. Establish U.S.-Canadian cross-border working groups
made up of public, private, and academic participants in the
Atlantic Northeast and in the Pacific Northwest to develop
a bi-national approach to safeguarding the power grid from
the growing risk of disruption
25
Appendix - Definitions
27
Acknowledgments
28
About the Authors
29
Task Force Participants
30
Notes
32
2
I. INTRODUCTION
Building infrastructure and societal resilience must be one of America’s top national
security and economic security priorities, and a focus on energy sector resilience should
lead the way. Disruptive risks to the critical foundations of U.S. national power and
prosperity are likely to grow in frequency and intensity in the 21st Century. These will
come from acts of terrorism, acts of nature, and periodic accidents arising from the scale
and complexity of the systems and networks that underpin modern life. People and
investment capital will gravitate to the nations that most successfully cultivate the ability to
withstand, respond, recover from and adapt to these disruptions. Left behind will be those
brittle jurisdictions that demonstrate an unwillingness or inability to manage foreseeable
stresses.
The United States should be well positioned to navigate the turbulent decades ahead.
Historically, resilience in the face of adversity has been one of the nation’s defining
qualities. Americans have consistently met hardships and misfortunes head-on and
overcame them. In the process they have bequeathed to their children and grandchildren a
sense of optimism and confidence about our individual and collective ability to shape the
future for the better.
However, in recent years America’s capacity for resilience has waned. Much of the
nation’s infrastructure was constructed in the 19th and first three-quarters of the 20th Century
and it is now aged and decaying. The economic recession since 2007 has been draining the
ability of many states and municipalities to adequately fund public safety, emergency
preparedness, and public health programs to meet major emergencies. And in the face of a
political environment that has become more polarized and dysfunctional, many Americans
are losing their can-do attitude.
The good news is that by assigning new priority to resilience, Americans will not only be
responding to a practical necessity, we will also be embracing a helpful antidote for our
current malaise. Resilience is the ability to prepare and plan for, absorb, recover from or
more successfully adapt to actual or potential adverse events.1 To have infrastructure,
systems, networks and communities that are able to withstand and bounce back nimbly from
disruptive events will improve our quality of life and prosperity. Accomplishing this
agenda will take an open and inclusive process that draws on the capabilities of our entire
society. It will require renewed civic engagement at the local and regional levels,
harnessing the innovative and management skills of small business leaders and
corporations, and garnering support for this inherently nonpartisan work from public-sector
policy makers. And the reward for applying ourselves to this task will be that communities
and critical infrastructure foundations will work better both in times of normalcy as well as
in times of crisis.
As a stepping-off-point for undertaking this vital task, the American people would do well
to recalibrate its thinking about the role that infrastructure plays in supporting our way of
life. By and large, recent generations have taken for granted the tremendous investment
our forebears made in constructing the industrial landscape that has made the United States
the most prosperous nation in the world. Rail and mass transit, highways, canals, dams,
water and wastewater systems, information technology and communications provide
functions and services that are essential to maintaining an advanced society. All these
sectors, in turn, rely on a dependable supply of electricity, fossil fuels, nuclear power, and—
looking to the future—on more renewable sources of energy.
This makes assuring the
resilience of both the old and new elements of the energy sector an absolute imperative.
The scale of the U.S. energy sector is enormous. The U.S. electric grid draws on the
generating capacity of over 5,300 power plants that combined produce 1,075 gigawatts.
Nearly half of this power generation is produced by combusting coal; 20 percent by
combusting natural gas, and 19 percent by nuclear power that is generated by 104
commercial nuclear reactors. The remainder comes from hydroelectric plants (7 percent),
consuming oil (2 percent), and solar, wind, and geothermal (3 percent). This electricity is
moved from power plants to 140 million homes and business via 211,000 miles of highvoltage transmission lines and thousands of substations. 2
The petroleum segment of the energy sector provides Americans with gasoline, liquefied
petroleum gases, residual fuel oil, distillate fuel oil, and jet fuel. Two-thirds of the crude oil
to make these petroleum products is imported. Within the United States, there are more
than 500,000 crude oil producing wells, 30,000 miles of gathering pipeline, and 51,000
miles of crude oil pipeline. The nations 133 petroleum refineries transport their product to
consumers through 116,000 miles of product pipeline, and 1,400 petroleum terminals. 3
Domestic natural gas is the most rapidly expanding sector in the United States where there
are nearly 450,000 gas production and condensate wells and 20,000 miles of gathering
pipeline. Some natural gas arrives in the United States in a liquefied form (LNG). Gas is
processed at over 550 plants and the distribution of gas to homes and businesses involves
over 1,175,000 miles of pipeline.4
The increasing vulnerability of the energy sector to disruption has been something
Americans have been coping with for nearly four decades. For much of that time the
disruptive threat has been an external one, as during the 1973 oil crisis when the
Organization of Arab Petroleum Exporting Countries (OAPEC) declared an oil embargo in
response to the U.S. assisting the Israelis in the Arab-Israeli war. However, the source of
disruptive risk has started to change in recent years. On August 14, 2003, the largest
electrical failure in the history of North America plunged more than 50 million people
across the northeastern and midwestern United States and southern Canada into darkness.
This extensive blackout was caused not by an outside adversary, but by a cascading chain of
events triggered by some untrimmed trees in Ohio that became entangled in high-voltage
power lines. More recently, there was the massive industrial accident in April 2010 aboard
the Deepwater Horizon offshore drilling platform in the Gulf of Mexico that led
Washington to put in place a temporary embargo on all deep-sea drilling. This explosion
that led to the largest marine oil spill in history resulted in billions of dollars in direct and
indirect economic losses.
2
Looking ahead, there is no shortage of foreseeable risks that could cause disruptions to the
energy sector. Given America’s ongoing dependency on foreign sources of crude oil,
external events such as instability in the Middle East and West Africa will cause price
volatility. The electrical power grid continues to age, and for the most part, not gracefully.
As key components turn 40 and 50+ years old, they are susceptible to mechanical failure.
At the same time, modernization efforts have resulted in an electrical infrastructure that has
become increasingly automated with many of its components managed by supervisory
control and data acquisition (SCADA) systems that are susceptible to cyber threats.
Physical attacks on key components of the sector also remain a threat. One sobering
consequence of the frequent attacks by insurgents on Iraq’s energy infrastructure during the
Iraqi War is the proliferation of knowledge, experience, and skills to conduct acts of
sabotage against this sector.
Finally, the frequency and intensity of weather-related
disasters is predicted to continue to rise, placing particularly at risk the refineries, offshore
rigs, and pipelines that are concentrated in and around the Gulf of Mexico.
Indisputably, the energy sector has extensive experience in mitigating and recovering from
disasters, and industry leaders in the sector are generally cognizant of its vulnerabilities.
Given the geographically far-flung and hazardous environments that the oil and gas industry
must operate within, it has to incorporate an expansive view of security as part of its risk
management and continuity of business strategies. Meanwhile, the U.S. electric power
industry has become well practiced at recovering from major regional outages. However,
too often the approach of industry leaders has been to simply restore systems when they
periodically fail. Much overdue is a comprehensive strategic approach for better
anticipating and adapting to the range of risks the energy sector will almost certainly face in
the near, medium, and long term. The endgame should be taking the necessary steps
towards ensuring that America has an energy sector that is dependable and sustainable so
that it can meet the nation’s energy needs while being responsible stewards of the natural
environment.
To help develop a vision and a strategy for building a more resilient energy infrastructure,
this report has benefitted from the wide-ranging discussions and diverse perspectives of the
Energy Sector Task Force, organized by Stephen Flynn, Carter Page, and Scott Bates, for
the Center for National Policy. The Task Force enlisted thought leaders from the energy
industry, financial sector, academia and the policy arena as participants. From 2010-2011,
the task force met around the country (in New York, Los Angeles, and Dallas) to wrestle
with three tasks:
(1) Crafting a vision for a resilient energy sector.
(2) Identifying the areas of intersection where efforts to advance sustainability,
security and resilience could be mutually reinforcing.
(3) Defining priorities to achieve resilience in the energy space.
The Task Force meetings were co-hosted by New York University’s Center for Global
Affairs, Southern Methodist University’s Maguire Energy Institute, and the University of
3
Southern California’s National Homeland Security Center for Risk and Economic Analysis
of Terrorism Events (CREATE). In addition to research conducted over a period of 18
months, this report has been informed from the invaluable insight and expertise of many of
the Energy Sector Task Force participants.
