House 112-76. March 19, 2012. The Implications of Refinery Closures for U.S. Homeland security and Critical Infrastructure safety. House of Representatives.
[Excerpts from the 54 page testimony]
Our country relies on a complex and modern infrastructure system to distribute energy domestically. This reliance is critical to delivering necessary supply to meet demand in the Northeast as well as in all regions of our country. Any minor disruption in this system can create major problems for many of the very things that we depend on every day, from heating our homes to fueling our vehicles. A major disruption can cause serious issues for our Nation and our security.
If a buyer is not found for the Philadelphia refinery and the facility is closed, over half the refining capacity in the Northeast will be removed in a span of only 6 months. I have serious concerns as to how much stress this puts on the current infrastructure system and the increased risk in the event of a natural disaster, terrorist attack, or other geopolitical event.
After Hurricanes Katrina and Rita hit the Gulf Coast, we witnessed just how vulnerable the reliance on the Gulf Coast and pipeline infrastructure for energy supplies can be. Five days after Hurricane Katrina struck, the U.S. Minerals Management Service reported that 88.5% of Gulf crude oil production was shut down or off-line. This amounted to 25% of the total Federal off-shore crude production, leaving many platforms evacuated or destroyed. Less than a month later, Hurricane Rita made landfall in the Gulf, resulting in significant damage. The cumulative effect of these two storms resulted in the temporary suspension of operations at ten refineries, a loss of over 2 million barrels per day from the market, and significant pipeline disruption.
The Colonial pipeline, a critical artery for the Northeast to receive our refined fuel products from the Gulf, was temporarily closed, along with Capline and Plantation pipelines.
Of similar concern is the threat to oil facilities from acts of terrorism. Since the September 11, 2001, terrorist attacks, there has been great concern about the security of the Nation’s critical infrastructure including oil refineries and pipelines. Al-Qaeda and its affiliate networks have previously expressed interest in attacking critical infrastructure in the homeland including oil and gas facilities. Last year, the Department of Homeland Security and the FBI warned State and local police across the United States that al- Qaeda has a continued interest in attacking oil and natural gas targets. In fact, this information came directly from intelligence that was seized during the raid of Osama bin Laden’s compound in Abbottabad. Al-Qaeda targeting the oil infrastructure has long been a part of the al-Qaeda playbook.
In 2002, the group claimed responsibility for the bombing of a French oil supertanker off the coast of Yemen. In a brazen February 2006 operation, al-Qaeda attacked the Abqaiq facility in eastern Saudi Arabia. The facility is one of the world’s largest and it produces 13 million barrels of oil per day. Although the damage inflicted by the attack was quickly contained, the mere news of an attack pushed oil prices up by $2. Perhaps more significantly, experts believe that attacks on oil and gas infrastructure could be an increasingly common likelihood as al-Qaeda changes its target set to an area that would garner the most attention and inflict the most damage on the United States’ economy. Relatedly, the Department of Homeland Security recently warned about cyber-attacks against the oil and gas sectors by the hacker group Anonymous.
In closing, the threat to our energy distribution system is very real. Accidents, natural disasters, and terrorist attacks have proven to disrupt oil facilities’ operations in the past. I expect that they will also do it in the future. That is partly why I am concerned about further pressuring our delivery systems to accommodate in the event of Philadelphia refinery closures. I look forward to hearing from today’s witnesses on how these closures will impact the region and the country and how we can provide for the continuing security of our oil distribution systems and the safety of our homeland.
CHAIRMAN PATRICK MEEHAN. The rising cost of energy of course is dominating the headlines and impacting so significantly our budgets, our business budgets, and our family budgets, demonstrating, I think, for all of us how economic security, energy security, and National security are all really inextricably intertwined in this industry. There were riots because of rising fuel prices back in the late 1970s. I remember 1979 when I was growing up in Bucks County, some of the first gas riots occurred in the Five Points section of Levittown, my hometown in southeastern Pennsylvania,
BRIAN HIGGINS. What are the other options for getting oil to this area? Are the ports in this area equipped to both handle crude oil? Are any nearby ports able to handle waterborne oil products? Even if there are ports that can handle waterborne oil products, will there be an ability to inject oil into the pipelines used by the refineries? Furthermore, we also need to look at the security issues involved in relying on cargo ships and pipelines to supply oil to this region. We know that before his death, Osama Bin Laden asked al-Qaeda operatives to target pipelines, oil tankers, and dams in the United States. Since bin Laden’s death, however, is this still a threat? What exactly are the Department of Homeland Security and the Department of Transportation doing to ensure that these pipelines are not vulnerable to terrorist attacks? In addition to terrorist attacks, what are the Department of Homeland Security and the Department of Transportation doing to ensure that in the event of a natural disaster, oil will reach the Northeast if the Pennsylvania refineries are closed? After Hurricanes Katrina and Rita, we witnessed just how vulnerable these pipelines can be. We need to know how to be prepared in the event of a natural disaster.
