# Vulnerability of Concentrated Critical Infrastructure: Background and Policy Options

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URL: https://www.frixlaw.com/law-library/documents/crs%3ARL33206

## Record

- **Collection:** Congressional research report
- **Document type:** CRS Report
- **Published:** September 12, 2008
- **Citation:** RL33206

## Text

Vulnerability of Concentrated Critical
Infrastructure: Background and Policy
Options
name redacted
Specialist in Energy and Infrastructure Policy
September 12, 2008

Congressional Research Service
7-....
www.crs.gov
RL33206

CRS Report for Congress
Prepared for Members and Committees of Congress

Vulnerability of Concentrated Critical Infrastructure: Background and Policy Options

Summary
“Critical infrastructure” consists of systems and assets so vital to the United States that their
incapacity would harm the nation’s physical security, economic security, or public health. Critical
infrastructure is often geographically concentrated, so it may be distinctly vulnerable to events
like natural disasters, epidemics, and certain kinds of terrorist attacks. Disruption of concentrated
infrastructure could have greatly disproportionate effects, with costs potentially running into
billions of dollars and spreading far beyond the immediate area of disturbance. Hurricane Katrina
in 2005, and Hurricane Ivan in 2008, have demonstrated this kind of geographic vulnerability by
disrupting much of the U.S. energy and chemical sectors.
Congress has been examining federal policies related to the geographic concentration and
vulnerability of critical infrastructure. In the 109th Congress, the Energy Policy Act of 2005 (P.L.
109-58) facilitated the construction of new liquefied natural gas import terminals in diverse ports.
Provisions in the Pipeline Safety Improvement Act of 2006 (P.L. 109-468) require studies to
identify geographic areas in the United States where unplanned loss of oil pipeline facilities may
cause oil shortages or price disruptions. The 110th Congress is considering additional policies
which may affect critical infrastructure concentration. Prominent among these are legislative
proposals such as H.R. 6566, H.R. 6709, S. 3202, and S. 3126, which would lift federal
moratoriums on, or otherwise encourage, offshore oil and natural gas development outside the
western Gulf of Mexico.
Geographic concentrations of U.S. critical infrastructure typically have developed through some
combination of market influences, including resource location, agglomeration economies, scale
economies, community preferences, and capital efficiency. Congress and federal agencies also
have adopted policies affecting the capacity and location of critical infrastructure, including
prescriptive siting, economic incentives, environmental regulation, and economic regulation.
Some federal policies have been developed specifically to address perceived threats to critical
infrastructure. These influences often have been in place for decades, gradually driving critical
infrastructure to its geographic configuration today.
Some analysts may argue that little government intervention is necessary to alleviate geographic
vulnerabilities of critical infrastructure because the private sector will adjust its practices out of its
own financial interest. However, if Congress concludes that federal intervention is needed, it may
employ a number of policy options to encourage geographic dispersion (including eliminating
policies that encourage concentration ), ensure survivability, or ensure that effective infrastructure
recovery capabilities are in place to mitigate impacts of concentrated infrastructure disruption.
Addressing geographic vulnerabilities may call for a combination of options. Congress may also
consider whether other legislative proposals with the potential to affect critical infrastructure
development—directly or indirectly—are likely to relieve or exacerbate geographic vulnerability.
The economic efficiency of public critical infrastructure and the efficient use of federal funds for
infrastructure development may also be important considerations.

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Vulnerability of Concentrated Critical Infrastructure: Background and Policy Options

Contents
Introduction ................................................................................................................................1
Scope and Limitations...........................................................................................................2
Geographic Infrastructure Concentration .....................................................................................2
What is Critical Infrastructure?..............................................................................................2
What is Geographic Concentration? ......................................................................................3
Geographic Hazards..............................................................................................................5
Meteorological Events ....................................................................................................5
Earthquakes and Tsunamis ..............................................................................................5
Infectious Disease ...........................................................................................................6
Terrorism ........................................................................................................................7
Frequency of Major Geographic Events ................................................................................7
Market Influences on Geographic Concentration ...................................................................8
Resource Location ..........................................................................................................8
Agglomeration Economies ..............................................................................................9
Scale Economies ........................................................................................................... 10
Community Preferences ................................................................................................ 10
Capital Efficiency ......................................................................................................... 11
Federal Policies and Infrastructure Concentration...................................................................... 11
Prescriptive Siting............................................................................................................... 12
Economic Incentives ........................................................................................................... 12
Environmental Regulation................................................................................................... 13
Economic Regulation .......................................................................................................... 14
Policy Options to Reduce Infrastructure Vulnerability ............................................................... 15
Eliminating Policies Encouraging Concentration ................................................................. 15
Encouraging Geographic Dispersion ................................................................................... 16
Ensuring Infrastructure Survivability................................................................................... 17
Ensuring Infrastructure Recovery Capabilities..................................................................... 18
Conclusions .............................................................................................................................. 18

Figures
Figure 1. Oil and Gas Pipelines in the Continental United States..................................................9

Tables
Table 1. Selected U.S. Disasters Since 1990 with Costs Exceeding $1 Billion..............................7

Contacts
Author Contact Information ...................................................................................................... 19

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Vulnerability of Concentrated Critical Infrastructure: Background and Policy Options

