Special Report

Industry hopes its centralized assets aren't in the crosshairs.
Fortnightly Magazine - November 1 2001


Industry hopes its centralized assets aren't in the crosshairs.

When the topic of U.S. energy security comes up, OPEC typically springs to mind. Sure enough, following the Sept. 11 attacks on the World Trade Center and Pentagon, politicians and energy executives quickly rallied before the public for less reliance on oil supply from OPEC member nations, and for bolstering domestic energy production.

Some politicians saw the timing as perfect to promote the Bush administration's agenda to open environmentally sensitive areas-including the Arctic National Wildlife Refuge (ANWR) in Alaska-to oil and gas production. They pointed to the fact that, as of this past summer, the United States relied on imports for 57 percent of its oil supplies, and that 25 percent of these imports came from the Persian Gulf. Saudi Arabia, whose oil accounts for 14.5 percent of U.S. imports, could face instability from militants angry over U.S. military attacks on fellow Muslim countries, thereby jeopardizing U.S. access to oil in the country.

At the same time, other Republican backers of opening ANWR to production, most notably Sen. Frank Murkowski, R-Alaska, showed restraint, stating that the time was not appropriate to advance the ANWR issue, given the circumstances in New York and Washington, D.C. Some industry executives also backed away from commenting on the ANWR controversy, fearing they would be viewed as opportunists.

Consensus on Safeguards

While timing appears to be a divisive issue among interested parties on ANWR, another energy security provision-safeguarding the nation's existing energy infrastructure-has received almost unanimous support inside the Beltway.

Immediately after the attacks, electric utilities implemented emergency plans to protect transmission lines and generating stations, particularly nuclear power plants. The North American Electric Reliability Council (NERC) ordered utilities to implement emergency procedures. At the same time, Energy Secretary Spencer Abraham placed the energy industry on condition 2 alert, second only to condition 1, forcing plants and pipelines to tighten their security.

Preparation work two years earlier for the Year 2000 computer bug came in handy as electric utilities, in the Sept. 11 aftermath, sought to assess their infrastructure from top to bottom. The Edison Electric Institute (EEI) said its utility members had an easier time reviewing physical conditions of their electric transmission grids, as well as generating assets, because of the Y2K measures.

While preparing their systems for Y2K, the utilities developed procedures for locating and correcting disturbances throughout their systems. Equally important, during the Y2K preparations, the energy industry had formed strong ties with government agencies.

In the wake of the attacks, EEI convened a task force of utility chief executives to assess protection for transmission lines and key facilities. The association held an initial task force meeting one week after the attacks, bringing together 25 top utility CEOs from across the country.

"They decided to reinstate our Y2K network of information sharing," EEI spokesperson Jayne Brady says. Along with scrutinizing every detail of their operations, utilities also are "beefing up current security practices." She emphasizes, though, that while utilities have considerable experience dealing with natural disasters such as hurricanes and winter storms, there have been minimal cases of domestic terrorist incidents.

The Y2K preparations were "a very good exercise," NERC's media relations manager Ellen Vancko says. "A lot of that coordination is still in place."

Airliners vs. Nukes

For utilities that operate nuclear plants, industry officials have said there may be no defense against the kind of attacks that occurred Sept. 11. The Nuclear Regulatory Commission (NRC) said that nuclear power plants have "robust containment buildings" designed to withstand extreme events such as hurricanes, tornadoes, and earthquakes.

"However, the NRC did not specifically contemplate attacks by aircraft such as Boeing 757s or 767s and nuclear power plants were not designed to withstand such crashes," the NRC said in a statement. "Detailed engineering analyses of a large airliner crash have not yet been performed."

The NRC did assure that an airliner crash into a nuclear plant, spent fuel dry storage cask, or spent fuel transportation cask would not trigger a nuclear explosion. Regulators also require nuclear plant licensees to implement security programs that include well-armed civilian guard forces and physical barriers.

The Nuclear Energy Institute (NEI), a lobbyist for the nuclear industry, commented after the attacks that reactor containment buildings are designed to withstand the impact of airborne objects up to a certain force. "Design requirements with respect to aircraft impacts are specific to each facility," NEI says.

Entergy, operator of nine nuclear reactors in its South and Northeast divisions, responded immediately to the potential threat by limiting access at certain nuclear plant facilities to only one highway checkpoint instead of multiple entrances to the plants. While security is always tight, Entergy now is inspecting all packages, however harmless appearing, that enter its nuclear facilities.