The central issue that this report and the associated recommendations aspire to address is
the need to move away from our business-as-usual approach to energy production and
consumption. Over the next two decades, U.S. energy demand is projected to rise and the
gap is expected to widen between that demand and the domestic energy supplies to meet it.
This leaves us with three alternatives:
(1) Import more energy, especially oil.
(2) Increase domestic production. The U.S. has enormous energy resources, both nonrenewable and renewable, and the recent discovery of extensive, unconventional
natural gas deposits provides a very low-cost supply source.
(3) Reduce energy demand. This can be done most effectively by making
improvements to energy efficiency such as reducing the per unit requirement of energy
by businesses in their production processes and by households in their daily activities,
as well as shifting to less energy-intensive activities. These improvements can be
stimulated by market forces and advanced by new technological developments.
The first alternative is clearly an unattractive option for economic, political, and security
reasons. However, a combination of the second and third alternatives would support the
imperative of building greater energy resilience.
A final note: This report reflects what the authors and many leading experts consider to be
top opportunities and challenges associated with the energy sector. Additionally, by
emphasizing resilience as an overarching strategic imperative, it also aims to provide a new
conceptual approach to thinking more broadly about how to manage the future of America’s
vast energy needs. However, it is not intended to be comprehensive in terms of all issues
and recommendations relating to energy resilience. Among the topics that are not explicitly
included are: the relationship between energy resilience and climate change, the future of
nuclear power, America's abundant coal resources and the potential of carbon capture and
storage to enable us to utilize them in a more climate-friendly manner, and the promise and
obstacles associated with the development of renewable energy.
4
II. FINDINGS
1. The American people must frankly acknowledge that we will remain dependent on
imported oil for the foreseeable future and that this brings with it ongoing exposure to
external political and market forces
Since the first commercial well was constructed in Titusville, Pennsylvania more than 150
years ago, Americans have looked to oil to help meet its enormous appetite for energy.
Today, the average U.S. citizen uses half again as much energy as the average European and
ten times as much per capita as China, India and Africa. Long ago, Americans’ demand for
oil out-paced the available domestic supplies. Inevitably, the shortfall has translated into a
significant dependence on imported oil. By 2010, the United States was the leading global
petroleum consumer but the third largest crude oil producer.5 37 percent of the energy used
in the United States comes from oil where it is primarily used by the transportation sector.6
And, while about half the oil used in the U.S. is produced domestically and about a quarter
of imported oil comes from Canada, the remaining quarter depends on sources located in
some of the world’s most volatile regions where it must transit through strategic bottlenecks
such as the Persian Gulf’s Strait of Hormuz. This reality greatly affects the reliability and
affordability of energy for the U.S. economy.7
Combined, the Persian Gulf and African nations provide 41% of the crude oil imports to the
U.S. The good news is that our nation’s dependence on imported oil has been declining in
recent years. The bad news is that one of the important factors contributing to this has been
the economic recession. When the U.S. economy picks up steam again, so too will it’s
demand for energy and, of course, Americans will not be alone in the global energy
marketplace. The appetite for oil by other major economies such as China and India
continues to rise as well. Simply put, the United States will not be in a position to wall
itself off from the price turbulence of the international oil market. And this reality will be
with us for the foreseeable future. As Daniel Yergin, a leading industry analyst has flatly
asserted: “the world energy system won’t look much different twenty years from now.”8
Given America’s century-old dependency on fossil fuels and the infrastructure that has been
built up to harness those fuels, it will take decades to achieve fundamental structural
changes to the energy sector. The scale of the task of making these structural changes
should not in any way be used as an excuse to not undertake it. But, as a practical matter, it
will take at least a couple of generations to execute.
Simply put, oil is a global commodity that is traded on a global market. Its price is
determined by a complex array of political, economic and social factors that collectively
determine how projected global supplies will be able to meet anticipated global demand.
There is broad-based recognition among industry analysts that any realistic increase in
domestic U.S. oil production will have only a nominal influence on the cost of a barrel of
oil.
5
However, price and price volatility are not the only issues at stake. Energy supplies must
be directly available for use by the critical sectors that depend on them. In other words,
supply must always match the constant demand for energy in order to avoid cascading
effects across the economy and disruption to the broader society. For instance, refined
petroleum products have become nearly “just-in-time,” with their consumption within the
U.S. economy happening almost simultaneously with their production. In Southern
California for instance, there is typically only 7 to 10 days of refined fuels available for the
entire region. This includes what drivers have in their gas tanks (which are typically only
half full) and what is being stored at intermediaries like filling stations and fuel trucks
transiting to those stations. A run on California gas stations in the event of emergency
could quickly exhaust nearly all the available inventory. Should the Los Angeles-area port
and pipeline infrastructure that moves those crude oil shipments to those refineries be
damaged by a natural disaster, an act of terrorism, or a large-scale accident, the region
would literally run out of gas in a couple of weeks.
6
2. Policymakers must adequately plan for the continued expansion of domestically
produced natural gas as a significant source of meeting America’s future energy needs
With nearly daily headlines on the rising cost of gasoline at the pump and a barrage of
media reports on how ongoing unrest in the Middle East translates into volatile per barrel
costs of crude oil, it is not surprising that most Americans are generally unaware of the
significant and growing role that natural gas is playing in the U.S. energy sector. But one
quarter of the energy consumed in the United States is produced from natural gas that is
derived from North American sources. This makes it a far larger contributor to the U.S.
energy sector than the oil we import from the Persian Gulf region. Globally, natural gas has
grown from around a 16% share of energy consumption in the 1960s to about 24% in 2009.9
There are important differences in the market forces for natural gas and crude oil. These
variances can be traced to the very nature of the fuels. Because of its physical
characteristics, high compressibility and low viscosity, natural gas has a relatively low cost
of recovery, as compared to oil. But, with regard to transportation and storage, gas is at a
relative disadvantage. Conversely, oil, as a liquid, is easily transported over long distances
by tankers to ports that are near where it will be refined into petroleum products that then
can be transported to the end users. As a result, delivery costs typically represent a
relatively small portion of the cost of developing an oil field. 10
In the case of natural gas, most of the supply around the world is transported via pipeline to
end users for consumption and the infrastructure to support delivery represents a large
portion of the development costs. 11 As a result, natural gas markets have tended to develop
7
regionally. Liquefied Natural Gas (LNG) is starting to change that dynamic. Natural gas
can be stored and moved long distances, but first it must be liquefied which requires
expensive purification and refrigeration equipment. But because it is a relatively cleaner
energy source that can be competitive with the price of oil, investors are increasingly
bankrolling the multi-billion dollar cost to construct the specialized facilities and ships that
can move LNG to distant markets. 12
The United States has vast proven fields of natural gas and a growing capacity to access
them safely and cost-effectively. Almost 90 percent of the natural gas used in the United
States comes from domestic production. 13 And gas, as the source for generating electricity
has been on the rise for the last twenty years. From 1990 to the present day, most of the
newly built power-plants are gas-fired. 14 Technological advancements on multiple fronts
help to explain the move to natural gas. Beyond accessibility of shale reserves, new natural
gas plants burn fuel more efficiently, can be built in half the time taken to build a coal-fired
plant and emit less than half the amount of carbon dioxide as the typical coal-fired plant. 15
From a resilience perspective, expanding the relative size that natural gas plays in the U.S.
energy sector is a positive development. This is because of the advantage natural gas has
over oil in being able to be produced within our politically stable continental environment.
It has an added resilience advantage over coal due to the fact that it is a cleaner energy
source. As such, it causes less damage to the environment thereby helping to mitigate the
disruptive risk associated with climate change. Cleaner energy, from a macro resilience
perspective, is better energy.
8
3. Policymakers and industry leaders must candidly acknowledge that there are risks to
the environment and to local communities associated with developing natural gas
resources and that there are appropriate roles for both the public and private sectors in
mitigating those risks
While natural gas is a cleaner fuel than the other fossil fuel alternatives, its impact on the
environment is not entirely benign. This is particularly the case with unconventional gas
development. Still, there is an emerging consensus within the academic and engineering
communities that these environmental impacts, while challenging are also manageable and
can be minimized with further research, new technological innovations, and appropriate
regulation at the state and federal level.16 This growing general agreement that natural gas
can be developed safely comes at a time when more and more technically recoverable
unconventional gas (which includes shale gas, tight sands and coalbed methane) is being
discovered.
