Maritime Cybersecurity Regulation on the Horizon

King & Spalding
Contact

Over the past year, various institutions and organizations—both domestic and international—have shown an interest in moving the increasingly prevalent cybersecurity conversation offshore. Domestically, both Congress and federal agencies have pushed to mandate cybersecurity measures for ships, ports, terminals, and offshore facilities. Internationally, a United Nations agency has issued new guidelines designed to enhance cybersecurity in worldwide shipping operations. 

Even experienced energy companies may overlook this confluence of interest in maritime cybersecurity and its implications. Critical energy infrastructure has long been at the forefront of cybersecurity, both because it is a frequent target of cyberattacks and because the potentially debilitating effects of a successful attack. However, maritime cybersecurity regulations will not necessarily target just the energy industry and are likely to come from a variety of sources, some of which may be unfamiliar to industry players. As we head into 2017, we encourage members of the energy industry to recognize and prepare for maritime cybersecurity regulation that is unquestionably on the horizon domestically and internationally.

Background

In the modern digital age, nearly every industry relies on various computer systems to support operations. Maritime operations are no exception. Ships, ports, terminals, and offshore facilities often rely on Internet-connected operational and information technologies for communication, navigation, logistics, safety monitoring, security, and operation of machinery, among other things. Moreover, in the very near future we are likely to see an increasing number of interconnected, autonomous machines that communicate directly with one another. While these technological advances can enhance the efficiency, safety, and effectiveness of maritime operations, they also expose companies to significant risks in the form of cyberattacks. 

Virtually all computer systems are at risk of cyberattacks. Much of the new connectivity in maritime operations is achieved by integrating widely-used commercial platforms, which are well understood by hackers, with aging industrial control systems. Successful attacks on operational technology, such as industrial control systems, can have huge consequences, both in terms of the impact to ongoing operations and in terms of business and legal exposure for harm to health, safety, or the environment. This category of attack is also most likely to attract intense government scrutiny of the company’s operations. Most cyberattacks, however, seek to steal information, not cause physical damage. Information technology—corporate systems—offer hackers a wealth of sensitive data to target, including things like production and processing techniques or strategies for negotiating with governments and trading partners.

Despite a strong national interest in regulating the cybersecurity of critical energy infrastructure, the industry’s maritime operations have largely gone under the radar. To date, approaches to cybersecurity in the energy industry’s maritime operations have largely been voluntary, and thus company- or even vessel-specific. At the same time, global economic growth and the corresponding increase in energy demand have led many energy companies to explore offshore options for replenishing reserves and meeting production needs. Oil and gas producers, in particular, have shown a steadily rising interest in maritime technologies, such as floating production storage and offloading vessels and floating liquefied natural gas operations, that can both meet energy demand and align companies with global efforts to reduce emissions. But the rapid adoption of new operational technologies and an increased dependence on networked cyber structures opens the possibility of cyberattacks that could threaten the economy, worker safety, the environment, or national security.

In 2016, a number of domestic and international institutions or organizations have promoted the development of cybersecurity measures that would prevent potential disruptions to maritime operations caused by hacking, malware, or other cyber-related risks. As this article will detail, the proposed measures are not specific to the energy industry—they apply equally to other sectors with maritime operations, including shipping, port and terminal operations, and other maritime services. Because of their diffusion across a number of institutions and their broad applicability, these indicators of impending maritime cybersecurity regulation may not be immediately apparent to energy industry players. But they are of special importance to energy industry participants with significant offshore operations. In preparing for 2017, all eyes should be on maritime cybersecurity as the next horizon for an industry that has always been at the forefront of cybersecurity regulation. 

Cybersecurity in the Energy Industry

Energy was the second-most likely industry to be targeted by cyberattacks in 2015, and it led that category the year before.[1] Attackers have demonstrated an intent to do everything from engaging in industrial espionage to taking control of operational equipment. At least in a dozen public incidents in the last decade, foreign hackers have gained remote access to U.S. energy facilities and stolen sensitive information, such as passwords or engineering schematics.[2] Power plants, offshore facilities, pipelines, and dams are all prime targets.