As for those who fear nuclear plants would pose a grave danger if targeted by an airliner, "We are not speculating on 'what if?' scenarios because it could expose particular vulnerabilities," Entergy's Diane Park, manager of corporate communications for Entergy Nuclear South, says.

Entergy also trusts the attacks will not soften President Bush's commitment to keeping nuclear power a viable part of the energy supply mix. "Do we stop building skyscrapers because of the threat?" Park asks.

Lessons Learned at Ground Zero

During EEI's task force meeting, Eugene McGrath, chairman, president, and chief executive of Consolidated Edison of New York-the electric utility at ground zero of the World Trade Center attack, which has worked continuously to rewire large portions of lower Manhattan-strongly urged other utility companies to test emergency plans in their own communities, advice that was readily heeded by fellow utility executives, EEI's Brady says.

Con Edison was fortunate because it had redundant communication systems, such as its cache of BlackBerry mobile email systems that allowed it to overcome the disruption in telephone and mobile phone usage in New York City. The utility also had trained emergency staffers who were able to begin repair work immediately on damaged infrastructure in the ground zero area because they had a supply of respirator suits for its employees to wear.

As director of the energy industry's overall efforts, the Department of Energy has been in regular communication with the National Infrastructure Protection Center (NIPC), a department created in 1997 by President Clinton and located at the Federal Bureau of Investigation (FBI) headquarters in Washington. The center monitors threats and attacks against critical industrial infrastructure in the United States, including energy, telecommunications, and banking and finance.

In its response, the Federal Energy Regulatory Commission (FERC) issued a statement alerting energy companies that it would allow them to recover costs associated with beefing up security at their facilities.

"The commission is aware that electric, gas, and oil companies may need to adopt and/or update procedures and install facilities that further safeguard electric power grids and natural gas pipeline systems," FERC said in a statement. The commission said it's committed to expediting the processing on a priority basis any application that would "specifically recover such costs from wholesale customers." FERC said companies also can propose a separate rate recovery mechanism, such as a surcharge over currently existing rates or some other cost recovery method.

The FBI Connection

Vancko says her organization has been in almost daily contact with the FBI to ensure proper security measures are being followed. "We've had direct contact with the federal government and our security coordinators," she said.

Each of the 21 NERC regions employs its own security officer who is responsible for ensuring proper measures are being taken by member energy companies. Some regions have a large nuclear reactor presence while security coordinators in other regions such as the Pacific Northwest must watch over hydroelectric assets. Each region has different factors on which security is based, Vancko says.

In June, three months before the attacks in New York and Washington, NERC issued a study on protecting electricity industry infrastructure. The council offered a quote at the beginning of the study from a book entitled with a refrain that rings similar to comments of pundits who compared the Sept. 11 actions to the Japanese raid of Dec. 7, 1941. "Whether at Pearl Harbor or at the Berlin Wall, surprise is everything involved in a government's (or in an alliance's) failure to anticipate effectively," the quote reads.

In the study, "An Approach to Action for the Electricity Sector," NERC noted that recent requests for security funding often had been met with the rhetorical management question: "Nothing has ever happened, so why spend money on security?" NERC responded that much has happened, including computer intrusions, sabotage, vandalism, and plots to disable towers and substations, although not on the scale of what occurred to Con Edison's infrastructure on Sept. 11.

Nuclear Plant Self-policing Found Suspect

The nuclear industry's move toward self-regulation of security at its power plants hit a major pothole in the wake of the attacks on the World Trade Center and Pentagon.

The Nuclear Energy Institute (NEI), the lobbying arm for the nuclear power industry, has worked with the Nuclear Regulatory Commission (NRC) to implement the safeguards performance assessment (SPA) program, a process that involves nuclear plant operators conducting "full-scale, force-on-force exercises" on their own with less direct NRC involvement. Currently, the NRC uses its own staff to oversee security through its operational safeguards response evaluation (OSRE), which measures the ability of nuclear power plants to protect against attacks aimed at causing radiological sabotage.

The SPA pilot was scheduled to kick off in September, with the Palo Verde nuclear generating facility as the first participant. Arizona Public Service, operator of Palo Verde and a subsidiary of Pinnacle West, had decided to postpone its involvement in the program a week prior to the Sept. 11 attacks. The company now is penciled in as the second participant in the pilot, starting in January, behind TXU Electric's Comanche Peak nuclear plant, southeast of Dallas.

Comanche Peak was selected to implement the SPA program starting in November, but the company could not guarantee its participation would begin as scheduled in the light of the attacks. "The drill date is very tentative at this point," TXU spokesman Rand LaVonn says.