According to the U.S. Department of Energy’s Energy Information
Administration, the United States has an estimated 1,744 trillion cubic feet (tcf) of
technically recoverable natural gas, including 211 tcf of proved reserves. This translates
into there being enough natural gas potentially available in the United States to meet our
projected needs for the next 90 to 116 years. 17 Furthermore, these shale gas reservoirs will
almost certainly account for half of new reservoir growth. 18 The production of shale gas
has become increasingly viable because of technological advances relative to horizontal
drilling and hydraulic fracturing. In addition, it has become more commercially viable
given the rising price of oil.
Nonetheless, there is considerable controversy associated with producing shale gas and
there are legitimate environmental issues that warrant close attention. The most
controversial element of unconventional gas development is the process of hydraulic
fracturing. The U.S. Environmental Protection Agency (EPA) describes hydraulic
fracturing as a “well stimulation process used to maximize the extraction of underground
resource; including oil, natural gas, geothermal energy, and even water.”19 Oil and gas
producers use hydraulic fracturing to “enhance subsurface fracture systems to allow oil or
natural gas to move more freely from the rock pores to production wells that bring the oil or
gas to the surface.” 20 A mixture of water and chemicals are pumped into rock formations
until the pressure of the water creates or enlarges deep underground fractures. Another
agent is then pumped to keep the fractures open and, due to internal pressure of the rock
formation, the injected fluids rise back to the surface. 21 This fluid is at the heart of
environmental concerns. And, while hydraulic fracturing discharge fluids are regulated by
the National Pollution Discharge Elimination System (NPDES) under the Clean Water
Act,22 legitimate concerns persist about the capacity for these waters to be appropriately
treated at the local and state level. A single well can produce more than a million gallons of
wastewater that contains environmentally hazardous materials that exist naturally at drilling
depth. These include benzene, radium and corrosive salts.23 In addition, other carcinogens
are added to the water in the chemicals required for the hydraulic fracturing process. 24
Moreover, there is widespread and growing concern about methane emissions throughout
the production, storage and distribution cycle of natural gas.25 Calls continue, both within
9
the environmental community and from government-sponsored commissions for more
study, and tighter and consistent enforcement of existing environmental regulations.
Another concern associated with the rapid exploitation of shale gas reserves is that it can
overwhelm the capacity of communities to support the influx of people and the operations
associated with extraction. Shale gas is typically found in rural areas that have limited
roads and other infrastructure including schools, hospitals, and fire protection. These
communities are also susceptible to the “boomtown” phenomenon that can be socially
destabilizing. This risk necessarily requires careful planning of development efforts in
conjunction with host communities.
There are worrisome signs that a disruptive and unproductive legal war may be getting
underway between industry and the local and national opponents of gas drilling. A
February 2012 court ruling in favor of a small upstate New York community that banned
drilling under its zoning laws after a developer spent $5 million acquiring leases26 is an
example of the many battles, at various levels, that are yet to be fought. Absent strong
leadership at the national level, the gas industry is likely to find itself facing a growing
patchwork quilt of local and state requirements. This situation increasingly warrants an
acknowledgement that national regulations need to be put forward for unconventional gas
development and that the public and private sectors must work closely together to
demonstrate compliance with those regulations.
4. Policymakers must not overlook the critical role that energy efficiency can play in
advancing energy resilience
Any model of a resilient energy sector must be one that is environmentally and
economically sustainable. It would be foolhardy for the United States, and the rest of the
world, to engage in a no-holds barred pursuit of energy production that is cheap and reliable
if in so doing, we end up causing serious damage to the world’s air and water quality with
the associated costs to our health and well-being.
Technological developments that simply elevate a rapid growth in energy production and
consumption will expand the risk of climate change with all the associated adverse
consequences. There is mounting scientific evidence that greenhouse gas emissions are
significantly contributing to the projected 3 to 7 degree Fahrenheit rise in the earth’s global
temperature by 2100 which, in turn, is expected to cause more common and severe heat
waves, more frequent and powerful storms, and increased flooding along coastlines.27
Energy efficiency efforts that help to lower the consumption of energy are the flip side of
the resilience coin. The challenge of putting in place effective strategies and safeguards to
provide reliable energy supplies can be offset by diminishing the overall demand. The
potential for effective policies and investments to improve energy efficiencies and curtail
consumption are substantial, particularly if directed at the transportation and residential
sectors where one-half of America’s energy is consumed. These two sectors are controlled
primarily by the actions of individual consumers. That reality translates into the need for a
broad-based energy efficiency strategy. When it comes to the commercial and industrial
10
sectors, incentives are required in order to make appropriate energy efficiency design
changes to both the construction of new structures as well as the retrofitting of old ones.
Assigning energy efficiency the priority it deserves will be difficult, but it is very much
worth the effort. And as the 20th Century’s largest energy consumer in the world, (America
is now the second largest after China) Americans should feel both a practical and moral
obligation to take the lead on the issue. Americans make up only 4.5 percent of the world’s
population but we contribute around 15 percent of the total global greenhouse gas
emissions.28
There is only one way to balance safeguarding the environment with the enormous need for
energy that is required to power the internet, our homes, vehicles, and the industrial
landscape that our modern lives require. We need to reduce the amount of energy required
to provide the products and services that we depend upon while simultaneously advancing
the development of renewable resources. There are nearly 73 million street and exterior
lamps in the United States that consume 57 terawatts of power. By adapting light usage
through use of smart technologies and assessing actual lighting needs, this consumption
could be reduced by at least 25 percent.29 Meanwhile, in-house compact fluorescent lights
are 3 to 4 times more efficient than their incandescent counterparts. 30 Homes that are well
insulated require less heat and air conditioning to maintain comfort for their residents. By
insulating steam and condensate return lines and maintaining them in a good condition of
repair, an industrial facility can reduce their energy usage by 20 percent.31 New materials
such as continuous fiber ceramic composites can be used as corrosion resistant liners around
turbines to seal in head and gases, reducing pollutants and downtime for maintenance. 32
Recent economic analysis demonstrates that large-scale efforts to improve energy efficiency
are financially attractive. According to one assessment of the climate mitigation plans of 20
geographically diverse U.S. states (including Arkansas, Florida, Maine, New York, Utah
and others), the states’ “climate policies could have a significant and beneficial effect on job
creation and overall economic development.”33 The analysis demonstrated that if all 50
states adopted similar plans and policies, with federal government coordination, the United
States could reduce greenhouse gas emissions in the next decade to 10 percent below 1990
levels and see a cumulative “net economic savings” of more than $500 billion. 34
The Obama administration has argued that meeting America’s energy needs in a sustainable
way must be an” all-of-the-above” effort. Most expert economists, energy producers, and
environmentalists who have a deep understanding of the U.S. energy sector agree. Pursuing
energy efficiency by embracing technological innovations in production, transmission and
consumption, while simultaneously fostering the development of renewable resources, are
absolutely essential to building a more resilient society. We are long past the time when our
policymakers provide only sweeping rhetoric about future goals. Instead, they need to start
right now to roll up their sleeves, agree to scientifically-based objectives, set aggressive
timelines, and support those efforts with the appropriate incentives for implementation.
11
5. Policymakers must develop a better understanding, mitigate the risk, and plan for the
potential disruption to energy supplies that result from changing U.S. refinery capacity.
Approximately 15 million barrels of oil 35 are processed each day at America’s 124
refineries.36 A single 42-gallon barrel of crude oil is typically refined into 45 gallons of
products. 37 And, while the bulk of crude oil is processed into gasoline (19 gallons per
barrel), the products created using petroleum include a multitude of everyday items from
crayons to eyeglasses to heart valves. 38
U.S. refineries operate at about an 86% utilization rate, down from about 90% five years
ago.39 Faced in recent years with decreasing demand for their products while trying to run
refineries that necessitate millions of dollars in maintenance and large numbers of staff, the
refining industry has been idling, reducing capacity, and closing older facilities.40 There are
many factors influencing the decreased demand for petroleum products with the economic
recession and improving new car gas mileage topping the list. Through 2008 and 2009,
gasoline consumption in the United States dropped by more than 100 million barrels a year.
41
Meanwhile refining capacity has increased over the last ten years even with the reduction
in the number of refineries in operation. The result is that some in the industry are
contemplating cutting back refinery capacity further.
One important criterion that should be considered both in standing up new refineries or
closing down old ones is their geographic location. While there is generally a market
benefit for co-locating energy infrastructure in a specific region, there is a security and
resilience benefit from having them geographically dispersed. The market-based appeal to
concentrate can be traced to the limited number of locales that provide a supportive
regulatory environment, have an ample pool of experienced workers upon which to draw,
and are proximate to key suppliers. But when there are “too many eggs in one basket,” the
risk associated with a large-scale man-made or natural disaster can be devastating for the
national economy.