Compounding the problem, energy facilities are frequently operated by outdated industrial control systems that have been rendered vulnerable to cyberattacks as a result of bringing these systems “online.” For example, former and current U.S. officials disclosed earlier this year that a dam outside of New York City was infiltrated by Iranian hackers in 2013, providing the hackers access to the industrial control systems operating the facility. Attackers with access to industrial control systems may be able to manipulate the physical operations at a facility, potentially causing physical damage, employee injury, or environmental harm. According to researchers, the U.S. has more industrial-control systems connected to the Internet—over 57,000—than any other country in the world.

Because of the particular vulnerability of networked energy infrastructure, as well as the potentially debilitating effects of a successful cyberattack, regulatory agencies have moved quickly to issue standards or offer guidance. The Federal Energy Regulatory Commission (FERC) was one of the first agencies in any industry to adopt cybersecurity regulations. It has adopted eleven critical infrastructure protection standards for the U.S. power grid that require cybersecurity measures, approving version 6 of these standards in January 2016.[3] The Nuclear Regulatory Commission (NRC) has also promulgated mandatory cybersecurity regulations and has issued guidance on best practices for compliance.[4] Meanwhile, the Department of Energy (DOE) and the Transportation Security Administration (TSA) have promulgated non-binding guidance addressing cybersecurity of the electricity subsector, oil and gas subsectors, and pipeline security.[5]

As a new year begins, the energy industry is now facing the prospect of new regulatory oversight of its cybersecurity efforts in maritime operations. The past year revealed a series of indicators that maritime cybersecurity regulation is imminent. Six months ago, the United Nations (UN) International Maritime Organization (IMO) published Interim Guidelines on Maritime Cyber Risk Management (“Interim Guidelines”),[6] which were drafted with input from representatives of 44 Member States, including the United States Coast Guard (USCG). Six months before that, the U.S. House of Representatives sent a bill to the Senate that would require USCG to enforce cybersecurity standards at U.S. ports and in maritime operations. Meanwhile, the two federal agencies with primary jurisdiction over industrial maritime operations—USCG and the Bureau of Safety and Environmental Enforcement (BSEE)—have been speaking out publicly about the need for regulatory involvement in maritime cybersecurity.[7] In 2017, we expect maritime operations will emerge as the next frontier of cybersecurity regulation affecting in the energy industry. 

IMO Interim Guidelines

The Interim Guidelines were approved at a June 1, 2016 meeting of the IMO Maritime Safety Committee (MSC). The IMO is a specialized agency of the UN tasked with creating a regulatory framework to ensure the safety, security and environmental performance of international shipping. The MSC is a central part of the IMO dealing with all maritime safety and security issues.[8] The Guidelines are the product of an MSC working group that included the USCG and representatives from 43 other countries.[9] The Interim Guidelines provide high-level recommendations regarding protection against current and emerging cyber threats and vulnerabilities for all participants in international shipping. The Interim Guidelines currently are non-binding, although their mere existence may inform legal standards of care and may affect the approach of domestic regulators on this issue. Moreover, the MSC considered promulgating mandatory guidelines at its most recent meeting in late November of 2016, electing instead to wait for a committee to complete further study on facilitation issues.