"SPA is an effort to show that utilities can carry out these drills on their own and do a very good job," LaVonn explains. Comanche Peak always has been ranked as one of the most secure nuclear plants in the country and that's probably why it was chosen for the pilot program, he adds.

In announcing the pilot this past summer, the NRC said the SPA program is part of ongoing efforts to identify more efficient and effective ways to assess security at nuclear power plants.

As federal regulators have moved to allow the nuclear power industry to police itself, serious breaches in plant safety still are taking place, according to an NRC security expert. In an assessment of nuclear plant safety, released in 1999, David Orrik, a retired naval officer and security specialist at the NRC, charges cutbacks in direct federal oversight of nuclear plant safety could have devastating effects if a reactor was the target of sabotage.

In his "Differing Professional Opinion" assessment submitted to the NRC's executive director for operations, Orrik notes that through the NRC's OSRE program, significant weaknesses were identified in 27 of the 57 plants that had been evaluated as of February 1999. "'Significant' here means that a real attack would have put the nuclear reactor in jeopardy with the potential core damage and a radiological release, i.e., an American Chernobyl," he writes.

Orrik says OSRE is the only program NRC has that directly focuses on the terrorist threat against nuclear power plants, whether by overt or surreptitious attack.

"And now there is increasing pressure throughout the nuclear power industry to reduce costs, and security forces are taking direct hits; reduction in annual budgets, reduction in number of security officers," Orrik says. "A countervailing pressure is necessary."

In 1999, the Clinton administration decided to keep the OSRE program in place but assured industry the NRC would work toward a program whereby utilities would conduct self-assessments of a portion of their nuclear plants' security, says Paul Gunter, director of the reactor watchdog project at the Nuclear Information and Resource Service.

Industry observers note that prior to the Sept. 11 attacks, the NRC and nuclear plant operators had argued against tighter security at plants because there was no evidence of a credible terrorist threat.

Edwin Lyman, scientific director for the Nuclear Control Institute in Washington, D.C., says the nuclear industry will probably wait until the current panic subsides before it pushes again for self-assessment of its security operations as an alternative to the NRC assessing its protection mechanisms. "The industry is totally opposed to being graded," Lyman says.

Even after the original bombing of the World Trade Center in 1993, the NRC relied on trends indicating that nuclear plants were unlikely to be attractive targets of terrorists, says Bennett Ramberg, author of several books on nuclear power and weapons, including . While there is no evidence of cases where terrorists have successfully sabotaged a nuclear reactor anywhere in the world, Ramberg notes recent news from South Asia shows that Pakistani mujaheddin have threatened to sabotage Indian nuclear reactors.


"Despite the rise in incidents and the educational experience of preparing for the Year 2000 conversion exercise, surveys and anecdotal evidence have shown that awareness of potential threats and vulnerabilities, linked to the industry's growing dependency on information systems, is relatively low," NERC said in the study. "To assure the same high levels of service capability into the 21st century, utility executives and their heads of operations, physical security, and cyber security must take steps now to protect their assets, their service, and their public image against the increasing tide of threat and disruption."

NERC recommends that the entire energy sector, as well as the telecommunications and banking industries, participate in regional interdependency simulation exercises to gain a better understanding of how the industries interact. "The value of such tabletop exercises was recognized in the late 1980s by the National Electric Security Committee formed by NERC at the behest of the United States government's National Security Council, as it addressed an increase in state-sponsored global terrorism," the study said.

The electricity sector, NERC noted, may want to take the lead in bringing these industries together to enhance infrastructure security for the Salt Lake City Winter Olympics next year.

Quick, Hide the GIS Data

The Interstate Natural Gas Association of America (INGAA), the gas pipeline industry lobbying group, has been coordinating with its member companies to beef up security at above-ground facilities and along pipeline rights-of-way, says Martin Edwards, director of legislative affairs for the association.

Many in the energy industry, including INGAA, have urged the federal government to limit the level of information available to the general public about the location of energy facilities. For example, the Office of Pipeline Safety, a regulatory and enforcement agency inside the Department of Transportation, decided to curtail access to its brand new National Pipeline Mapping System, a geographic information system database containing locations and attributes of gas pipelines, hazardous liquid lines, and liquefied natural gas facilities operating in the United States.

Because it took the NPMS off its public Web site, OPS plans to provide information from its mapping database to particular pipeline operators and other energy companies on an as-needed basis, DOT spokesperson Patricia Klinger says. OPS, though, has not determined whether it will return the mapping database to its Web site.