Presently, almost 45% of the nation’s refining capacity is located in the Gulf Coast region
and if the current trend continues, the region will soon play an even larger role.42 Perched
on the shores of the Gulf of Mexico, not far from the Louisiana border is Port Arthur, Texas
- home to the Motiva Port Arthur Refinery Expansion Project. When it is completed it will
be the largest refinery in the United States and one of the ten largest refineries in the
world.43 Just a short distance away is the Port of Houston that is the largest seaport by
tonnage in the United States and the sixth largest in the world primarily because of the
major refineries and petrochemical facilities that line the 25-mile long shipping channel.
12
This translates into most of the nation’s gasoline being refined in an area that is prone to
major hurricanes and these hurricanes are projected to occur with greater frequency and
intensity. A direct hit by a Category 3, 4, or 5 storm to the Gulf region’s energy
infrastructure could leave much of the nation literally out of gas for the several weeks to
months that it would take to recover.
Gulf Coast Refineries and Hurricane Tracks
Sources: National Oceanic and Atmospheric Administration, US Energy Information Administration
Pictured: All hurricanes rated H2-H5 between 1995-2010
Opal, October 1995 (H4)
Roxanne, October 1995 (H3)
Earl, September 1998 (H2)
Georges, September 1998 (H4)
Bret, August 1999 (H4)
Isidore, September 2002 (H3)
Lili, October 2002 (H4)
Charley, August 2004 (H4)
Ivan, September 2004 (H5)
Dennis, July 2005 (H4)
Emily, July 2005 (H5)
Katrina, August 2005 (H5)
Rita, September 2005 (H5)
Wilma, October 2005 (H5)
Dean, August 2007 (H5)
Dolly, July 2008 (H2)
Gustav, August 2008 (H4)
Ike, September 2008 (H4)
Ida, November 2009 (H2)
Alex, June 2010 (H2)
Karl, September 2010 (H3)
13
Meanwhile on the West Coast, the majority of the refining capacity for California and the
southwest is concentrated in the vicinity of Los Angeles and San Francisco. This region sits
on major fault lines presenting a strong earthquake risk that could result in catastrophic
damage to near-shore and onshore pipelines and other infrastructure. In addition, an
earthquake could lead to the long-term closure of the Ports of Los Angeles and Long Beach
that are the main conduits for the tankers that bring crude oil shipments to some the state’s
largest refineries. Much of the land upon which the nation’s largest port complex sits,
particularly Terminal Island, has ben constructed using the spoils recovered from dredging
San Pedro Bay. This land is particularly vulnerable to a phenomenon know as liquefaction
where the shaking of the ground caused by the earthquake breaks down the strength and
stiffness of the soil with the result that it becomes something akin to quicksand. Soils that
are liquefied can no longer carry the load of structures that rest on it so those structures sink
and collapse.44
Given that so many of the nation’s major refineries are situated in areas that face a
significant risk of natural disasters, the sector’s resilience posture is not benefiting from the
current and planned closures of refineries in other regions where so many Americans live
and require ongoing access to energy supplies. According to analysis by the Energy
Information Administration, two Philadelphia-area refineries were closed in the fall of
2011, and an additional refinery may be idled by July 2012. These refineries made up
nearly 50% of the East Coast’s refining capacity. 45 While capacity exists in the Gulf Coast
14
California-Nevada Fault Map for Los Angeles
Source: U.S. Geological Survey, March 2012.46
region to replace the product refined at these refineries, the added distance elevates the
vulnerability of the northeastern region to disruptions given that the transportation and
supply chains have become more extended. The inevitable consequence for the region will
be higher prices and volatility. 47 Edward Morse, former deputy assistant secretary of state
for international energy policy and now with Citigroup, has offered a succinct statement
about an oft-overlooked reality of the energy sector: “Energy is all about infrastructure and
logistics.” 48 The rise in home heating prices in the winter of 2011-2012 was painful for the
several million people who use oil to fire their furnaces from Pennsylvania to Maine. 49
Their situation is not likely to improve given the move to shut down smaller and older
refineries located in the Northeast, replacing them only with much larger and newer
refineries located in the South.
15
6. Upgrading the electric grid is critical to building a more secure and resilient U.S.
energy sector.
The very complexity of the power grid makes bolstering its resilience both complicated and
critical. Reliable operations require both an adequate supply of power generation,
transmission and distribution lines, and substations that can produce and move electricity to
the end-users. There are four power grids in North America: the Eastern Interconnected
System that includes the states and Canadian provinces east of the Rocky Mountains with
the exception of Texas and Quebec, the Western Interconnected System that serves states
west of the Rocky Mountains as well as the Canadian provinces of Alberta and British
Columbia; the Texas Interconnected System, and the Quebec Interconnection. 50 The
eastern grid system receives power generated from Canada that exported about 53 terawatthours of electricity to the United States in 2009, mostly from Quebec, Ontario, and New
Brunswick to New England and New York. Smaller volumes are exported from British
Columbia and Manitoba to Washington, Minnesota, California, and Oregon. There is
considerable interconnectedness between the Canadian and U.S. power markets, with
United States exporting electricity to Canada (18 terawatts-hours) as well as importing.51
Map of Canadian and Northern United States Energy Grid
Source: Global Energy Network Institute52
Within the United States, millions of electricity customers are served by more than 10,000
generating units from more than 3,000 distribution utilities. 53 The ownership of the many
parts of the grid is divided thousands of ways amongst private and public entities including
investor-owned utilities, the federal government, public companies and cooperatives.54
More than 3,000 different organizations are involved with distributing electricity to U.S.
consumers. 55
16
In addition to the quality of life issues—and at times, life dependency itself—associated
with reliable electric power, the economic stakes are enormous. Large-scale blackouts in
the United States have very severe consequences. For example, the August 2003 blackout
that affected the Northeast and Midwest United States and Ontario, Canada affected 50
million people and in some areas of the U.S. power was not restored for four days.56 In
Canada, rolling blackouts continued for a week. Estimates of U.S. economic losses range
from $4 to $10 billion. 57 More recently, the September 2011 Southern California blackout
that affected about a million and a half people, some for days, plunged offices and homes
into the dark, caused historic traffic gridlock and automobile accidents throughout the
region and shut down outbound flights from San Diego International Airport. 58
Given how critically important the power grid is, the ambivalence most Americans have
about its age is surprising. Power plants average more than 30 years of age; the average age
of transformers is 42; and most transmissions lines are at least 25 years old. 59 The
American Society of Civil Engineers has assigned the power grid the grade of “D” in its
2009 report. The Electric Power Research Institute found grid infrastructure plagued with
maintenance problems including transformers with frayed wires and loose screws. Former
Secretary of Energy Bill Richardson has gone so far as to describe the United States as “a
superpower with a third-world grid.” 60
Compounding the challenge is that upgrading the grid requires resources that the
deregulated electrical energy market has not been able to provide. Simply to meet demand
in the next 20 years, estimates run to about $300 billion for transmission investment.61 And,
smart grid upgrades over the same time period are estimated to require about $90 billion. 62
Furthermore, the electric grid remains vulnerable to cyber attacks. James Lewis, the
technology program director at the Center for Strategic and International Studies has stated
that the electric grid is the “number one” likely target for cyber-terrorism. 63 And, while a
recent Bloomberg survey found that energy companies are spending, on average, about $45
million a year on cyber security, this investment in no way matches the threat. In fact, to
counter most known threats, companies would have to spend more than seven times what
they are spending now. 64
What makes the grid particularly exposed to the risk of cyber attacks is the fact that the
industry has been rapidly adopting new information technology applications into its
operations without understanding the risks. Central to managing the electric grid is the use
of industrial control systems (ICS) that include supervisory control and data acquisition
(SCADA) systems and distributed control systems (DCS). SCADA systems make it
possible to control geographically dispersed assets remotely by acquiring status data and
monitoring alarms. Based on the information received from the remote station control
devices, automatic or operator-driven supervisory commands can be provided from a
centralized location. These field devices can perform such functions as opening and closing
breakers and operating the speed of motors based on the data received from sensor systems.