Introduction
Critical infrastructure is so vital to the United States that its incapacity would harm the nation’s
physical security, economic security, or public health. The federal government has a key role in
helping protect the nation’s critical infrastructure from all types of hazards through programs of
mitigation, preparedness, response, and recovery. Accordingly, Congress has a strong interest in
the vulnerability of critical infrastructure to natural hazards, accidents, or terrorism. Since
September 11, 2001, legislators, government agencies, and industry increasingly have been
focused on the sources of infrastructure vulnerability and potential measures to address those
vulnerabilities through operational changes and capital investment.
When infrastructure is physically concentrated in a limited geographic area it may be particularly
vulnerable to geographic hazards such as natural disasters, epidemics, and certain kinds of
terrorist attacks. Whereas a typical geographic disruption is often expected to affect infrastructure
in proportion to the size of an affected region, a disruption of concentrated infrastructure could
have greatly disproportionate—and national—effects. A catastrophic ice storm in metropolitan
Chicago, for example, would undoubtedly create local emergencies, but could also temporarily
disrupt rail transportation and associated commerce throughout the country because Chicago is a
major railway hub. Extended closure of the port of Long Beach, the largest port in the nation,
would greatly harm California’s economy, but could also disrupt vital supply chains for a number
of national industries.1 The social and economic impacts of geographic disasters are often difficult
to quantify, but their costs can quickly run into the billions and can spread far beyond the area of
the event itself. In 2005, Hurricanes Katrina and Rita demonstrated this kind of geographic
impact by disrupting a substantial part of the national U.S. energy and chemical sectors, both
heavily concentrated in the Gulf of Mexico. In 2008, Hurricanes Gustav and Ike have caused
similar disruptions, renewing concerns about geographic vulnerability.
As the nation’s responses to recent natural disasters continue, and as its homeland security
activities evolve, Congress has been examining federal policies related to the geographic
concentration and vulnerability of critical infrastructure. For example, in the 109th Congress, the
Energy Policy Act of 2005 (P.L. 109-58) facilitated the construction of new liquefied natural gas
import terminals in diverse ports by granting the Federal Energy Regulatory Commission
exclusive siting approval authority (Section 311). Provisions in the Pipeline Safety Improvement
Act of 2006 (P.L. 109-468) require periodic studies to identify geographic areas in the United
States where unplanned loss of oil pipeline facilities may cause oil shortages or price disruptions
(Sec. 8(a)). The 110th Congress is overseeing implementation of these measures and considering
additional policies which may affect critical infrastructure concentration. Prominent among these
are legislative proposals such as H.R. 6566, H.R. 6709, S. 3202, and S. 3126, which would lift
federal moratoriums on, or otherwise encourage, offshore oil and natural gas development outside
the western Gulf of Mexico. 2
This report provides an overview of geographic concentration and related vulnerability among
critical infrastructures in the United States. The report illustrates the nature of such geographic
1

Hall, P.V. “‘We’d Have to Sink the Ships’: Impact Studies and the 2002 West Coast Port Lockout.” Economic
Development Quarterly, vol. 18, no. 4. November 2004, pp. 354-367.
2
For further discussions, see CRS Report RL33404, Offshore Oil and Gas Development: Legal Framework, by (name
redacted), and CRS Report RL33493,
Outer Continental Shelf: Debate Over Oil and Gas Leasing and Revenue Sharing, by
(name redacted).

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Vulnerability of Concentrated Critical Infrastructure: Background and Policy Options

concentration and how it may expose infrastructures to catastrophic failure due to geographic
hazards. It identifies several long-term forces which have contributed to infrastructure
concentration. These forces include resource location, agglomeration economies, scale
economies, community preferences, and capital efficiency. It reviews several ways in which the
federal government has also influenced critical infrastructure, such as prescriptive siting,
economic incentives, environmental regulation, and economic regulation. The report concludes
with options to address geographic vulnerability in the context of current federal infrastructure
policy.

Scope and Limitations
This report focuses on “nationally” critical infrastructure and related federal policies. While many
of the infrastructure and policy issues addressed in this report may also apply at the state and
local levels, the report discusses them only in the context of federal activities. This report also
discusses a number of specific geographic hazards to critical infrastructure in the context of a
broader federal policy discussion. The report does not attempt to quantify the likelihood of any
particular hazard occurring in any particular location, or the degree of vulnerability of any
particular infrastructure concentration to geographic hazards. Such projections are available
elsewhere3 and are beyond the scope of this analysis.

Geographic Infrastructure Concentration
What is Critical Infrastructure?
Twenty years ago, “infrastructure” was defined primarily with respect to the adequacy of the
nation’s public works.In the mid-1990’s, however, the growing threat of international terrorism
led policy makers to reconsider the definition of “infrastructure” in the context of homeland
security. Successive federal government reports, laws, and executive orders have refined, and
generally expanded, the number of infrastructure sectors and the types of assets considered to be
“critical” for purposes of homeland security. The USA PATRIOT Act of 2001 (P.L. 107-56
Section 1016e) contains the federal government’s most recent definition of “critical
infrastructure.” According to the act, “critical infrastructure” is
systems and assets, whether physical or virtual, so vital to the United States that the
incapacity or destruction of such systems and assets would have a debilitating impact on
security, national economic security, national public health or safety, or any combination of
those matters (Section 1016e).

This definition was adopted, by reference, in the Homeland Security Act of 2002 (P.L. 107-296,
Section 2.4) establishing the Department of Homeland Security (DHS). The Bush
Administration’s 2006 National Infrastructure Protection Plan (NIPP) contains a detailed list of
critical infrastructures and assets of national importance, as follows:

3
See, for example: Risk Management Solutions, Inc., “Catastrophic Risk in the United States,” cited in U.S.
Government Accountability Office, Natural Disasters: Public Policy Options for Changing the Federal Role in
Natural Catastrophe Insurance, GAO-08-7, November 2007, p. 9.

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•

Agriculture and food

•

Emergency services

•

Banking and finance

•

Energy (except nuclear)

•

Chemicals

•

Government facilities

•

Commercial facilities

•

Information technology

•

Commercial nuclear

•

National
monuments/icons

•

Critical manufacturing

•

Dams

•

Postal and shipping

•

Defense industrial base

•

Public health and
healthcare

•

Drinking water/water
treatment

•

Telecommunications

•

Transportation

4

As the list suggests and the NIPP acknowledges explicitly, “The majority of the [critical
infrastructure/key resource]-related assets, systems, and networks are owned and operated by the
private sector.”5 The list may continue to evolve as economic changes or geopolitical
developments influence homeland security policy.

