In recent years, the security of computerized data and the ability of public and private entities to respond to unauthorized penetration of computer networks has been intensely debated by policymakers. The risks associated with network breaches remain a critical concern to companies, including those in the energy sector.
Cybersecurity efforts to harden critical infrastructure against cyber incidents advanced significantly on both sides of the Atlantic in February 2013. Both the European Union’s (EU) Cybersecurity Strategy and President Obama’s Executive Order on Improving Critical Infrastructure Cybersecurity, issued within days of each other, seek to advance a regulatory framework and set of practices to improve cybersecurity in a variety of sectors, including the Energy Sector, that impact economic and national security.
The one certainty over the next few years will be greater regulatory requirements whether through purely voluntary means, the use of incentives to adopt cybersecurity best practices, or government mandates. Energy and natural resources companies will, if they have not already done so, want to take notice and work proactively within these new regulatory frameworks to advance this public debate.
President Obama’s Cybersecurity Executive Order
On February 12, 2013, President Obama issued an Executive Order focused on improving critical infrastructure cybersecurity, which is defined so broadly that it would certainly include all phases of the energy sector. The Order marks a major milestone in the federal government’s efforts to guard against growing cyber threats, but by its terms the Order is inherently limited. The Order addresses cybersecurity through a series of largely voluntary measures designed to increase information sharing from the government and to develop industry best practices through voluntary mechanisms and incentives. In conjunction with the Order, the President also issued an updated Presidential Policy Directive (PPD) on critical infrastructure aimed at (i) improving coordination, functional relationship, information sharing, and situational awareness within the Executive Branch, and (ii) assessing and improving the federal government’s relationship with private industry and critical infrastructure stakeholders. Information about the PPD can be found at this link: White House Fact Sheet on PPD.
President Obama therefore directed key cabinet officials to improve the sharing of classified and unclassified government information to specific targets of cyber incidents and further voluntary programs to encourage the adoption of baseline cybersecurity standards. The Order also creates a “consultative process” to coordinate improvements to the cybersecurity of critical infrastructure including through the use of sector-specific coordinating councils, the Critical Infrastructure Partnership Advisory Council, and critical infrastructure owners and operators, which would include the owners and operators of all elements of the energy sector. The Order also seeks to develop a set of best practices through the creation of a “Cybersecurity Framework” to be developed through a public-private partnership headed by the Director of the National Institute of Standards and Technology (NIST). In advance of publishing a formal Request for Information (RFI), NIST has already published a notice advising of the content of the RFI to promote thinking within industry about this process, which is available at: Framework for Reducing Cyber Risks to Critical Infrastructure. In response, energy and natural resource companies should develop a strategy to engage NIST either directly or through industry or other associations. Finally, the Order makes clear that the federal government will consider incentives and other means to encourage the adoption of cybersecurity baseline requirements and standards.
For more information on the Order, please view “President Obama Issues Executive Order on Cybersecurity” at www.kslaw.com/imageserver/KSPublic/library/publication/ca021513.pdf.
The EU’s Cybersecurity Strategy and Proposed Directive
On February 7, 2013, the European Commission published two cybersecurity documents designed to provide a comprehensive vision of how European Union Member States, national authorities, and private industry will prevent and respond to cyber disruptions and attacks: (1) a Cybersecurity Strategy focusing on improving coordination among EU Member States to improve cyber resilience and reduce cybercrime and (2) a proposed Directive on Network and Information Security that would impose significant regulatory hurdles on a host of private entities, including providers of energy, banking, transport, health, internet, social media, e-commerce, and cloud computing services, if implemented.
EU Member States are to focus, through the Cybersecurity Strategy, on five strategic priorities: (i) achieving cyber resilience; (ii) drastically reducing cybercrime; (iii) developing cyberdefence policy; (iv) developing industrial and technical resources; and (v) establishing a coherent international cyberspace policy for the EU. Of greater significant to the private sector and “market operators” in the energy sector may be the draft European legislation in the proposed Directive. If implemented, the Directive will require market operators in the energy sector to take “appropriate” measures to manage the risks posed to the security of their networks that “shall guarantee a level of security appropriate to the risk presented.” Moreover, the Directive would impose notification requirements regarding cyber incidents and penetration on the energy sector that could conflict with other data protection regulation efforts. Finally, the Directive would authorize significantly enhanced oversight by authorities within Member States to investigate non-compliant entities, conduct security audits, and issue binding instructions to market operators in and out of the energy sector.
For more information on the EU’s Cybersecurity Strategy and Directive, please view “European Commission Publishes Cybersecurity Strategy and a Proposed Directive on Network and Information Security” at www.kslaw.com/imageserver/KSPublic/library/publication/ca022213.pdf.
Immediate Effects
While additional regulatory burdens are sure to arise, the most immediate impacts of the efforts of the White House and EU will concern whether and how to engage public authorities and policymakers as they consider baseline cybersecurity standards and additional mandatory requirements. Given the potential risks associated with cyber incidents and the certainty that additional regulation in this area will impose costs on both the energy sector and the end user, only active engagement with these public authorities can ensure that energy and natural resources companies will not be left out of the national and international conversation on these important topics.