Distributed control systems (DCS) are typically facility-centric and used to control localized
industrial processes such as the flow of steam into turbines to support generation of power
in an electric plant. DCS and SCADA systems are networked together so that the operation
17
of a power generation facility can be well coordinated with the demand for transmission and
distribution. 65
When most ICS were originally installed to help operate components of the power grid,
they relied on logic functions that were executed by electrical hardware such as relays,
switches, and mechanical timers. Security generally involved physically protecting access
to the consoles that controlled the system. But, over time, microprocessors, personal
computers, and networking technologies were incorporated into ICS designs. Then in the
late 1990’s, more and more Internet Protocol (IP) devices started to replace proprietary
hardware, software, and communications protocols. This trend supported a growth in
connections between ICS and information technology (IT) systems so as to allow managers
to gain better access to real-time data on their systems on their corporate networks. These
networks are, in turn, often connected to the Internet. The inevitable result of this increased
reliance on standard computers and operating systems is to make ICS more vulnerable to
computer hackers. Tampering with ICS and SCADA systems, in turn, can have serious
personal safety consequences. Since industrial control systems directly control assets in the
physical world, if these systems are compromised, the outcome can be damage to critical
assets that place lives, property, and other critical infrastructure at risk. 66
POTENTIAL CASCADING EFFECTS OF ELECTRIC POWER FAILURE
Source: Department of Homeland Security67
18
According to a June 2011 report by the National Institute of Standards and Technology
(NIST), cyber security breeches of industrial control systems could include unauthorized
changes to the instructions, commands, or alarm thresholds that result in disabling,
damaging, or shutting down key components. Alternatively, false information about the
status of systems can be sent that cause human operators to make adjustments or to take
emergency actions that inadvertently cause harm. Such attacks on the power grid can have
cascading effects on other critical infrastructures. If a power-generating unit is taken offline
because of the loss of monitoring and control capabilities, it could result in a loss of power
to a transmission substation, triggering failures across the power grid if other substations are
not able to carry the added load. The resultant blackouts would affect oil and natural gas
production, water treatment facilities, wastewater collection systems, refinery operations,
and pipeline transport systems.68
There are a dearth of security solutions tailored for industrial control systems even though
those systems require a high degree of reliability.
As a consequence, relatively
unsophisticated cyber attacks can generate major damage and long-term outages. A
possible scenario hypothesized by the NIST is illustrative:
Using war dialers—simple computer programs that dial consecutive phone numbers
looking for modems—an adversary finds modems connected to the programmable
breakers of the electric power transmission control system, cracks the passwords that
control access to the breakers, and changes the control settings to cause local power
outages and damage equipment. The adversary lowers the settings from 500 Ampere
(A) to 200 A on some circuit breakers, taking those lines out of service and diverting
power to neighboring lines. At the same time, the adversary raises the settings on
neighboring lines to 900 A, preventing the circuit breakers from tripping, thus
overloading the lines. This causes significant damage to transformers and other
critical equipment, resulting in lengthy repair outages. 69
On top of the relatively new threats to the power grid associated with cyberwarfare, there
also remains a catastrophic risk, albeit with a low probability, that dates back to the Cold
War. The detonation of a nuclear weapon in the atmosphere will create a high-altitude
electromagnetic-pulse (HEMP) that creates an “instantaneous, intense energy field that can
overload or disrupt…electrical systems and high technology microcircuits.” 70 While the
threat of an EMP has been discussed and debated in scientific circles since the dawn of the
age of nuclear weapons, it was only in 2001 that Congress enacted legislation to formally
study the issue. The passage of that law created the “Commission to Assess the Threat from
High Altitude Electromagnetic Pulse” or EMP Commission. In July of 2008, the
Commission reported out to Congress with recommendations about protecting U.S.
infrastructure from EMP attack. 71 For the most part, these recommendations have not been
acted on.
The kind of electromagnetic damage that can damage a power grid as a result of an EMP
burst from a nuclear weapon can also be caused by a natural source. The risk arises from a
super solar flare that is generated periodically by the sun that can cause an extreme
geomagnetic storm. According to a 2009 report by the National Academy of Sciences,
ground currents induced by geomagnetic storms can overload circuits, trip breakers, and
19
even melt the copper windings of transformers. High voltage transmission lines ended up
acting like antennas, spreading these currents over wide areas.
The growing
interconnectedness of the power grid when combined with the capacity stressing demands
routinely required by electricity users has exacerbated the problem. Modeled on a giant
geometric storm that took place in May 1921, the authors of a 2010 National Academy’s
report projected that 350 transformers would be at risk of permanent damage leaving 130
million people without power. When transformers fail, so too will water distribution,
transportation, communications, and many emergency and other critical government
services. Given the 12-month lead time typically required to replace a damaged transformer
with a new one, the economic and societal disruption caused by this extensive of an outage
would be devastating.72
Whether the threat is from a low probability electromagnetic disturbance caused by a
nuclear weapon or major solar storm, or from the already clear and present danger of a
cyber attack, U.S. policymakers, industry leaders, and the American people must wake up to
both our deep dependency on the power grid to support our way of life, and its growing
vulnerability to disruption.
20
III. RECOMMENDATIONS
An emphasis on energy sector resilience helps to remind us of our enormous dependence on
the availability of reliable energy for nearly every aspect of our modern lives. It also makes
clear that we cannot take that availability for granted. Assuring its continuity requires
understanding the threats and vulnerabilities that can disrupt the sector and undertaking
actions to mitigate and manage those risks. At the same time, a focus on energy resilience
highlights that energy depends upon other critical systems that also must be safeguarded
against the risk of disruption, the most important of which is the natural ecosystem upon
which our lives ultimately depend.
It is self-defeating to adopt a myopic focus on simply protecting the way that energy is
currently produced, distributed, and consumed. As a practical matter, there is ample
evidence that the present locales for much of the world’s oil reserves are politically unstable
and will remain so for some time. Additionally, the kind of environmental and societal
consequences that are projected to arise from climate change will inevitably put the energy
sector under greater stress, making it more costly to protect. Finally, given the role that
reliable sources of energy has played in improving our quality of life, we should also
embrace the moral obligation of ensuring the actions—or lack of action—that we take now
do not come at the expense of the well-being of our children, grandchildren, and future
generations.
In short, a focus on resilience reminds us that we need to plan for both the near and longterm, since the end game is to safeguard the continuity of what is both critical and valuable
to us. In this way, by making resilience our overarching strategic imperative for the energy
sector, we are able to simultaneously consider the need to address the kind of threats to the
existing energy infrastructure that are typically the preoccupation of those who worry about
energy security, while acknowledging that we must also manage the kind of systemic risks
that have been highlighted by those who are advocates for sustainability. In other words,
an emphasis on resilience provides a way to find common ground as we confront the
challenging decisions we must now make to guide our energy future. If we stay on our
current trajectory, the energy sector will only become more brittle because of both internal
and external dynamics. A “business-as-usual” approach is reckless and irresponsible.
Moving from where we are to where we need to be will require that the American people
possesses a clear-eye understanding of the risks to our existing energy infrastructure. For a
starting point, we need to acknowledge that the energy sector we have today was
constructed largely in response to the prevailing market imperatives of the late 19th century
and the 20th century. In other words, it was not designed to provide resilience in the face of
contemporary risks. We need to assess its vulnerability to disruption and the likely
consequences should current and projected threats manifest themselves. To the extent we
are investing in new energy infrastructure and making major reinvestments in legacy
systems, we must seize every opportunity to “bake-in” resilience by incorporating design
and operational decisions that improve the capacity for the sector to withstand, respond,
recover, and adapt to foreseeable man-made or naturally occurring disruptions.
21
We must also apply ourselves to the task of energy efficiency, with the goal of using far less
energy, especially from fossil fuels sources, to meet the needs of our daily lives. The less
dependent we become on imported oil in particular, the more we reduce our exposure to
global forces that lie largely outside our control. The more we use cleaner sources of
energy, the more we reduce the risk of furthering climate change with its associated stress to
energy and other critical infrastructures, especially the power grid.
If adopted, the following seven recommendations will help to make resilience a central
element of U.S. energy policy:
1. Develop and Maintain a Comprehensive North American Energy Resilience Plan.
The President should establish, by executive order, a bipartisan Presidential
Commission to craft a comprehensive North American Energy Resilience Plan that will
inform legislation and executive branch policy. The Commission should include a
bipartisan group of 15 former Cabinet Officers, Governors, and former House and
Senate Members. In consultation with our Canadian and Mexican neighbors, the
Commission should be specifically tasked with creating a plan for improving energy
resilience and identifying the regulatory, economic, and diplomatic measures to support
the execution of the plan. In order to mitigate the risk of ideological conflict, the Plan
should be action-oriented and focus on identifying specific measures that will enhance
the capacity of the energy sector to withstand, respond, and recover from major
disruptive events. The Plan should have measurable short and long-term goals with 2year, 5-year, and 10-year timelines. The Commission should be a standing one with
membership terms of 3 years that can be renewed once. The Commission should be
supported by five advisory groups; one each for oil and gas, nuclear power, the electric
power grid, renewables, and conservation. Participants for these advisory groups
should be drawn from the private sector, non-profit sector, and public sector. The
Commission also should be supported by a committee of experts organized by the
National Academy of Science and the National Academy of Engineering to assist in
evaluating the underlying science that informs the Plan. The Commission should have
the specific mandate to advance public education and engagement by holding regular
public hearings and outreach.