What is Geographic Concentration?
This report defines “geographic concentration” of critical infrastructure as the physical location of
critical assets in sufficient proximity to each other that they are vulnerable to disruption by the
same, or successive, regional events. To be of national significance, the collection of concentrated
assets may account for a significant fraction of the nation’s total infrastructure capacity in a given
sector or subsector. Alternatively, the collection of regional assets could make up an infrastructure
hub, accounting for a nationally significant fraction of commodity or service flows through that
infrastructure sector or subsector. The threshold above which such assets could be considered
“nationally” concentrated would depend upon the type of impact resulting from a prolonged
disruption. From strictly a market perspective, for example, some policy makers have suggested
that a change in energy infrastructure capacity of as little as 10% to 15% could have an
exaggerated effect on related market prices. 6 The corporate merger guidelines used by the United
States, Canada, and the European Union variously assume that a company must have a 25% to
35% market share to exercise market power, and so uncompetitively influence market prices or
supplies. 7 Although the loss of critical infrastructure would have effects beyond market price,
other possible metrics of concentration (e.g., environmental) offer little additional clarity on
concentration thresholds.
4

“Critical manufacturing” was subsequently added to this list by the DHS. See Department of Homeland Security,
“Designation of the National Infrastructure Protection Plan Critical Manufacturing Sector,” Docket No. DHS-20080038, Federal Register, April 30, 2008 (Volume 73, Number 84), pp. 23476-23478.
5
NIPP. p. 10.
6

Hon. Joe Barton, Remarks at the House Energy and Commerce Committee Hearing on Recovering from Katrina,
September 7, 2005.
7
Facey, B.A. and H. Huser, “A Comparison of Horizontal Merger Guidelines in Canada, the European Union, and the
United States,” Antitrust, fall 2004, pp. 43-50.

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Many of the critical infrastructure sectors identified in the NIPP exhibit some degree of
geographic concentration, as illustrated by the following examples.
•

Chemicals (chlorine)—Over 38% of U.S. chlorine production is located in
coastal Louisiana.8

•

Transportation (marine cargo)—Over 33% of U.S. waterborne container
shipments pass through the ports of Long Beach and Los Angeles in southern
California.9

•

Transportation (rail)—Over 37% of U.S. freight railcars pass through Illinois,
primarily around Chicago. Over 27% of freight railcars pass through Missouri,
primarily around St. Louis.10

•

Agriculture and food (livestock)—Approximately 28% of U.S. hog inventories
are located in Iowa. Another 15% of hog inventories are located in the eastern
counties of North Carolina.11

•

Public health and health care (pharmaceuticals)—Approximately 25% of U.S.
pharmaceuticals are manufactured in Puerto Rico, primarily in the San Juan
metropolitan area.12

•

Energy (refining)—Approximately 43% of total U.S. oil refining capacity is
clustered along the Texas and Louisiana coasts.13

•

Banking and finance (securities market)—Approximately 39% of U.S. securities
and options (by market value) are traded on the floors of the New York and
American Stock Exchanges in lower Manhattan.14 Approximately 21% of U.S.
securities industry employees are located in New York City.15

•

Defense industrial base (shipyards)—Over 31% of U.S. naval shipbuilding and
repair capacity is in and around Norfolk, VA. 16

8

U.S. Census Bureau, Alkalies and Chlorine Manufacturing: 2002, Economic Census, Manufacturing Industry Series,
EC02-31I-325181 (RV), December 2004, Table 2, Table 6b.
9
Army Corps of Engineers, Waterborne Commerce Statistics Center (WCSC). “U.S. Waterborne Container Traffic by
Port/Waterway in 2006.” Last revised January 29, 2008. http://www.iwr.usace.army.mil/ndc/wcsc/by_portname06.htm.
10
Assoc. of American Railroads. “Rail Carloads Carried by State: 2006.” 2008. http://www.aar.org/PubCommon/
Documents/AboutTheIndustry/RRState_Rankings.pdf.
11
U.S. Department of Agriculture, National Agricultural Statistics Service (NASS), Quarterly Hogs and Pigs, June 27,
2008. p. 5.
12
U.S. Census Bureau, Pharmaceutical Preparation Manufacturing: 2002, Economic Census, Manufacturing Industry
Series. EC02-31I-325412 (RV), December 2004. Table 2; Puerto Rico Manufacturing. 2002 Economic Census of
Island Areas. IA02-00I-PRM (RV). October 2005. Table 1.
13
Energy Information Administration. Refinery Capacity 2008. June 20, 2008. Table 1. http://www.eia.doe.gov/
oil_gas/petroleum/data_publications/refinery_capacity_data/refcapacity.html.
14
U.S. Securities and Exchange Commission. “Select SEC and Market Data Fiscal 2006.” 2007. Table 12.
http://www.sec.gov/about/secstats2007.pdf.
15
Securities Industry Association (SIA). “Securities Industry Employment.” August 2008. p. 7. See
http://www.sifma.org/research/statistics/other/employment-NY-quarterly.pdf.
16
Colton Company. “Employment in the Major Shipbuilders.” August 14, 2006. http://www.shipbuildinghistory.com/
today/statistics/jobsbyyard.htm Capacity estimate based on 2004 major shipyard relative employment data.

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In addition to single infrastructure concentrations, some regions of the United States contain
concentrations of multiple critical infrastructures. As indicated in the examples above, coastal
Louisiana has concentrations of both refining and chemical production capacity. In addition to a
concentration of financial services, the metropolitan New York and New Jersey area contains a
concentration of U.S. port capacity (12% of container shipping) and airport capacity (8% of
airline passengers), among other critical infrastructure.17

Geographic Hazards
Where critical infrastructure is geographically concentrated, it may be distinctly vulnerable to a
range of geographic hazards, including natural or unnatural events. These events could have
varying potential for infrastructure disruption depending upon the type of event, its location, and
the infrastructure sectors present in that location. What such events have in common is their
geographic scale. Among the geographic events posing the greatest hazard to U.S. critical
infrastructure concentrations are the following.

Meteorological Events
Major meteorological events, such as hurricanes, tropical storms, floods, and ice storms, have the
potential to physically disrupt critical infrastructures or displace related critical workers in large
geographic areas. For example, the damaging effects of hurricanes Katrina and Rita (and
associated flooding) on energy and chemicals infrastructure in the Gulf of Mexico have been
widely reported. In 1998, a major ice storm in Quebec, Canada, and the northeastern United
States caused widespread, persistent power and communications blackouts, disrupted other
power-dependent services, and prevented critical workers from traveling to their jobs.18

Earthquakes and Tsunamis
Earthquakes have the potential to damage concentrations of critical infrastructure in seismically
active regions of the United States, including the west coast, Alaska, and the central Mississippi
Valley. The 1994 earthquake in Northridge, CA, is an example of such seismic activity in a region
with concentrated critical infrastructure. The Northridge earthquake had limited impact on the
region’s major ports, airports, and energy infrastructure, but it did cause significant damage to
bridges and highways vital for commercial trucking and public transportation.19 A 1995
earthquake in Kobe, Japan was far more destructive to Japanese critical infrastructure. In addition
to highway damage, the earthquake heavily damaged the port of Kobe, Japan’s largest container
shipping port, as well as chemical manufacturers, steel manufacturers, railroads, and utilities in
the area. Repairs to the port took almost a year to complete. 20

