A GOP lawmaker’s interest in building up redundancy in US pipeline capacity to mitigate cybersecurity risks would likely provide reliability benefits but at a cost too high to garner investor interest, energy industry stakeholders and analysts said.
Speaking July 20 at a congressional hearing on efforts to thwart the growing prevalence of ransomware attacks, Representative David McKinley, Republican-West Virginia , suggested “development of a redundant energy system of additional pipelines, so that if we do get hacked, we can [work] around it.”
The idea was commended by those focused on the need to shore up pipeline reliability and resilience to cyberattacks as well as weather-related disruptions.
But several analysts pointed to the inherent economic hardships of acquiring investment for and obtaining profit in backup pipeline capacity, with utilization limited to emergencies. Also, the low-carbon agenda of the Biden administration and siting difficulties experienced by a slate of projects in recent years push the idea further into the realm of impossibility, as industry would need significant government subsidies to get onboard, industry watchers said.
“I feel redundant pipelines is an unrealistic solution to the problem,” said Matt Andre, a supply team analyst with S&P Global Platts Analytics. “Pipeline costs can run into the billions of dollars, which would make this option economically unfeasible.”
Andre said he could see the value in low-cost, small interconnects to offer more route optionality. But, “a pipeline’s goal is to run at full capacity, so interconnecting to another pipeline could just mean you’re pushing someone else’s supply out of the pipe, and you wouldn’t want to run a duplicate pipeline for an underutilized route because that would be a waste of money,” he said. “Any way you slice it, I feel pipeline companies’ money would better be spent on cybersecurity measures.”
Christi Tezak, managing director of research at ClearView Energy Partners, said redundancy has been a hard sell from an energy infrastructure perspective. “It amounts to ‘insurance’ – if you will – and additional system capacity (let alone duplication) is a very expensive type of insurance,”’ she said in an email. “The other options include hardening the infrastructure and enhancing cyber-protection for the systems you have.”
A case for redundancy
But industry players and stakeholders have not thrown in the towel.
McKinley said that the backup system he touted “would lessen the attractiveness of attacking our pipelines.” Yet, “President Biden and his people on the left, unfortunately, seem to be continuing to block this optional exchange of building additional pipelines as a redundant system,” he said, pointing to the cancellations of the Keystone XL Pipeline, Constitution Pipeline and Atlantic Coast Pipeline.
McKinley contended that an aversion to continued investments in the oil and natural gas sectors could present a risk to the reliability and security of the US power system. Further, it was taking an opportunity for “accomplishment” in the fight against cybercrime off the table when instances of ransomware attacks globally have increased 500% in the last two years and the amount of money exchanged for victims to regain access to their networks has shot up 300%, he said.
Gary Kruse, managing director of research for Arbo, agreed in regards to the need for more redundancy, not just to mitigate the impact of cyberattacks but for overall system reliability.
“The blackouts in Texas were caused in part by a reliance on a single basin, the Permian, which as a result of the freezing weather could not supply the gas needed to generate the power required,” he said, citing a report from the University of Texas at Austin. The same issue is also affecting California as it seeks to close the Aliso Canyon storage facility as that state also is “reliant primarily on the Permian and could see shortages caused by weather far beyond its borders.”
“In general, whenever there is a lack of redundancy in a system, you run a serious risk of supply disruption, and in the case of gas in the winter, that can lead to deaths,” Kruse said. “I hope the path we are going down, even at FERC , does not lead to recurring situations like in Texas all across the country, but that risk is clearly present whenever a pipeline that competes with existing infrastructure is blocked.”
When backups for interstate transmission pipelines are not available, the country’s network of distribution pipelines, which deliver gas to homes and businesses for cooking, heating and hot water, often must rely on inefficient, costly workarounds to maintain service, such as transporting gas in a compressed form by trucks, according to the American Gas Association.
Pointing to the ransomware attack that forced Colonial Pipeline to shut operations for nearly a week, Christina Sames, AGA’s senior vice president of safety, operations and security, said “if there had been other major pipelines bringing gasoline ” to the Southeast and East Coast, there probably would not have been the supply issues brought on by panic buying. “So that gets to how additional pipelines can help if there is a cyberattack, or if there's other issues.”
Colonial Pipeline stands out as an outlier in terms of its volumes and lack of competitors in the region. Pipeline capacity in the Permian, by contrast, is offered by a number of different entities who have seen their production volumes weaken with the pandemic.