2. Identify New Incentives for Consumers and Businesses to Embrace Energy
Efficiencies and to Reduce Energy Consumption.
Much of the regulatory power over the energy sector rests at the state level and too
much of that regulatory environment remains inconsistent. The result is a patchwork
quilt of requirements that undermines the national market for advancing proven
technologies and applications that advance energy efficiency.73 The President should
direct the Secretary of Energy and the Administrator of the Environmental Protection
Agency to prepare a report within 12-months that: (1) evaluates and ranks the 50 states
on their measures or lack of measures for improving energy efficiencies in households,
22
transportation conveyances, commercial properties, and industrial facilities; and (2)
identifies incentives that can be provided by executive order to encourage states to adopt
best practices for advancing energy conservation. One model program that should be
considered for replication around the nation is the Port of Los Angeles Clean Truck
Program. Established in 2008, the program offered financial incentives for new trucks
with lower emissions while imposing fees and a progressive ban implemented over four
years on older more inefficient trucks that move cargo in and out of the port terminals.
By January 2012, port truck emissions had been reduced by more than 80 percent while
reducing instances of traffic congestion caused by the frequent breakdowns associated
with the older truck fleet.74
3. Prepare a Formal Assessment of the National Security and Homeland Security
Implications Associated with Increasing the Development of North American and
Arctic oil and gas resources.
Since overseas oil production and the international supply routes that transport crude oil
to United States for refinement and consumption are vulnerable to disruption, U.S.
national security is advanced by having the source of those supplies come increasingly
from stable regions that are proximate to the U.S. markets. For instance, much of the oil
that comes into Southern California originates from the north slope of Alaska. This fact
helps to mitigate some of the risk associated with the current infrastructure capacity
issues that limit to one week the amount of refined fuels that are typically available to
support California consumption. Accordingly, there is a national security case to be
made for doing all that can be done to reduce, to the extent possible, reliance on
overseas sources, and elevating North American production when it can be done safely.
North America and its coastal regions are politically stable and, by definition, near to
U.S. consumers. There is an additional national security benefit from doing whatever
can be done at home to reduce the nation’s exposure to the risks attendant with
significant dependence on overseas supplies. As the United States eventually draws
down its dependency, we mitigate a need to send our men and women in uniform into
harms way to safeguard and secure access to important international energy markets.
At the same time, as the U.S. economy becomes more reliant on North American
sources of fossil fuels, so does the appeal for a potential adversary to target the
continental infrastructure that supports this growing reliance. Adequately protecting
U.S., Canadian, Mexican, and offshore infrastructure for energy production,
transportation and distribution is a homeland security imperative.
The President should require the Secretary of Defense, the Secretary of Energy, and the
Secretary of Homeland Security to prepare, within 12 months, an assessment of the
national security and homeland security equities associated with increased reliance on
North American-based fossil fuels.
Specifically, the construction of new U.S.Canadian pipelines should be evaluated for the potential contribution to national
security.
23
4. Reduce the vulnerability of U.S. refinery capacity to catastrophic disasters.
To date, the U.S. government has played no active role in deciding the location of the
nation’s refineries. These decisions have been made by industry and have been based
on market considerations including assessments of the local and state regulatory
conditions. The President should direct the Secretary of Energy to conduct a
comprehensive 12-month study on how recent and projected changes in the location of
U.S. refineries will affect the geographic dispersion of the nation’s refinery capacity.
The study should also propose recommended incentives for maintaining or advancing
the construction of new facilities outside of the Gulf Coast region as a national security
imperative. In addition, it should identify measures for remediating the disruptive risk
posed by a major hurricane to the Louisiana and East Texas coastlines and a major
earthquake in the Los Angeles and San Francisco Bay area. Congress should convene
hearings on the findings that should also be evaluated by the bipartisan Presidential
commission responsible for the National Energy Resilience Plan.
5. Task the U.S. national research laboratories to undertake a Cyber-Security
Initiative to develop a detailed profile of the physical-cyber risk to the electric grid
and to work with major research universities in developing options for mitigating
that risk.
Understanding the technical elements of the cyber threat to the power grid is a complex,
multi-disciplinary challenge, that requires an understanding of networking and
protocols, software and machine architecture, forma l methods and high-performance
computing, nanotechnology, and quantum and compressive imaging, to name a few.
Implementing potential solutions will involve an intricate array of not just technical
tools, but appropriate procedural protocols, public policy, and regulations. The U.S.
Department of Energy and the U.S. Department of Defense should launch a directed
research program that involves a collaborative effort amongst the U.S national research
laboratories, electric utilities, and the university-based cyber security research
community to simulate real-life conditions, systems and infrastructure, that would lead
to the discovery, testing, and analysis of state-of-the-art tools, technologies and software
in a scientifically rigorous manner. Concurrently, the research program should identify
policy guidelines and incentives for quickly integrating those tools, technologies, and
software into the power grid to bolster its resilience in the face of the cyber threat.
6. Encourage natural gas development with national standards supported by
appropriate monitoring and enforcement capabilities.
The Executive and Legislative branches of the federal government, working alongside
industry leaders, concerned citizens and other stakeholders should devise and implement
a regulatory framework for the safe and sustainable development of natural gas. Absent
leadership at the federal level, the industry is likely to face a more complicated,
24
convoluted, and costly regulatory landscape as a result of states and localities filling the
vacuum with their own safety and environmental safeguards. It is in the interest of
advancing national security and resilience for America to safely harness the massive
natural gas reserves that have been recently discovered in North America. A consistent
and credible regulatory regime is key to accomplishing this. The locus of the effort to
monitor compliance with national standards should be by third party entities such as
classifications societies that are widely used in the international maritime industry.
Industry should also work closely with governments at all levels to support the creation
of an adequately manned and trained public sector work force that is capable of
providing credible oversight of the third parties that are carrying out compliance
inspections.
7. Establish U.S.-Canadian cross-border working groups made up of public, private,
and academic participants in the Atlantic Northeast and in the Pacific Northwest
to develop a bi-national approach to safeguarding the power grid from the growing
risk of disruption.
All infrastructure is local, regional, continental, and global and policies and actions are
best devised at each of those levels. While the electric grid has become increasingly
interconnected, it still largely operates at the local, state, and regional level. In the case
of the Eastern Interconnection and the Western Interconnection, the regional grid is also
bi-national and includes provinces of Canada.
Identifying the appropriate plans, procedures, standards and regulations for bolstering
the resilience of the electric grid is best worked out at the regional level. To support this,
a cross-border working group should be stood up the in Atlantic Northeast and the
Pacific Northwest to reinforce and expand on the efforts of the North American Electric
Reliability Corporation (NERC) to provide “effective reliability standards that are clear,
consistent and technically sound, coupled with a strong standards enforcement
program.”75
The working groups should identify measures to meet projected demand, maintain
infrastructure, and improve transmission and distribution efficiencies. The groups
should also be charged with making recommendations to improve protective and
resilience efforts from naturally occurring events such as extreme weather and severe
solar storms, to man-made cyber threats to industrial control systems, physical attacks
on key components, and electromagnetic pulse risk associated with nuclear weapons.
The membership of the working group should include pubic officials at the local, state,
and provincial levels; electrical utility managers; major regional consumers of electricity
such as water utilities and transportation authorities; and relevant engineering and policy
experts from universities and national research laboratories.
25
APPENDIX
Definitions
Energy Security: “The connection between energy markets and national security in the
production, transmission and use of energy” (Deutch 2010).
Economic Resilience: The ability to maintain function by utilizing remaining sources as
efficiently as possible and investing prudently to promote repair and reconstruction (Rose
2009).
Resilience: The ability to prepare and plan for, absorb, recover from or more successfully
adapt to actual or potential adverse events (National Academy of Sciences 2012).
