Debate over Cybersecurity Oversight for Gas Pipeline and Bulk Power Systems Continues

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Earlier this month, Federal Energy Regulatory Commission (“FERC”) Chairman Neil Chaterjee testified before the U.S. Senate Committee on Energy and Natural Resources on issues related to cybersecurity in the energy industry.

In his testimony, Chaterjee seemed to soften at least his messaging, if not his position, calling for increased mandatory oversight of cybersecurity for gas pipelines.  In a joint letter written last June, Chatterjee, along with fellow FERC Commissioner Richard Glick, advocated for transfer of this oversight responsibility for gas pipelines from the Transportation Security Administration (“TSA”) to the Department of Energy (“DOE”).

The impetus for the letter was a cybersecurity event earlier last year in which multiple U.S. pipeline companies reported that certain of their communications systems had been shut down as a result of hacking.  And while the event did not lead to a disruption in gas service, it underscored the increasing vulnerability of the nation’s pipeline infrastructure and the U.S. electric grid, given the grid’s heavy reliance on natural gas as fuel source.

The current level of TSA’s oversight of the approximately 2.7 million miles of pipeline across the U.S. could be considered inadequate in several regards:

  • TSA has just six employees dedicated to this oversight, which amounts to 450,000 miles of pipeline oversight per employee.
  • TSA has no mandatory compliance or reporting requirements with respect to cybersecurity.
  • TSA relies exclusively on company self-reporting of cybersecurity incidents.

In stark contrast, the bulk power system is subject to intense, mandatory oversight and reporting with respect to cybersecurity:

  • Under the Federal Power Act, FERC has the authority to manage the standards, and oversight is carried out through the North America Reliability Corporation (“NERC”).
  • For cybersecurity events that involve international actors, both DOE and the Department of Homeland Security (“DHS”) also have oversight involvement.
  • Unlike the gas industry’s discretionary self-reporting, NERC Critical Infrastructure Protection standards (CIP standards) include nine standards and approximately 45 separate requirements.

NERC’s CIP standards are comprehensive; compliance with them can be time-consuming and expensive.

The bulk power system is seeing an increase in cyberattacks.  Changes in technology and customer platforms that look to provide the end-user greater access to and control over the system also create greater vulnerability as interconnection points with the grid increase.  The pipeline industry argues that its vulnerability is limited because many pipeline facilities still operate on manual controls to open and close flow.  But as automation and digital sensors become more prevalent in the transportation of a physical commodity like natural gas or oil, the opportunities for cyber-intrusion similarly increase.  Given the interrelationship between the gas and electric industries, and the growing vulnerability of both to cyberattacks, continued disparate treatment of the two industries for cybersecurity purposes becomes increasingly more difficult to justify.

Moreover, the lack of mandatory reporting standards for gas pipeline cyber events may, in fact, be leaving the industry less secure by creating a false sense of security.  Last summer, FERC issued a final rule and instructed NERC to adopt new rules aimed at standardizing reporting of cyber events and required greater sharing of information with other agencies, particularly DHS.  FERC determined that there was a “reporting gap,” noting that for the same reporting period, NERC reported zero events, DOE reported four events and DHS reported 59 events.  NERC is developing standards to address FERC’s concern regarding reporting accuracy in order to gain a better sense of the frequency and scope of the attacks.

Not surprisingly, the gas pipeline industry continues to push back against any mandatory oversight, contending that its cybersecurity risks are simply not comparable to those faced by the bulk power system.  Avoiding mandatory compliance requirements certainly has other benefits:  in January 2019, media reports announced that NERC had issued a $10 million fine related to cybersecurity violations for what NERC called a company’s culture of lax attention to cyber issues.  By avoiding the imposition of mandatory compliance requirements, the gas pipeline companies remain free from the imposition of fines for non-compliance.  A potential starting point for gas pipeline oversight could be those facilities that have digital interfaces and face comparable security risks as facilities serving the bulk power system.  With this approach, as the pipeline industry transitions to more automated operation, a framework for oversight would already be in place.

Overall, strong arguments exist for ending the hodgepodge of regulatory oversight and disparate treatment for gas pipeline and bulk power systems with respect to cybersecurity management. Questions regarding which agency or agencies will control and how inter-agency coordination will be handled continue to linger, but as instances of cyberattacks grow, it is clear that the nation would benefit from a coordinated effort of oversight at the federal level, including a well-defined path for sharing information regarding cybersecurity events.  Armed with a better sense of the nature and frequency of the attacks, improved protocols may help thwart acts of cyber-intrusion throughout the nation’s energy infrastructure.

* * *

I was a recent guest on POWER Magazine’s The POWER Podcast with Aaron Larson, where among other issues, I discussed some of the differences between natural gas pipeline and bulk power system cybersecurity requirements. Click here to listen to the episode.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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