The Interim Guidelines’ operational risk management approach closely maps the National Institute of Standards and Technology (NIST) Framework for Improving Critical Infrastructure Cybersecurity (“Framework”).[10] The Framework, a collaborative effort among a wide group of government and industry experts, has proven particularly influential in just a short period of time. Developed pursuant to Executive Order 13636 and released in 2014, the Framework was a source of inspiration for, among other things, FERC’s recent CIPs. Even though drafted specifically for critical infrastructure, it has been adapted by numerous regulators outside of the energy arena—including the FCC, FDA, and NHTSA—as well as by private companies to fit the unique risks of their particular industries.[11]

The resemblance between the Interim Guidelines and the NIST Framework is particularly evident where the Interim Guidelines employ the Framework’s now-familiar, five-element cycle of cybersecurity practices:

  1. Identify:  Define personnel roles and responsibilities for cyber risk management and identify the systems, assets, data and capabilities that, when disrupted, pose risks to ship operations.
  2. Protect:  Implement risk control processes and measures, and contingency planning to protect against a cyber event and ensure continuity of shipping operations.
  3. Detect:  Develop and implement activities necessary to detect a cyber event in a timely manner.
  4. Respond:  Develop and implement activities and plans to provide resilience and to restore systems necessary for shipping operations or services impaired due to a cyberevent.
  5. Recover:  Identify measures to back-up and restore cyber systems necessary for shipping operations impacted by a cyberevent.[12]

It is no surprise that the Interim Guidelines would draw upon the Framework’s model. The Framework coalesces the best of existing cybersecurity standards and practices into flexible risk-based guidelines, which mirrors the IMO’s goal with the Interim Guidelines.

House Bill 3878

While the IMO Interim Guidelines are the most recent indicia of regulatory interest in maritime cybersecurity, they are certainly not the only one. 2016 opened on the heels of the U.S. House of Representatives passing H.R. 3878, the Strengthening Cybersecurity Information Sharing and Coordination in Our Ports Act of 2015, in late December 2015. House Bill 3878 would have been Congress’s first statutory mandate for cybersecurity regulation in maritime operations. The House’s primary focus was the security of ports, but the bill’s requirements would have extended to upstream energy facilities, such as oil rigs, natural gas platforms, and mobile offshore drilling units. Although the congressional session expired with the bill still in the Senate Committee on Commerce, Science, and Transportation, the bill’s sponsor and two of its three co-sponsors have returned to Congress.

The real significance of House Bill 3878 to the energy industry comes from the combination of the bill’s two primary components and what it reveals about the future of maritime cybersecurity regulation. First, the House bill tasks the Department of Homeland Security (DHS) with developing a maritime cybersecurity risk assessment model and guidelines for incident reporting. Although the finer details of the risk assessment model would be left up to DHS, the bill requires that the model be “consistent” with the NIST Framework. Like the IMO Interim Guidelines, House Bill 3878 reflects the continuing influence of the NIST Framework in the development of cybersecurity measures. House Bill 3878 also requires DHS to “establish guidelines for voluntary reporting of maritime-related cybersecurity risks and incidents” to the National Cybersecurity and Communications Integration Center, as well as to appropriate federal agencies. It instructs DHS to “seek to ensure participation of at least one information sharing and analysis organization . . . . representing the maritime community.” Currently, the collection, analysis, storage, and transmission of maritime threat and incident data is served by the Maritime Information Sharing and Analysis Center (Maritime ISAC), a member of the National Council of ISACs.[13]

The second primary component of House Bill 3878 is an amendment to the Maritime Transportation Security Act (MTSA). Under the MTSA, the USCG is currently tasked with preventing maritime “transportation security incidents,” defined as incidents “resulting in a significant loss of life, environmental damage, transportation system disruption, or economic disruption in a particular area.”[14] To achieve this objective, the MTSA requires vessel and facility operators to prepare and submit vulnerability assessments and security plans aimed at deterring transportation security incidents to the “maximum extent practicable.”[15] House Bill 3878 would revise the relevant provisions of the MTSA to require that USCG-enforced vulnerability assessments and security plans include the “prevention, management, and response to cybersecurity risks.”