Resilience involves both the capacity to absorb shock and to rebound quickly. Resilience
actions for achieving these ends include protective measures such as hardening of assets,
systems, and networks (mitigation); nimbly responding when threats manifest themselves
with the aim of assuring the continuity of essential functions, services, and values; and the
rapid recovery of those functions, services, and values should protection and response
efforts fail under stress. In contrast to the emphasis that security places on prevention and
protection activities, the focus on resilience places a premium on anticipating and planning
for post-shock activities and outcomes. For example, property damage takes place at the
point of the shock, but business interruption just begins then and continues until the
economy has recovered to pre-existing baselines or a “new normal.” In the case of a
disruption of an oil pipeline, suppliers can deliver the product through alternative pipelines
or modes of transport. However, customers can reduce losses by using inventories,
conserving, using substitutes or bringing in alternative end-use technologies. Moreover,
customer-side resilience is usually less expensive than producer-side resilience (Rose
2009). Moreover, it promotes a sense of shared responsibility and empowers the general
citizenry to act (Flynn 2008).
References
Deutch, J. “Oil and Gas Energy Security Issues,” Resources for the Future Discussion
Paper, RFF, Washington, DC, 2010.
“Disaster Resilience: A National Imperative,” National Academy of Sciences, Washington:
The National Academies Press, 2012.
Flynn, S. “America the Resilient: Defying Terrorism and Mitigating Natural Disasters,”
Foreign Affairs 87 (2), 2008: 2.
Rose, A. Economic Resilience to Disasters, Community and Regional Resilience Institute
Report No. 8, CARRI, Oak Ridge, TN, 2009.
26
Acknowledgments
The important work of the Energy Sector Task Force, which played a support role in
informing the findings and recommendations of this report, could not have been undertaken
without the selfless commitment of time and intellect by Carter Page, founder and managing
partner of Global Energy Capital, who helped guide the discussions of the Task Force
meetings. The success of the Task Force effort was also due in no small part to the sage
counsel and skillful facilitation of Scott Bates, the current President of the Center for
National Policy. Moreover, the guidance and support provided to the Task Force by Adam
Rose of University of Southern California’s National Homeland Security Center for Risk
and Economic Analysis of Terrorism Events (CREATE), Vera Jelinak of New York
University’s Center for Global Affairs and Bruce Bullock of Southern Methodist
University’s Maguire Energy Institute has been invaluable. Adam Rose played a
particularly helpful role in reviewing the final report manuscript and providing many
helpful suggestions and comments. Finally, the Task Force and the authors of this report
were fortunate to have the able research assistance provided by Daniel Glassman, Andrew
Lavigne and Connor Goddard.
About the Center for National Policy
The Center for National Policy is an independent think tank dedicated for more than thirty
years to advancing the economic and national security of the United States. CNP brings
together thought leaders and decision makers who are focused on the revitalization of our
economy for the benefit of all Americans and the strengthening of the values of human
rights and democracy at home and across the globe.
27
About the Authors
Stephen E. Flynn
Dr. Stephen Flynn is a Professor of Political Science and the Founding Co-Director of the
George J. Kostas Research Institute for Homeland Security at Northeastern University.
Before arriving at Northeastern in November 2011, he served as President of the Center for
National Policy and spent a decade as a senior fellow for National Security Studies at the
Council on Foreign Relations. Dr. Flynn served in the Coast Guard on active duty for 20
years, including two tours as commanding officer at sea. He is the author of The Edge of
Disaster: Rebuilding a Resilient Nation (Random House, 2007), and America the
Vulnerable (HarperCollins 2004). Flynn holds the M.A.L.D. and Ph.D. degrees from the
Fletcher School of Law and Diplomacy, Tufts University.
Sean P. Burke
Sean Burke joined Northeastern University’s Kostas Research Institute as Associate
Director and Research Fellow on November 1, 2011. Immediately prior to coming to
Northeastern, Mr. Burke was the Vice President and Senior Fellow at the Center for
National Policy in Washington, DC. Mr. Burke has worked as an attorney at the Port
Authority of New York and New Jersey, in the Operations Division of the New Jersey
Office of Homeland Security and Preparedness and as a policy analyst at the Department of
Homeland Security. Mr. Burke is a former U.S. Coast Guard officer. Mr. Burke earned a
B.S. in Government from the U.S. Coast Guard Academy and a J.D. from Seton Hall
University School of Law.
28
ENERGY SECTOR TASK FORCE PARTICIPANTS
Daniel Ahn, The Citadel
Jared Anderson, Energy Intelligence Group
Mark Armentrout, The Texas Institute
Scott Bates, Center for National Policy
Mark Bernstein, University of Southern California
Albert Bressand, Columbia University
James Brown, Dowley Security
Bruce Bullock, Southern Methodist University
Sean Burke, Center for National Policy
David Chambers, California Energy Commission
Jonathan Chanis, New Tide Asset Management, LLC / New York University
Charles Cicchetti, Pacific Economics Group
Blake Clayton, LCM Commodities
George Cummings, Port of Los Angeles
Jack Derickson, Chevron
Breanne Dougherty, North American Gas Service
Alice Eckstein, New York University
Iraj Ershaghi, University of Southern California
Stephen Flynn, Center for National Policy
Mark Galeotti, New York University
Genevieve Giuliano, University of Southern California
Martin Gross, Sandalwood Securities
Stephen Hora, University of Southern California
Hillard Huntington, Stanford University
Vera Jelinek, New York University
Jason Juceam, Wilson Sonsini Goodrich & Rosati
Carolyn Kissane, New York University
Martin Laguerre, GE Energy
Andrew Lavigne, Center for National Policy
Michael Levi, Council on Foreign Relations
Alison Linder, Southern California Association of Governments
Mac Lynch, Apollo Alliance
Issac Maya, University of Southern California
Carter Montgomery, Central Energy LP
Edward Morse, Citigroup
Carter Page, Global Energy Capital LLC / Center for National Policy
Daniel Prieto, IBM Global Business Services
Alfred Puchala, Moelis & Company
William Raisch, New York University
Adam Robinson, Lehman Brothers Inc.
David Rogers, Chevron
Paul Ronney, University of Southern California
Adam Rose, University of Southern California
Geoffrey Rothwell, Stanford University
Bob Siegel, Willis North America
29
James Smith, Southern Methodist University
T.D. Smyers, U.S. Naval Air Station/Joint Base Reserve Base/Fort Worth
Erroll Southers, Uuniversity of Southern California
Gary Weed, ExxonMobil
Bernard Weinstein, Southern Methodist University
James Wicklund, Carlson Capital, LLC
Mine Yucel, Federal Reserve Bank of Dallas
The findings and recommendations of this report are those of the authors. While the
report has benefited from the input of the Task Force participants listed above, it has not
been written with the intent to reflect the individual and collective views of these
participants.
30
NOTES
1
“Disaster Resilience: A National Imperative,” National Academy of Sciences,
Washington: The National Academies Press, 2012, 3.
2
National Infrastructure Protection Plan: Energy Sector at
http://www.dhs.gov/xlibrary/assets/nipp_snapshot_energy.pdf
3
Ibid.
4
Ibid.
5
U.S. Energy Information Administration. How Dependent Are We On Foreign Oil? (Jun.
24, 2011) at http://www.eia.gov/energy_in_brief/foreign_oil_dependence.cfm.
6
U.S. Energy Information Administration, What are the major sources of Energy and Users
in the United States? (Oct. 25, 2011) at
http://www.eia.gov/energy_in_brief/major_energy_sources_and_users.cfm.
7
Ibid.
8
Chis Kahn and Jonathan Fahey, “Yergin: Only Politics Can Threaten Energy Supplies,”
Associated Press, 27 Oct. 2011.
9
The Future of Natural Gas, An MIT Interdisciplinary Study, Massachusetts Institute of
Technology, 2011. 4 at http://web.mit.edu/mitei/research/studies/documents/natural-gas2011/NaturalGas_Report.pdf
10
Ibid. 3
11
Ibid.
12
Kevin Roos, “Blackstone Makes $2 Billion Natural Gas,” New York Times, 27 Feb. 2012
at http://dealbook.nytimes.com/2012/02/27/blackstone-makes-2-billion-natural-gasinvestment/?ref=naturalgas.
13
U.S. Energy Information Administration. What is Shale Gas and Why is It Important?
(Feb. 14, 2012) at http://www.eia.gov/energy_in_brief/about_shale_gas.cfm.
14
U.S. Congressional Research Service. Displacing Coal With Generation from Existing
Natural Gas-Fired Power Plants. (R41027, Jan. 19, 2010) 3.