17

WCSC. 2008; U.S. Department of Transportation, Bureau of Transportation Statistics (BTS). Airport Activity
Statistics (AAS) 2000. BTS01-05. 2002. Table 3.
18
Environmental Index. “The Storm of the Century in Canada, January 1998.” 2000. Some 700,000 Canadians were
without power for over two weeks; U.S. Army Cold Regions Research and Engineering Laboratory. “An Evaluation of
the Severity of the January 1998 Ice Storm in Northern New England: Report for FEMA Region 1.” April 1998.
19
M.G. Boarnet, “Business Losses, Transportation Damage, and the Northridge Earthquake.” Journal of
Transportation and Statistics, vol. 1, no. 2, May 1998.
20
Risk Management Solutions, Inc. 1995 Kobe Earthquake 10-year Retrospective. Newark, CA. January 2005. p. 5.

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Coastal infrastructure concentrations are also potentially vulnerable to disruption by tsunamis.
The infrastructure damage to Sri Lanka, India, Indonesia, and other Asian nations from the 2004
tsunami in the Indian Ocean was extensive. Experts have testified before Congress that the United
States is also potentially vulnerable to a major tsunami. 21 Depending upon its magnitude, such an
event could disrupt ports and other critical transportation infrastructure.22 According to
California’s Seismic Safety Commission, for example, a major tsunami in southern California
could close the ports of Long Beach and Los Angeles for two months and cause $60 billion in
economic losses. 23

Infectious Disease
Epidemics and pandemics of infectious diseases such as Severe Acute Respiratory Syndrome
(SARS) and avian influenza (bird flu) have the potential to disrupt critical infrastructure by
infecting critical workers or restricting their movement. The Bush Administration’s National
Strategy for Pandemic Influenza states that “while a pandemic will not damage power lines,
banks or computer networks, it will ultimately threaten all critical infrastructure by removing
essential personnel from the workplace for weeks or months.”24 An outbreak of infectious disease
may sicken critical workers or force them into quarantine. It may also restrict their access to
critical facilities where the disease may be present. As one federal government report states,
during such an event “operations become disrupted, exposed people and facilities undergo
extensive testing ... and buildings and equipment require decontamination.”25
The 2003 SARS outbreak in Toronto demonstrated the vulnerability of critical health and
transportation infrastructure in Canada to such an infectious disease. The World Health
Organization, the U.S. Department of Health and Human Services, and other health organizations
have since expressed concern about the likelihood of a bird flu pandemic with more serious
potential consequences than SARS.26 In the event of a bird flu or similar outbreak in a particular
geography, some analysts have predicted up to 40% absenteeism among workers during the peak
weeks of a regional outbreak. 27
Concentrations of livestock may be similarly vulnerable to infectious disease, with the potential
to catastrophically affect the nation’s food supply. As one expert has testified before Congress,
“animal diseases can be quickly spread to affect large numbers of herds over wide geographic
areas. This reflects the intensive and concentrated nature of modern farming practices in the
21
C. Groat, Director, United States Geological Survey (USGS). Testimony before the House Science Committee
hearing, Tsunamis: Is the United States Prepared?, January 26, 2005.
22
J. Borrero, S. Cho, J.E. Moore II, H.W. Richardson, and C. Synolakis, “Could it Happen Here?,” Civil Engineering.
April 2005. pp. 54-65.
23
California Seismic Safety Commission. The Tsunami Threat to California. CSSC 05-03. December 2005. p. 6.
24
Office of the President, Homeland Security Council. National Strategy for Pandemic Influenza. November 1, 2005.
p. 2.
25
A. Brecher, U.S. Department of Transportation (DOT), Volpe National Transportation Systems Center. “Cleanup and
Recovery of Passenger Transportation Facilities after a Bio-attack.” Workshop resource paper. March 30, 2004.
26
For further background see CRS Report RL34190, Pandemic Influenza: An Analysis of State Preparedness and
Response Plans, by (name redacted) and (name redacted); World Health Organization (WHO).Avian Influenza:
Assessing the Pandemic Threat. WHO/CDS/2005.29. January 2005.
27
U.S. Department of Health and Human Services. “Pandemic Influenza Planning.” Internet page. December 5. 2005.
See http://pandemicflu.gov/plan/pandplan.html.

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US.”28 Foot and mouth disease (FMD), in particular, has the potential to infect regionally
concentrated stocks of hogs, cattle, and sheep should they be exposed. A 2002 General
Accounting Office report found that an FMD outbreak could cost the U.S. economy up to $24
billion dollars and could have “significant social impacts, such as enormous psychological
damage, especially on families and localities directly affected by the outbreak.”29

Terrorism
Certain types of terrorist attacks could be of sufficient scale to pose a geographic threat to critical
infrastructure. Nuclear bombs, radiological weapons (“dirty” bombs), or electromagnetic pulse
(EMP) devices could damage or render inaccessible concentrated critical assets. Cyber-attacks on
regional computer systems also have the potential to damage or disrupt computer networks’
ability to control critical infrastructure.30 Biological attacks could have impacts similar to those of
epidemics, although they could be more specifically targeted at particular regions. 31

Frequency of Major Geographic Events
Taken individually, the types of disasters discussed above occur only rarely in a specific location.
Taken collectively, however, such events occur often enough to warrant dedicated policy
attention. As Table 1 shows, reviewing only the past 15 years, major disasters have occurred in
North America almost annually. Not all of these events have impacted regions of concentrated
critical infrastructure, nor have they all significantly affected such infrastructure where it has been
present. Nonetheless, the cost estimates for these events indicate their disruptive power.
Table 1. Selected U.S. Disasters Since 1990 with Costs Exceeding $1 Billion
Year

Event

Location

Costs
($ billions)

2006

Tornadoes

Midwest/Ohio Valley

1.1

2005

Hurricanes (Category 4, 3, 1)

Central Gulf of Mexico, Florida

113.8

2004

Hurricanes (Category 2, 3, 4)

Florida, Alabama

45.0

2003

Hurricane (Category 3)

Mid-Atlantic

3.4

2003

Epidemic (SARS)

Ontario

0.8a

2001

Terror attacks

New York, Virginia, Pennsylvania

38.0

2001

Tropical storm

Texas, Southeast U.S.

