Thursday, January 10, 2008

On Critical Infrastrucure: Think Downstream

A brief note on the new GAO report on maritime security, focusing on the potential for disasters affecting the maritime energy infrastructure - particularly terrorist attacks against oil and liquified natural gas (LNG) tankers.

Much of the effort is focused, appropriately, on prevention. Much of this work is the responsibility of agencies such as DHS, the Coast Guard, and port authorities.

But an attack on the energy infrastructure - especially the oil infrastructure - could have downstream economic effects that local authorities can and should be prepared for. GAO alludes to a general lack of preparedness regarding these effects:

Multiple attack response plans are in place to address an attack, but stakeholders face three main challenges in making them work.

First, plans for responding to a spill and to a terrorist threat are generally separate from each other, and ports have rarely exercised these plans simultaneously to see if they work effectively together.

Second, ports generally lack plans for dealing with economic issues, such as prioritizing the movement of vessels after a port reopens. The President’s maritime security strategy calls for such plans.

Third, some ports report difficulty in securing response resources to carry out planned actions. Federal port security grants have generally been directed at preventing attacks, not responding to them, but a more comprehensive risk-based approach is being developed.
The short-term consequences of an attack - say, a small boat attack against a supertanker at a U.S. port - would be confusing enough, with many, many potential players involved:
[A]t the national level, the National Response Plan lays out the broad parameters of the federal role, both in spill response (that is, taking steps to contain a spill and mitigate its environmental damage, regardless of how it occurred) and in terrorism response (that is, for the attack, taking security-related actions and conducting an investigation).

The plan designates the Coast Guard as the primary agency for spill response on water and the FBI as the primary agency for terrorism response, and it calls on the two agencies to coordinate their responses if the incident involves an attack on energy commodity tankers.

Other federal plans and agreements also come into play, each with information about coordinating responses among the various agencies involved or taking specific action. At the port level, under the Oil Pollution Act of 1990 and the Maritime Transportation Security Act of 2002, Coast Guard’s Captain of the Port is to establish separate plans for spill and terrorism responses, working with local agencies, which are subsequently approved by Coast Guard districts. For both types of response plans, the agencies may include port authorities, fire departments, and facilities in the port. Some stakeholders, such as private oil spill response organizations, participate only in spill response planning, while other stakeholders, such as police departments, participate mainly in terrorism response planning.
But then the longer-term economic consequences are worth considering. Local authorities should be prepared for a potential economic slow-down:
Finally, the economic consequences of a major attack could include a temporary price spike reflecting fears of further attacks, and supply disruptions associated with delays of shipments if major transit routes, key facilities, or key ports are closed.

The loss of one cargo of an energy commodity might not have a significant, sustained price impact. However, if an attack results in port closures for multiple days or weeks, price responses and higher costs could mean losses in economic welfare to consumers, businesses, and government amounting to billions of dollars.
It's not just oil that we have to think about. If a port is closed or damaged, other commodities may not be able to enter, either.

The good news is that the U.S. has many ports, and for most commodities, other ports could pick up the slack. (Though this is not true for some shipments, as not all ports can handle the largest vessels, and not all ports can handle all types of commodities.) Especially in areas whose economic health is dependent on the inflow of goods to a given port or ports, these sorts of downstream effects should be considered part of the preparedness plan.

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