15
Ibid. 6
16
The Future of Natural Gas, An MIT Interdisciplinary Study, Massachusetts Institute of
Technology, 2011. Xiii at http://web.mit.edu/mitei/research/studies/documents/naturalgas-2011/NaturalGas_Report.pdf
17
U.S. Department of Energy. Modern Shale Gas Development in the United States: A
Primer. (April 2009). ES-1 at http://www.netl.doe.gov/technologies/oilgas/publications/epreports/shale_gas_primer_2009.pdf
18
Ibid.
19
U.S. Environmental Protection Agency. Hydraulic Fracturing Background Information.
(Updated Mar. 23, 2012) at
http://water.epa.gov/type/groundwater/uic/class2/hydraulicfracturing/wells_hydrowhat.cfm.
20
Ibid.
21
Ibid.
22
U.S. Environmental Protection Agency. National Pollutant Discharge Elimination
System. (Updated Mar. 12, 2009) at http://cfpub.epa.gov/npdes
23
“Natural Gas,” The New York Times, 29 Jun. 2011 at
http://topics.nytimes.com/top/news/business/energy-environment/natural-gas/index.html.
24
Ibid.
31
25
The Future of Natural Gas, An MIT Interdisciplinary Study, Massachusetts Institute of
Technology, 2011 at http://web.mit.edu/mitei/research/studies/documents/natural-gas2011/NaturalGas_Report.pdf.
26
Mireya Navarro, “New York Judge Rules Town Can Ban Gas Hydrofracking,” The New
York Times, 21 Feb. 2012 at http://www.nytimes.com/2012/02/22/nyregion/town-can-banhydrofracking-ny-judge-rules.html?_r=1&ref=naturalgas&pagewanted=print
27
U.S. Environmental Protection Agency. Climate Change Science Facts. (Apr. 2010) at
http://www.epa.gov/climatechange/downloads/Climate_Change_Science_Facts.pdf
28
Robert B. McKinstry, Jr., Thomas D. Peterson, Adam Rose and Dan Wei, “The New
Climate World: Achieving Economic Efficiency In a Federal System for GHG Regulation
Through State Planning,” North Carolina Journal of International Law and Commercial
Regulation. (Spring 2009): 3. Citing 4th IPCC Summary for Policy Makers at 5. and
http://www.census.gov/population/www/popclockus.html.
29
Ronald Gibbons: "The implementation of adaptive lighting technologies to the roadway
environment.” A presentation at the International Workshop: Smart and Resilient
Transportation Infrastructure, April 16-17, 2012, Virginia Tech, Blacksburg, VA.
30
http://www.green-energy-efficient-homes.com/energy-efficient-fluorescent.html
31
Environmental and Energy Study Institute, “Energy Efficiency Fact Sheet, May 2006 at
http://archives.eesi.org/publications/Fact%20Sheets/EC_Fact_Sheets/EE_Industry.pdf.
32
Ibid.
33
McKinstry, Jr., et. al., 816.
34
Ibid 32.
35
U.S. Energy Information Administration. Refinery Utilization and Capacity.(Jul. 28,
2011) at http://www.eia.gov/dnav/pet/pet_pnp_unc_dcu_nus_a.htm
36
U.S. Congressional Research Service. The U.S. Oil Refining Industry: Background in
Changing Markets and Fuel Policies. (R41478, Nov. 22, 2010) by Anthony Andrews, Pirog
Robert and Molly Sherlock.
37
U.S. Energy Information Administration. Oil and Petroleum Products Explained:
Refining Crude Oil(May 20, 2011) at
http://www.eia.gov/energyexplained/index.cfm?page=oil_refining.
38
Ibid.
39
U.S. Energy Information Administration. Refinery Utilization and Capacity (Jul 28,
2011) at http://www.eia.gov/dnav/pet/pet_pnp_unc_dcu_nus_a.htm.
40
U.S. Congressional Research Service. The U.S. Oil Refining Industry: Background in
Changing Markets and Fuel Policies. (R41478, Nov. 22, 2010) by Anthony Andrews, Pirog
Robert and Molly Sherlock.
41
Ibid. 1
42
Ibid.
43
Motiva Port Arthur Refinery Expansion Project. Project Information at
http://www.motivaexpansionproject.com/pages/projectinfo.aspx.
44
University of Washington, Department of Civil Engineering, Soil Liquefaction Site at
http://www.ce.washington.edu/%7Eliquefaction/html/what/what1.html
45
U.S. Energy Information Administration. Reductions in Northeast Refining Activity:
Potential Implications for Petroleum Product Markets (Dec. 23, 2011) at
http://www.eia.gov/analysis/petroleum/nerefining.
32
46
U.S. Geological Survey, March 2012 at
http://earthquake.usgs.gov/earthquakes/recenteqscanv/FaultMaps/Los_Angeles.html
47
Ibid.
48
Jeff Sommer, “Gas Price Disparity Seems Here to Stay,” New York Times, 10 Mar. 2012.
49
Diane Cardwell and Clifford Krauss, “As Price of Oil Soars, Users Shiver and Cross
Their Fingers,” New York Times, 21 Jan. 2012.
50
U.S. Energy Information Administration. What is the electric power grid and what are
some challenges it faces? (Oct. 20, 2009) at
http://www.eia.gov/energy_in_brief/power_grid.cfm.
51
National Energy Board. Canadian Energy Overview 2009 - Energy Market Assessment.
(Calgary, June 2010). 37.
52
Global Energy Network Institute at
http://www.geni.org/globalenergy/library/national_energy_grid/canada/canadiannationalele
ctricitygrid.shtml
53
Ibid.
54
The Future of the Electric Grid, An Interdisciplinary MIT Study. Massachusetts Institute
of Technology, 2011. 4-5 at http://web.mit.edu/mitei/research/studies/the-electric-grid2011.shtml
55
Ibid. 6
56
U.S.-Canada Power System Outage Task Force, Final Report on the August 14, 2003
Blackout in the United States and Canada: Causes and Recommendations (Washington,
DC, August 2004) at https://reports.energy.gov/BlackoutFinal-Web.pdf).
57
Ibid.
58
Robert J. Lopez and Andrew Blankstein, “Officials Begin Attempting to Restore Power
in San Diego Amid Blackout,” Los Angeles Times, 8 Sep. 2011 at
http://latimesblogs.latimes.com/lanow/2011/09/officials-begin-attempting-to-restore-powerin-san-diego-amid-blackout.html
59
U.S. Congressional Research Service. The Smart Grid and Cybersecurity: Regulatory
Policy and Issues (R41886 Jun. 15, 2011) by Richard J. Campbell.
60
Daniel Stone, “It’s the Electric Grid, Stupid,” The Daily Beast, 9 Sep. 2011.
61
Institute of Electrical and Electronics Engineers. Eye on Washington at
http://ieeeusa.com/policy/eyeonwashington/default.asp
62
Ibid.
63
Brian Wingfield, “Power Grid Cyber Attack Seen Leaving Millions in Dark for Months,”
Bloomberg News, 1 Feb. 2012 at (http://www.bloomberg.com/news/2012-02-01/cyberattack-on-u-s-power-grid-seen-leaving-millions-in-dark-for-months.html)
64
Ibid.
65
U.S. Department of Commerce. Guide to Industrial Control Systems (ICS) Security,
(Special Publication 800-82, Jun. 2011) by K. Stouffer, J. Falco and K. Scarfone.
66
Ibid
67
National Aeronautics and Space Administration. NASA Science News. Severe Space
Weather – Social and Economic Impacts. June 2009 at http://science.nasa.gov/sciencenews/science-at-nasa/2009/21jan_severespaceweather/
68
Ibid
69
U.S. Department of Commerce. Guide to Industrial Control Systems (ICS) Security,
(Special Publication 800-82, Jun. 2011) by K. Stouffer, J. Falco and K. Scarfone. 3-17.
33
70
U.S. Congressional Research Service. High Altitude Electromagnetic Pulse (HEMP) and
High Power Microwave (HPM) Devices: Threat Assessments (RL32544 Jun. 21 2008) by
Clay Wilson.
71
Ibid.
72
National Aeronautics and Space Administration. NASA Science News. Solar ShieldProtecting the North American Power Grid. October 26, 2010 at
http://science.nasa.gov/science-news/science-at-nasa/2010/26oct_solarshield/
73
For advancing energy efficiency standards for heating and cooling of homes and offices,
a regional as opposed to a national approach may be more appropriate given the high degree
of variation in mean temperatures throughout the country.
74
The Port of Los Angeles. Clean Truck Program Fact Sheet. Dec. 20, 2011 at
http://www.portoflosangeles.org/ctp/idx_ctp.asp
75
North American Electric Reliability Corporation. Company Overview at
http://www.nerc.com/page.php?cid=1|7
34