5.0

1998

Ice storm

Quebec, Northeast U.S.

1.4b

1997

Flood/Tornados

Ohio/Mississippi Valley

1.0

28

P. Chalk, RAND Corp. “The Bio-Terrorist Threat to Agricultural Livestock and Produce.” Testimony before the
Senate Government Affairs Committee. November 19, 2003.
29
General Accounting Office. Foot and Mouth Disease. GAO-02-808. July 2002. pp. 20-21.
30
Weiss, J. “CyberWar.” Frontline. Public Broadcasting System. Television interview. April 24, 2003.
31
For further discussion see Senate Judiciary Committee, Subcommittee on Terrorism, Technology and Homeland
Security hearing, Lessons Learned from Hurricane Katrina in Regard to Emergency Preparedness for a Terrorist
Attack, October 26, 2005.

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Year

Event

Location

Costs
($ billions)

1996

Hurricane (Category 3)

North Carolina

3.2

1995

Flood / Tornados / Hail

South Central U.S.

5.5

1994

Ice storm

Southeast U.S.

3.0

1994

Earthquake

California

40.0

1993

Flood

Midwest

21.0

1992

Hurricane (Category 5)

Florida, Louisiana

26.5

Sources: National Hurricane Center. “The Thirty Costliest Mainland United States Tropical Cyclones 19002005.” Dec. 2007. http://www.aoml.noaa.gov/hrd/tcfaq/costliesttable.html; National Climatic Data Center. “19802007 Billion Dollar U.S. Weather Disasters.” 2007. http://lwf.ncdc.noaa.gov/img/reports/billion/disasters2007.pdf;
Dixon, L. and Stern, R.K., RAND Corp. “Compensation for Losses from the 9/11 Attacks.” Nov. 8, 2004;
Eyesenbach, G. “SARS and Population Health Technology.” Journal of Medical Internet Research, vol. 5, no. 2,
2005;R.T. Eguchi, J.D. Goltz, C.E. Taylor, S.E. Chang, P. J. Flores, L. A. Johnson, H. A. Seligson, and N. C. Blais,
“Direct Economic Losses in the Northridge Earthquake: A Three-Year Post-Event Perspective,” Earthquake
Spectra, vol. 14, no. 2, May 1998, pp. 245-264.
a.

Includes only direct costs for extra protective gear, clinics, isolation rooms, and lost wages for quarantined

health-care workers. Cost likely exceeds $1 billion with business losses included.
b.

Excludes Canadian costs.

Market Influences on Geographic Concentration
Although attention to the geographic concentration of U.S. critical infrastructure has increased in
the wake of recent terrorist attacks and natural disasters, such geographic concentrations are not
new. They have developed for multiple reasons—typically some combination of market
influences, including resource location, agglomeration economies, scale economies, community
preferences, and capital efficiency. These influences often have been in place for decades,
gradually driving critical infrastructure development to its geographic configuration today.

Resource Location
The location of certain critical infrastructures is driven by the location of related natural resources
or, in some cases, natural terrain. Such influences are particularly apparent in energy, agriculture,
and transportation. United States oil and natural gas basins, for example, are located in particular
regions of the country, including the Gulf of Mexico, the Rockies, and Appalachia. These
locations are generally far from Northeastern urban centers which are the primary locations of oil
and gas demand. Consequently, large oil and gas pipelines tend to be concentrated between these
widely separated resource regions and the Northeast, as shown in Figure 1. Likewise, production
of phosphoric acid, a key component of agricultural fertilizer, is concentrated in Florida, which
has the nation’s largest deposits of phosphoric rock. 32 Agricultural production is also driven by
geography, since particular crops require particular climates, weather conditions, and types of
soil. Terrain may also be a driver of infrastructure concentration. There are relatively few natural
harbors suitable as deepwater ports in the western United States compared to the eastern part of
32

Environmental Protection Agency (EPA). “About Phosphogypsum.” July 31, 2008. http://www.epa.gov/rpdweb00/
neshaps/subpartr/about.html.

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the country. Consequently, the ports that exist, such as Long Beach, have become very heavily
utilized. In these cases, and others, the concentration of a natural resource drives the
concentration of infrastructure exploiting that resource.
Figure 1. Oil and Gas Pipelines in the Continental United States

Source: Energy Information Administration.

Agglomeration Economies
Where resource location and terrain are not constraints, concentrations of critical infrastructure
may emerge due to economic factors collectively referred to as “agglomeration economies.”
Broadly speaking, it is clear that [industry] concentrations form and survive because of some
form of agglomeration economies, in which spatial concentration itself creates the favorable
economic environment that supports further or continued concentration.33

For critical infrastructure, such agglomeration economies may include the availability of
specialized knowledge, the availability of skilled workers, access to production inputs, and access
to large markets for the goods and services produced. 34 The concentration of semiconductor
manufacturing in Silicon Valley illustrates such economies. Silicon Valley emerged near major
research institutions (e.g., Lawrence Livermore National Laboratory), with the ready availability
of highly skilled graduates from leading research universities (e.g., U.C. Berkeley, Stanford
University), and with access to both product suppliers, computer manufacturers (e.g., Apple
Computer), and software companies. Agglomeration economies have also been demonstrated in
food manufacturing, and may similarly influence other critical infrastructure sectors such as
financial services, chemicals manufacturing, and telecommunications.35

33

M. Fujita, P. Krugman, and A. Venables, The Spatial Economy. MIT Press. 1999. p. 3. (Hereafter cited as Fajita, et
al., The Spatial Economy.)
34
Fujita, et al., The Spatial Economy, p. 5.
35
J.P. Cohen, and C.J.M. Paul, “Agglomeration Economies and Industry Location Decisions: The Impacts of Vertical
and Horizontal Spillovers.” Working Paper 01-010. University of California, Davis, U.S. Department of Agricultural
and Resource Economics. October 2001.