BRANDON WALES, DIRECTOR, HOMELAND INFRASTRUCTURE THREAT AND RISK ANALYSIS CENTER, DEPARTMENT OF HOMELAND SECURITY
HITRAC’s initial analysis shows that the refinery closures should not have homeland security impacts due to this loss of supply.
HITRAC serves as the analytic arm of the Department’s Office of Infrastructure Protection and provides strategic, operational, and tactical analysis to our public- and private-sector partners so that they can make more-informed decisions regarding the management of risk. Our work supports homeland security-related exercises, training activities, contingency and security planning, and response to real-world incidents that affect the Nation’s infrastructure. Modeling complex real-world systems such as the petroleum network underpins all of the analysis performed by HITRAC. A massive and complex network of refineries, transmission pipelines, tank farms, and terminals produce and deliver refined petroleum products. Because the network is so interconnected, interruption of any of these components could cascade into other parts of the system causing imbalances and shortages. However, the system is dynamic. In the event of a disruption in one part of a pipeline network, for example, flow can sometimes be diverted to functioning pipelines or production can be surged at another refinery while consumers respond to shortages and resulting price increases by limiting consumption. Because of the significant role that petroleum plays in our economy, HITRAC has undertaken a number of capability development efforts to better understand the domestic and international fuel supply. In 2011, for example, we completed a model of the National transportation fuel system, which helps analysts estimate the effects from damage or disruption to components of this system.
HITRAC has provided support to decision makers during a wide variety of real-world incidents, including flooding in the Midwest, Hurricane Irene, the Japanese earthquake and ensuing risks of tsunami and radiation fallout, wildfires in the Southwest, earthquakes in Peru and Haiti, and industrial accidents including the BP Oil Spill.
The crude oil and petroleum product network forms a complex and integrated supply chain, which is global in its scope. Supply-chain analysis examines the ways individual firms make operational decisions in response to disruptions, including how they purchase goods, produce products, sell them in markets, and ship them via different modes of transportation. Disruptions within these chains can affect the ability of some infrastructure entities to provide their products or service to the population. Foreign facilities and foreign sources of materials are of particular concern because they are farther away, are outside of U.S. Federal assistance, and may be more prone to disruption than domestic sources and facilities.
Mr. MEEHAN. This committee deals with the issue of terrorism, and one of the great concerns that we have is the vulnerability of pipelines and other kinds of assets within the network from refineries to transmission pipeline to tank farms and terminals to the most vulnerable presumably among them, pipelines themselves, and I just did sort of a quick off the back of the cuff look just going through January 2006, we had a jihadist website that linked al-Qaeda that encouraged attacks on the United States pipelines. That was in January 2006. In June 2007, the jet fuel pipelines at JFK were targeted and attacked. In July and September 2007, we had the Mexican rebels detonated bombs along the pipelines along the Mexican coast. In November 2007, we had a United States citizen that was convicted of trying to conspire to blow up a pipeline from here in the middle district of Pennsylvania. We had testimony earlier this morning that bin Laden in Abbottabad had created an identification of pipelines as one of the principal targets. What is the vulnerability that we have to the sureness of supply here if a pipeline like the pipeline that is servicing us that will be used as the substitute to serve the capacity here can be impacted? Can it be impacted and will it have a downstream implication for our region?
Mr. WALES. Over the past several years, the Office of Infrastructure Protection has conducted over 60 vulnerability assessments on pipeline infrastructure throughout the country. In some cases, in conjunction with that, we have conducted over 80 buffer-zone protection plans. That is, working with State and locals and the private sector on integrated planning related to the security and resilience of those pipelines, and as part of those buffer-zone plans have given out over $10 million in grant funds to local communities to execute the planning and improve security around pipelines. In addition, during the fiscal years of 2012 and 2013, the Office of Infrastructure Protection will be executing a regional resiliency assessment of the Colonial and Plantation pipelines because they are a real critical artery in our overall energy infrastructure on the East Coast and in some cases because of the closing of these refineries they are becoming even more critical.