In a safety advisory issued Sept. 11, OPS told pipeline operators not to discuss specific details of their security arrangements. Generally, pipelines have increased patrols and video surveillance of pipeline facilities. With saboteurs and terrorists possibly still operating inside the United States, "there's a fear they are very crafty," Klinger says.

While there is a history in South America and Africa of political insurgents targeting oil and gas pipelines, similar activity rarely has occurred in the United States. Nonetheless, Edwards says INGAA believes it was critical for the government to remove any detailed GIS maps that could serve as a guide for potential saboteurs.

INGAA has been working with the NIPC since the department's inception in 1997 and has a good relationship with them, Edwards explains.

Perhaps the most dramatic security measure directly affecting the gas industry occurred in the Boston area where, as a security measure, the U.S. Coast Guard halted shipments of liquefied natural gas (LNG) to Distrigas' import terminal in Boston Harbor. LNG plays an important role in the New England gas supply picture, which includes an increasing number of gas-fired power plants. LNG provides 25 percent of New England's daily peak gas supply in the winter and 15 percent of the region's total gas supply, according to the New England Gas Association.

While the price of gas in New England may spike due to LNG import restrictions, the opposite may be true for heating oil this winter, according to Robert Cuomo, a principal with the DRI-WEFA, a Lexington, Ma.-based consulting firm. The demand for jet fuel will plummet this winter with the slowdown in air travel, which will translate into refineries producing more distillate fuels such as heating oil, Cuomo says.

Decentralize and Diversify

A presidential commission in 1997 issued a report, "Critical Foundations: Protecting America's Infrastructures," that noted "the significant increase in the proportion of oil transported via pipelines over the last decade provides a huge, attractive, and largely unprotected target array for saboteurs. Elements of the pipeline system that could be targeted include lines at river crossings, interconnects, valves, pumps, and compressors."

For the electric power industry, the commission report said the most significant physical vulnerabilities appear to be related to substations. "There is general agreement that since the industry designs for stability during single and certain double failures, a coordinated attack on multiple targets would be required to cause a significant disruption to service," the report said. "Furthermore, such an attack would need to hit multiple targets simultaneously or in rapid sequence."

In its national energy plan, the Bush administration last spring noted that the nation's energy infrastructure "is vulnerable to physical and cyber disruption that could threaten its integrity and safety."

Some politicians and environmentalists contend the Sept. 11 attacks show the industry should not rely so much on large, centralized plants and should instead focus on independent power producers and renewable sources.

George Friedman, chairman of STRATFOR, a geopolitical consultant, says power plants and refineries are potential targets because they "are not subject to rapid regeneration." United States energy infrastructure has inclined toward concentration and efficiencies of scale because there was the perception that terrorists would not strike on U.S. soil. "That creates a substantial vulnerability," Friedman said during a Sept. 24 conference call on energy infrastructure security.

While nothing good can come out of the Sept. 11 attacks, energy independence should now be an issue government officials address in a serious manner, said Hugh Holman, senior research analyst at CIBC World Markets. In 1979, President Carter told the United States that by 1990, it should have decreased by half its reliance on imported oil. Instead, oil imports climbed considerably, Holman notes. "One of the things we can do is ... adopt alternative energy sources other than oil," Holman says.

Seth Dunn, a research associate at the Worldwatch Institute, says distributed generation (DG) has the potential to offer the same reliability for electric power that the Internet has for communications. "DG can provide an invaluable hedge," Dunn said.

In moving to a more decentralized energy structure, Robert Jablon, a Washington-based energy attorney, argues security would be enhanced by a greater focus on local energy production, at least as a backup. "One area of concern is the consequence of disruption of the electricity transmission grid," Jablon said. "In these regards, more attention may also need to be paid to advancing distribution generation."

After winning a ringing endorsement in President Bush's national energy plan released last spring, the nuclear power industry may encounter some turbulence in the short-term from the Sept. 11 attacks. Nevertheless, nuclear power from existing plants will remain economically competitive in terms of cost of producing energy in a period that may see extreme volatility in the price of oil and gas, Cuomo explains.

For the energy industry as a whole, Cuomo says it, like all other industrial sectors, is certain to be hurt by the short-term economic effects from the World Trade Center and Pentagon attacks. The economic rebound that analysts were forecasting for the fourth quarter of this year prior to Sept. 11 probably will begin to occur no earlier than the second quarter of 2002 because of the disruptions, he predicts.

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