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Scale Economies
Critical infrastructure may become geographically concentrated in pursuit of “scale economies.”
Scale economies are found in industries where unit costs fall as the scale of operations
increases. This phenomenon was first studied in pipeline industries ... when it was observed
that the amount of material required to make a pipe of a given diameter increased only twothirds as quickly as the carrying capacity of the pipe. This observation led to larger pipes
having lower unit costs.36

In addition to pipelines, researchers have identified scale economies across many critical
infrastructure sectors.37 The size of new chemical plants, for example, increased by a factor of
five between the late 1950s and early 1980s, in part due to scale economies.38 Some analysts
likewise suggest that the concentration of shipping container traffic among several U.S.
“megaports” is partly due to economies of scale in warehousing and terminal operations.39
Because scale economies tend to drive an increase in size of individual facilities, they may also
geographically concentrate regional infrastructure capacity where multiple facilities are located in
the same region.

Community Preferences
Community preferences have sometimes led to concentrations of critical infrastructure by
preventing or inviting the development of new facilities in particular new locations. Such
preferences have affected, for example, ongoing efforts by energy developers to site new
liquefied natural gas (LNG) import terminals. Since 2000, developers have proposed the
construction of over 70 new LNG terminals in U.S. ports or U.S. waters, many near major natural
gas markets in California and the Northeast. But most near-to-market terminal proposals have
struggled for approval due to community concerns about LNG safety, effects on local commerce,
and other potential negative impacts. Due primarily to local community opposition, LNG
developers have withdrawn terminal proposals in Alabama, California, Maine, Massachusetts,
North Carolina, and Florida. Other terminal proposals in Rhode Island, New York, and New
Jersey are facing stiff community opposition. In some cases state and local agencies also have
been at odds with federal agencies over LNG terminal siting jurisdiction. Communities in only a
few states, notably Louisiana and Texas, have encouraged the siting of new LNG facilities. As a
result, most new LNG terminals approved by federal agencies are located in the Gulf of Mexico,
where natural gas infrastructure is already heavily concentrated.40 Similar siting preferences have

36
P.W. Bauer, “Are We in a Productivity Boom? Evidence from Multifactor Productivity Growth.” Economic
Commentary. Federal Reserve Bank of Cleveland. October 15, 1999.
37
L.R. Christensen, and W.H. Greene, “Economies of Scale in U.S. Electric Power Generation.” Journal of Political
Economy, vol. 84, no. 4, 1976, p. 655.
38
M.B. Lieberman, “Market Growth, Economies of Scale, and Plant Size in the Chemical Processing Industries,”
Journal of Industrial Economics, vol. 36, no. 2, 1987, pp. 175-191.
39
National Research Council. Making the Nation Safer: The Role of Science and Technology in Countering Terrorism.
National Academies Press. 2002. p. 216.
40
For further discussion of LNG siting see CRS Report RL32205, Liquefied Natural Gas (LNG) Import Terminals:
Siting, Safety, and Regulation.

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faced other types of critical infrastructure and industries, including electric power,
telecommunications, and transportation.41

Capital Efficiency
Capital efficiency seeks to maximize financial returns on capital investment. Since most U.S.
critical infrastructure is in the private sector, capital efficiency has long influenced how and
where private companies have invested in infrastructure capacity.42 Attention to capital efficiency
sharply increased in the 1990s, however, as financial markets grew dissatisfied with other
measures of company performance such as simple revenue growth. 43 This attention, in turn, led a
range of capital-intensive infrastructure companies, such as electric utilities, telecommunications
providers, pipelines, and other industrial companies, to sharply reduce annual capital
requirements from historical levels. 44 Economic deregulation of the energy, telecommunications,
and transportation industries, among others, accelerated this trend.
In some cases companies reduced capital requirements by cutting “excess” infrastructure
capacity—reducing reserve capacity in capital equipment or reducing inventories of production
supplies (“just-in-time” inventory). For example, power generation capacity margins for the U.S.
electric utility industry as a whole fell by almost 40% between 1992 and 2000.45 There has been a
similar reduction in excess capacity among other critical infrastructures, many of which now
operate near or at capacity. Oil refineries, for example, have seen capacity utilization rise from
below 77% in 1985 to 89% in 2005.46 While such a reduction in reserve capacity has not, itself,
led to geographic infrastructure concentration, it has greatly increased the sensitivity of
infrastructures to the disruption of concentrated capacity.

Federal Policies and Infrastructure Concentration
Although market forces have been the primary influence on critical infrastructure development,
especially in the private sector, Congress and federal agencies historically have, from time to
time, adopted policies intended to affect the capacity and location of critical infrastructure in the
national interest. Although these policies often have been motivated by the desire to promote
specific social objectives (e.g., economic development, environmental protection, infrastructure
reliability) they have sometimes also encouraged or discouraged the geographic concentration of
critical infrastructures. Examples of these policies follow.

41

D. Laws, and L. Susskind, “Changing Perspectives on the Facility Siting Processes.” Maine Policy Review.
December 1991. pp. 29-44.
42
General Accounting Office (GAO). Challenges for Critical Infrastructure Protection. GAO-03-233. February 28,
2003. p. 1. This report states that over 80% of critical infrastructure is private.
43
See, for example, S.R. Rajan, “Turning Capital to Wealth: A Ranking of U.S. Utilities.” Public Utilities Fortnightly.
December 1999.
44
M. Singer, and K. Turnipseed, “Curing Capital Addiction.” McKinsey Quarterly. 1993. no. 4. pp. 69-77.
45

T. Karier, “Keeping the Lights On: A Banking Industry Model to Avoid Shortages.” Public Utilities Fortnightly. July
1, 2002.
46
Energy Information Administration. “Refinery Utilization and Capacity.” July 28, 2008. Internet database.
http://tonto.eia.doe.gov/dnav/pet/pet_pnp_unc_dcu_nus_a.htm.