Agency Interest in Maritime Cybersecurity

Even in the absence of legislative action, the energy industry should prepare for USCG to begin incorporating cybersecurity risks into its enforcement of the MTSA. Although the MTSA does not contain any explicit cybersecurity requirements (nor do any of the thirteen major regulations predicated upon it), USCG and DHS have been exploring avenues for regulating cybersecurity under the MTSA’s existing language. In August of 2016, USCG released a paper titled “Cyber Risks in the Marine Transportation System,” which explained USCG’s risk-based approach to cybersecurity in the marine environment. Notably, the paper stated that organizations need to incorporate their cyber procedures into MTSA-required security plans.[16] This is consistent with USCG’s June 2015 “Cyber Strategy” report that identified USCG’s intent to incorporate cybersecurity risk information into existing vessel and facility security assessments at an unspecified future time.[17] The paper also stated that existing MTSA notification requirements extend to reportable incidents “with a cyber nexus.” Along the same lines, USCG and DHS sought public comment in 2014 and 2015 on the development of maritime cybersecurity standards consistent with the five core functions of the NIST Framework: identify, protect, detect, respond, and recover.[18] The focus of these standards was on the vulnerability of facility industrial control systems and the possibility of physical damage resulting from a cyberattack. Thus, House Bill 3878 appears to have been an attempt to codify cybersecurity enforcement efforts that were already underway within USCG.

Like USCG, BSEE has indicated an interest in regulating maritime cybersecurity even in the absence of a specific statutory mandate. Under the Outer Continental Shelf Lands Act (OCSLA), BSEE has jurisdiction over the safety of offshore oil and gas exploration and production, which includes permitting, conducting inspections and investigations, enforcing regulatory requirements, and overseeing oil spill response planning and preparedness. Due to their overlapping jurisdiction, BSEE and USCG operate under a Memorandum of Understanding and various Memorandums of Agreement concerning the regulatory supervision of offshore oil and gas facilities.[19] Under the agreements, BSEE is the lead regulatory agency for fixed and floating outer continental shelf facilities, as well as mobile offshore drilling units while attached to the seabed. Where applicable, BSEE and the Coast Guard conduct joint inspections evaluating both agencies’ regulations.

BSEE has not yet promulgated any regulations that specifically address cybersecurity. However, it has indicated an interest in regulating cybersecurity even in the absence of a specific statutory mandate to do so. It appears possible that BSEE could chose to interpret its current authority to include cybersecurity. Specifically, BSEE’s current regulations require companies to utilize the “best available and safest technology” in oil and gas exploration, development, and production.[20] This standard could be read to require that offshore facilities have adequate cybersecurity measures in place. At a recent conference on offshore technology, BSEE Director Brian Salerno, sharing a stage with Rear Adm. Paul Thomas, Assistant Commandant for U.S. Coast Guard Prevention Policy, publicly acknowledged the agency’s concern with the cyber-vulnerability of the offshore oil and gas industry. The BSEE director said that “regulatory consistency on the part of the BSEE and the Coast Guard” would be necessary to promote a broader safety culture that includes operators, contractors, suppliers, vendors, and all of the various parts of the offshore oil and gas community. BSEE and the Coast Guard have been collaborating regarding possible approaches to maritime cybersecurity risk management, after making similar public statements in 2015.[21] Cybersecurity regulation by BSEE would likely involve more direct supervision of upstream energy operations than the USCG regime, which principally relies on vessel and facility operators to perform self-assessments. 