We would say that part of that regional resiliency assessment will have us conducting detailed assessments of various critical chokepoints along those pipelines both hydraulically critical pumping stations as well as control centers and others.
Our primary concern would be a prolonged damage to the pipeline that kept it down for more than a week, more than 2 weeks. I think, you know, once you start getting beyond a week or 2, the ability for the excess inventory and terminals along its route starts to be diminished and then you could start to have more serious impacts,
Mr. CARNEY. I think you have identified the main homeland security risk with respect to the concentration of refining capacity here in the United States, and it is hard for me to imagine that our homeland security is not threatened in some way by that, by concentrating the facilities that will deliver refined products or petroleum products to regions in the country as opposed to having a more distributed network. In addition, the discussion this morning has centered around the off-shoring frankly of refining capacity, which would then make the United States, in my opinion, less independent, less energy-independent and more at risk to overseas attacks on whatever facilities. I appreciate the fact that you are going to do an analysis of those pipelines in particular because it seems to me that it is a little bit hard to wrap my head around the fact that Dr. Gruenspecht has indicated that the Colonial pipeline is near capacity and we are going to be relying on it to move product here to our region, that that won’t have a negative impact. But setting that aside, will your study include the risks associated with relying more on refined product coming from overseas where facilities in other parts of the world that we can’t protect, so to speak, are at risk?
Two of the refineries have already closed. So we are talking about long-term implications of our own energy independence as a Nation as well as the security of that network, and it is hard for me to imagine that it is not going to be a greater risk. It is a little disturbing to hear, Dr. Gruenspecht, that a lot of these facilities are basically taking domestic supplies and exporting refined products in a world where we are importing such a big part of our petroleum needs, that the market drives certain of these products overseas. In fact, my understanding is, a lot of those refined products out of the Gulf Coast are for export. Is that accurate?
Mr. GRUENSPECHT. We have been exporting increasing amounts of product from the Gulf Coast. Obviously the Gulf Coast also is a major source of supply to other parts of the country. It is the major refining center in the country. Roughly half of the refining capacity in the country is on the Gulf Coast.
Mr. CARNEY. So at a time when we are putting in policies that are having negative implications for our demand for end-products, i.e., the use of ethanol and other biofuels, to help the Nation be more energy-independent, because of the way the markets work, we are still exporting product, which is making us less independent.
Let me give you a real-world example of where this is in operation around the world. One of the biggest threats that we face in the world right now is the threat of a nuclear-armed Iran, and one of the actions that we have taken in the Congress is to impose sanctions on Iran, which have been putting significant pressure, economic pressures on the country. One of those sanctions is to attack their need for refined petroleum products because they don’t have refining capacity in the country, and it is having devastating impacts. Can’t you just flip that around?
Finally, there has been a great deal of attention recently on the future of electric vehicles as the “future of transportation.” It was recently reported that the United States is pursuing a trade case against China over its practices related to rare earth minerals, a vital component of hybrid car batteries. The same reports note that China controls 97 percent of the world’s supply of rare earth minerals. As Congress and the administration seek ways to increase our energy security, economic security, and National security, AFPM urges policymakers to weigh the full spectrum of trade-offs.
While weaning the United States off oil is a good talking point, artificially forcing the market to adopt expensive new technologies that rely on the fair trade practices of China could bring a new set of challenges. In the meantime, the United States can instead develop its own abundant supply of energy, which can increase our energy, economic, and National security. The United States can do so without subsidies or mandates, all our industry needs is the room to do it. As we look to diversify our energy sources, we must not turn our back on petroleum-derived fuels that we will continue to depend upon for decades to come. To do so would simply disadvantage the consumer, harm our National economy, and erode our energy security.
Robert Greco, Group Director, Downstream & Industry Operations, American Petroleum Institute.
About 75 U.S. refineries have closed since 1985. As this has happened, however, the remaining larger, more efficient facilities have expanded capacity so the total U.S. refining has actually increased by 13%.