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Prescriptive Siting
The federal government has prescriptively sited, constructed, and operated federally owned or
operated critical infrastructure. Such infrastructure includes transportation facilities, military
bases, postal facilities, federal energy facilities, and national laboratories. In some cases, such
prescriptive siting has led to geographic concentration of critical infrastructure. For example, the
federal government sited and constructed the Panama Canal in the early 1900s, encouraging a
concentration of military and commercial shipping through the new waterway which persists
today. (The canal carried over a third of U.S. grain exports in 2006.)47 In the Pacific Northwest,
dams constructed or operated by federal agencies on the Columbia River system account for 28%
of U.S. hydroelectric generation capacity. 48 In other cases, prescriptive federal siting has
dispersed critical infrastructure. In the early 1940s, for example, the federal government financed
and sited a major steel plant in Utah, far from existing U.S. steel plants and steel markets. A key
reason for siting the plant (viewed as critical for shipbuilding during World War II) in Utah was
“as a precaution against steel shortages in the West in case of a Pacific coast invasion or closure
of the Panama Canal.”49 A more current example is the U.S. Postal Service, which routes no more
than 1.3% of all mail through any single processing and distribution center.50
Although the federal government prescriptively sites its own infrastructure, it is difficult to find
examples of federal prescriptive siting of private sector infrastructure. One way the government
has done so, however, is through its control of federal lands and other federal assets necessary for
infrastructure development. For example, the Trans-Alaska Pipeline Authorization Act of 1973
(P.L. 93-153) directed the Secretary of the Interior to authorize a right-of-way for construction of
the Trans-Alaska Pipelines System (TAPS) through federal lands in Alaska. The construction of
TAPS physically diversified U.S. oil supplies, although it initiated a new geographic
concentration of critical infrastructure in Alaska. TAPS transports nearly 17% of United States
domestic oil production. 51 More recently, the Energy Policy Act of 2005 (P.L. 109-58) directs
federal agencies to designate “energy corridors” on federal lands in 11 western states for the
siting of new oil, gas, and hydrogen pipelines and electricity transmission facilities (Section 368).
While both the TAPS and energy corridor projects involve privately owned facilities, the location
of those facilities is established prescriptively by the federal government.

Economic Incentives
Economic incentives are another policy mechanism employed by the federal government to direct
private sector infrastructure siting. Such incentives are intended to encourage private developers
to build infrastructure that might otherwise not be built or to build infrastructure in a location
favored by government. While most federal incentive programs are not geographically targeted,
some are intended to affect infrastructure development in particular geographic areas. The
47

U.S. Army Corps of Engineers. Waterborne Commerce of the United States: Calendar Year 2006. Part 5—National
Summaries. July 2008. Table 2-1; Panama Canal Authority. “Commodity Movement through the Panama Canal over
Principal Trade Routes.” 2008. Available at http://www.pancanal.com/eng/maritime/statisti.html.
48
Energy Information Administration . Energy Information Administration. Electric Power Annual 2006. DOE/EIA0348(2006). October 22, 2007. Table 2.1; Federal Columbia River Power System. Federal Columbia River Power
System. August 2003. p. 9. http://www.bpa.gov/power/pg/fcrps_brochure_17x11.pdf.
49
A.K. Powell. “Geneva Steel Plant.” Utah History Encyclopedia. University of Utah Press. 1994.
50
U.S. Postal Service. Personal communication and non-public data. December 7, 2005.
51
Alyeska Pipeline Service Co. Internet page. Anchorage, AK. May 2008. http://www.alyeska-pipe.com/about.html.

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construction of the transcontinental railroad and telegraph is an historic example of such a policy.
Under the Pacific Railway Act of 1862, the Congress provided private companies with 30-year
bonds, federal land grants, and other incentives to construct a rail and telegraph line along a
specified route from Nebraska to the Pacific coast. The federal government continues to offer
such financial incentives for critical infrastructure projects today. For example, in 2004 Congress
passed the Alaska Natural Gas Pipeline Act (P.L. 108-324, Div. C) offering an $18 billion loan
guarantee, accelerated depreciation, and investment tax credits to private developers for the
construction of a new natural gas pipeline similar to the existing Trans-Alaska oil pipeline. In
both the railroad and the Alaska gas pipeline cases, Congress has viewed the new infrastructure as
critical for expanding and diversifying (geographically) the nation’s critical assets.

Environmental Regulation
Federal environmental laws, such as the Coastal Zone Management Act and the Clean Air Act,
also have influenced the geographic development of critical infrastructure. The Coastal Zone
Management Act of 1972 (CZMA, P.L. 92-583) was enacted to enable states to establish
coordinated coastal zone management programs balancing environmental protection with coastal
development. State coastal management plans implemented under the CZMA may affect the
geographic concentration of infrastructure by encouraging or discouraging the siting of coastal
infrastructure. Research has shown, for example, that one third of states with coastal management
plans under CZMA appear to have adopted policies seeking to confine the physical expansion of
ports to areas already committed to port and industrial uses.52 Energy industry representatives
have argued that state plans under CZMA have also been used to block the development of new
energy infrastructure in many parts of the country.53
The Clean Air Act of 1970 (CAA, P.L. 91-604) created a national program to mitigate the harmful
effects of air pollution by regulating pollution sources. Among other provisions, the CAA requires
that new facilities emitting certain air pollutants install best available control technology as
determined by the Environmental Protection Agency. New facilities being sited in counties not in
attainment of federal air quality standards may have more stringent—and potentially more
costly—emissions control requirements than facilities sited in counties that are in attainment of
those standards, depending upon a state determination of the lowest emission rate available and
the need to acquire emissions offsets. By affecting facility costs in this way, some analysts argue
that the CAA encourages the concentration of infrastructure in geographic “pollution havens,” or,
alternatively, encourages the dispersion of facilities away from existing infrastructure in polluted
regions. One empirical study in New York, for example, suggests that air quality regulations have
significantly affected the destination choices of relocating manufacturing plants.54 Because
facility siting decisions are complex, however, other empirical studies of CAA effects on siting
concentration, specifically, have been less conclusive. 55

52

M.J. Hershman, “Seaport Development and Coastal Management Programs: A National Overview.” Coastal
Management, vol. 27, 1999, pp. 271-290.
53
Argonne National Laboratory. Environmental Policy and Regulatory Constraints to Natural Gas Production.
ANL/EAD/04-1. December 2004. p. 25.
54
J.A. List, et al. “Effects of Air Quality Regulation on the Destination Choice of Relocating Plants.” Oxford Economic
Papers, vol. 55, no. 4, 2003, pp. 657-678.
55
T. Jeppesen, et al. “Environmental Regulations and New Plant Location Decisions: Evidence from a Meta-Analysis.”
Journal of Regional Science, vol. 42, no. 1, 2002, pp. 19-49.