In April of 2016, BSEE also issued a final rule on Blowout Prevention and Well Control (“Well Control Rule”).[22] The Well Control Rule was a response to the 2010 Deepwater Horizon incident. It establishes requirements related to blowout preventers on oil and gas wells, with implementation staged over several years. Notably, the Well Control Rule also includes a provision requiring real-time monitoring capability for deepwater, high-temperature, or high-pressure drilling activities. The rule requires using an independent, automatic, and continuous monitoring system capable of recording, storing, and transmitting data regarding certain operational systems.[23] The real-time monitoring requirement arguably exposes companies engaged in drilling activities to additional cybersecurity risks, for example by prohibiting “air gapped” operational technology as a cybersecurity measure. BSEE acknowledged this risk in the notice-and-comment process, but concluded that the oil and gas industry already should have effective cybersecurity measures available.[24] On the one hand, if BSEE begins regulating maritime cybersecurity, as predicted, the agency may face criticism for the trade-off reflected in this conclusion. On the other hand, the conclusion underscores BSEE’s position that maritime cybersecurity measures are already needed and expected. The Well Control Rule’s real-time monitoring requirement may also provide BSEE with an added hook to justify regulating maritime cybersecurity under the existing “safest and best technology” standard.   

Consequences of Cybersecurity Regulation

The increased attention to maritime cyber risks raises a number of legal issues for companies involved in offshore energy production. To start, both USCG and BSEE have the authority to issue civil fines for regulatory violations. BSEE has authority under OCSLA to assess civil penalties of up to $40,000 per day.[25] Violations could even potentially result in criminal liability exposure if the agency were to determine that a violation was knowing and willful. Violations of the MTSA are subject to a penalty of $25,000 per violation.[26] Increased regulation also places a burden on businesses to be prepared to responding to government investigations or requests for information. In this context, regulatory compliance could prove particularly challenging because facilities’ industrial control systems can be highly individualized, meaning companies’ approaches to cybersecurity may vary tremendously.

Furthermore, cybersecurity regulation by USCG or BSEE and the issuance of Interim Guidelines by IMO can inform the standard of care applied in any civil lawsuits that follow a maritime cyber incident. A successful cyberattack on offshore oil and gas facilities involves more than financial impacts and reputational effects; it can potentially result in property and environmental damage, physical injuries, and even death. In such cases, state law negligence or wrongful death actions are to be expected, as are shareholder derivative lawsuits. Industry standards and regulations—even voluntary standards such as the NIST Framework—are commonly used to establish a baseline of reasonableness against which a company’s actions will be measured. For that reason, is worth noting how industry organizations such as the Oil Companies International Marine Forum (OCIMF)—which represents 105 oil companies internationally and consults with the IMO—have made maritime cybersecurity a priority heading into the new year. 

Conclusion

As these coalescing efforts evidence, maritime operations loom as the next frontier of cybersecurity regulation for the energy industry. As the IMO Interim Guidelines and House Bill 3878 demonstrate, the NIST Framework is likely to remain influential in the development of maritime cybersecurity standards. Meanwhile, the interest in direct regulation and enforcement by USCG and BSEE shows how maritime cybersecurity vulnerability is coming to be understood as not just a matter of business operations, but also as a threat to the national economy, the environment, and human life. Energy industry participants, in particular, should stay abreast of these developments and consult with experienced counsel regarding both participation in public policy and compliance with the present and anticipated maritime cybersecurity regulation regime. We also encourage companies in the industry to consider a number of steps outlined here to facilitate risk reduction efforts for their business:

  1. Conduct cybersecurity training for employees;
  2. Coordinate with legal and human resource departments regarding regulatory compliance;
  3. Upgrade outdated IT products vulnerable software;
  4. Improve the physical security of IT, such as data rooms and cabinets;
  5. Upgrade outdated and aging control systems in facilities;
  6. Separate data networks, especially between on- and offshore facilities;
  7. Seek out vendors, suppliers and contractors who promote a cybersecurity culture;
  8. Consider ways of contracting around third-party cyber vulnerabilities;
  9. Consider specific risk mitigation measures, such as the U.S. Safety Act;
  10. Organize legal work streams and emergency response coordination in advance of cyber incidents.

 

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.

© King & Spalding | Attorney Advertising

Written by:

King & Spalding
Contact
more
less

King & Spalding on:

Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
- hide
- hide

This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks. By continuing to browse this website you accept the use of cookies. Click here to read more about how we use cookies.