The Nickel Report

Recent press reports indicate that a cyber-attack disabled the third-party platform used by oil and gas pipeline company Energy Transfer Partners to exchange documents with other customers. Effects from the attack were largely confined because no other systems were impacted, including, most notably, industrial controls for critical infrastructure. However, the attack comes on the heels of a Federal Bureau of Investigation and Department of Homeland Security (“DHS”) alert warning of Russian attempts to use tactics including spearphishing, watering hole attacks, and credential gathering to target industrial control systems throughout critical infrastructure, as well as an indictment against Iranian nationals who used similar tactics to attack private, education, and government intuitions, including the Federal Energy Regulatory Commission (“FERC”). These incidents are raising questions about cybersecurity across the US pipeline network.

Federal oversight of pipeline safety and security is split respectively between the Department of Transportation’s Pipeline and Hazardous Materials Safety Administration (“PHMSA”) and DHS’s Transportation Safety Administration (“TSA”). PHMSA and TSA signed an MOU in 2004, which has been continually updated, coordinating activity under their jurisdictions over pipelines. Pipeline security activities within TSA are led by the Pipeline Security Division.

Notably, the Implementing Recommendations of the 9/11 Commission Act of 2007, codified at 6 U.S.C. 1207(f), authorizes TSA to promulgate pipeline security regulations if TSA determines that doing so is necessary. To date, TSA has opted not to issue pipeline security regulations, instead preferring a collaborative approach with industry through its Pipeline Security Guidelines, which were updated just last month. Nevertheless, growing risks are leading to calls for mandatory oil and gas pipeline cybersecurity regulations. Some assert that pipelines should adopt a regime similar to electricity grid regulations under Critical Infrastructure Protection (“CIP”) Standards, issued by the North American Electric Reliability Corporation (“NERC”) and approved by FERC.

Containing numerous critical infrastructure elements across a vast and far-flung network that carries a commodity critical to public welfare, the US oil and gas pipeline network shares many characteristics with the electric grid. Furthermore, the growing interconnection of information systems, as well as of the economy in general, increases the potential for events in one sector, particularly energy, to have cross-sectoral impacts.  For these reasons, there is legitimate concern that a cyber-attack leading to an oil and gas pipeline disruption could have wide-reaching effect, especially in light of the electricity subsector’s growing reliance on natural gas for generation.

However, there are important differences between the electric grid and pipeline system, most notably in the risk of cascading impacts, that may distinguish the appropriateness of regulations that set a baseline for cybersecurity. Events at an individual pipeline can result in cascading disruption both upstream and downstream in the oil and gas production process, as well as beyond to other sectors. Yet the electricity grid, where systems are more closely tied together, is unique in that a localized event can quickly result in a cascading failure of other operational technology across the grid. This was evidenced by blackouts throughout the Northeast in the 1970s and 2003, which were responsible for spurring the creation of NERC and its reliability standards. NERC CIP Standards, which only apply to systems connected to the electric grid, provide assurance to electricity subsector critical infrastructure owners and operators that other connected systems must adhere to a cybersecurity “floor.”  The NERC CIP Standards require measures to mitigate risk that the actions of one grid participant will not cascade to damage the systems of others on the grid. This is not the case with oil and gas pipelines, where cybersecurity regulations may actually divert resources from actual operational security and toward pure compliance.

Concerns about electric-gas coordination may point to issues beyond cybersecurity, and toward the electricity subsector’s growing vulnerability to common-mode disruption. As noted by NERC after its GridEx IV security exercise, meeting challenges in the electric grid’s ever-evolving threat environment may require “consider[ing] whether the diversity of fuel sources (today and into the future) presents a vulnerability to common mode failures or disruptions.”

It should be noted that certain oil and gas facilities, though not necessarily pipelines, are already subject to cybersecurity requirements under DHS’s Chemical Facility Anti-Terrorism Standards (CFATS). The CFATS Risk Based Performance Standard 8 outlines cybersecurity measures subject to DHS review during a CFATS inspection.

There are, of course, steps that oil and gas companies can take beyond regulatory compliance to mitigate risk of cyber-attack. In December 2016, PHMSA and TSA issued a joint notice, after activists tampered with certain pipelines, discussing steps to harden SCADA control systems on pipeline operational technology, including segregating the control system network from the corporate network, limiting remote access to control systems, and enhancing user access controls. In addition, all companies, including those in the oil and gas subsector and beyond, should consider engaging in an efficient and highly tactical incident response planning process that incorporates all necessary stakeholders across the enterprise, including those from both information technology and legal.

Oil and gas companies seeking further risk mitigation should also consider certifying or designating their cybersecurity programs under the Support Anti-Terrorism by Fostering Effective Technologies Act (SAFETY Act). Overseen by the DHS SAFETY Act Office, the act provides significant liability protections where an approved technology or service is deployed to counteract an “act of terrorism.”  Such an act of terrorism is determined by DHS, need not be politically motivated, and can include a cyberattack. While not necessarily applicable to lower scale cybersecurity incidents (by comparison, the Boston Marathon was not designated an act of terrorism), SAFETY Act liability protections can mitigate risk posed to companies by a cyber-attack with catastrophic consequences.