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While the environmental regulations under the CZMA and CAA apply generally to many regions
in the United States, some federal environmental policies have been directed at more specific
geographic areas. Congressional moratoria on oil and natural gas development in specific parts of
the outer continental shelf (due to concerns about local economic and environmental impacts) are
one example of such federal policy.56 Energy industry analysts have argued that the moratoria
have resulted in oil and gas infrastructure concentration in the central and western Gulf of
Mexico, where such development is permitted. This example notwithstanding, the federal
government does not appear to impose regional-level (as opposed to facility-level) environmental
restrictions frequently. 57

Economic Regulation
Economic regulation of critical infrastructure, or the lack thereof, by the federal government may
also influence infrastructure concentration. Under federal price regulation, the U.S. airlines
industry offered primarily direct, point-to-point service. After economic deregulation in 1978, the
airlines began offering far more indirect flights, routing air traffic through concentrated “hub”
airports—a largely unanticipated consequence of inter-carrier competition.58 Federal deregulation
of banking led to a consolidation of the banking sector, with ever-larger banks concentrating
critical operations in centralized administration facilities to capture economies of scale. 59
Limited federal regulation does not necessarily lead to infrastructure concentration, however,
especially if state or local agencies have regulatory authority. Under the Federal Power Act of
1935 (FPA), for example, retail electricity sales and generation investments of investor-owned
electric utilities are regulated by the states. State regulators have historically required utilities to
meet state electric generation needs by constructing in-state plants, or by jointly constructing
plants with neighboring utilities. Consequently, privately-owned electric power plants have been
geographically dispersed among the 50 states. The largest shares of U.S. generating capacity in
individual states are 10% in Texas and 6% in California.60 By contrast, the federally owned
Tennessee Valley Authority (TVA) had plans in the 1960s to construct 17 nuclear power reactors
at seven sites.61 Although TVA only completed six reactors due to changes in the energy market
and nuclear safety regulation, its original plans would have created a nationally significant
concentration of nuclear generating capacity within TVA’s territory. It is interesting to note that
the recent restructuring of the electric utility industry, which exempts new generation plants from
state economic regulation, appears to be encouraging the geographic concentration of new
generating plants near certain transmission corridors because plant developers are no longer
constrained by state regulators in their site selection.

56

For further discussion see CRS Report RL33493, Outer Continental Shelf: Debate Over Oil and Gas Leasing and
Revenue Sharing, by (name redacted).
57
Environmental Law Institute, Institutional Controls in Use. Washington, D.C. September 1995. p. 14.
58
G. Gowrisankaran, “Competition and Regulation in the Airline Industry.” FRBSF Economic Letter. No 2002-01.
Federal Reserve Bank of San Francisco. January 18, 2002.
59
S.J. Pilloff, Bank Merger Activity in the United States, 1994-2003. Board of Governors of the Federal Reserve
System. Staff Study 176. May 2004.
60
Energy Information Administration. Electric Power Annual 2006. DOE/EIA-0348(2006). October 22, 2007. Figure
2.1. p. 23.
61
McCullough, Jr, G.L., Chairman, Tennessee Valley Authority. Testimony before the Senate Energy and Natural
Resources Committee, Energy Subcommittee. March 4, 2004.

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Policy Options to Reduce Infrastructure
Vulnerability
Since helping to reduce the overall vulnerability of critical infrastructure is an objective of the
federal government, it is useful to outline what options, if any, may be considered to reduce
vulnerabilities and potential national consequences arising specifically from the geographic
concentration of such infrastructure.
Some analysts may argue that little government intervention in infrastructure concentration is
necessary because the private sector will appropriately adjust its infrastructure practices out of its
own financial interest. Catastrophic insurance premiums, for example, or internal corporate risk
management programs, may influence corporate practices in a way that reduces vulnerabilities
and associated risk to future profits by reducing the geographic vulnerability of private
infrastructure. As the National Strategy for the Physical Protection of Critical Infrastructures and
Key Assets states,
Customarily, private sector firms prudently engage in risk management planning and invest
in security as a necessary function of business operations and customer confidence....
Consequently, private sector owners and operators should reassess and adjust their planning,
assurance, and investment programs to better accommodate the increased risk....62

Holders of such a view would assert that the socially optimal geographic distribution of critical
infrastructure, balancing economic efficiency with geographic risk, is best left to the market
forces outlined earlier in this report.
Other analysts have argued that the private sector does not properly account for the full social
costs of critical infrastructure failure, or that individual companies cannot independently and
significantly influence geographic concentration in a critical sector.63 Holders of this view would
see a definite and active role for the federal government in alleviating geographic vulnerability of
critical infrastructure in addition to the market-driven measures taken by the private sector on its
own. If Congress concludes that federal intervention is appropriate, it has several broad policy
options for doing so.

Eliminating Policies Encouraging Concentration
One way Congress may alleviate geographic concentration and associated vulnerability is to
eliminate existing policies that encourage such concentration. As the previous discussion has
shown, some federal policies may increase concentration prescriptively. Others, especially certain
economic and environmental policies, may implicitly or unintentionally encourage geographic
concentration. Without such government influence, market forces may drive developers to less
geographically concentrated locations for future infrastructure projects. The challenge to this
approach of alleviating geographic concentration is that it may conflict with other objectives of
62

Office of the President. The National Strategy for the Physical Protection of Critical Infrastructure and Key Assets,
February 2003. p. X.
63
See, for example, P.R. Orszag, The Brookings Institution, “Homeland Security and the Private Sector.” Testimony
before the National Commission on Terrorist Attacks Upon the United States. November 19, 2003.

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federal legislation. In the case of the economic deregulation, for example, geographic
concentration often provides the consumer cost reductions and service improvements that
deregulation was intended to achieve. In the case of environmental laws, concentration is often
viewed as a desirable means of preserving undisturbed natural areas from destructive
development. Would the CZMA be able to fulfill its fundamental balance of environmental
protection and economic development if states were not free to concentrate infrastructure where
they choose to? The resolution of such policy questions would require a careful and complex
reconsideration of long-standing policy objectives in light of evolving concerns about critical
infrastructure risk.

Encouraging Geographic Dispersion
Another remedy for geographic vulnerability is to encourage the geographic dispersion of
concentrated assets where such dispersion is possible. As discussed in this report, the federal
government may implement a range of targeted policies, including prescriptive siting, economic
incentives, and regulation, to help bring about infrastructure dispersion. Such dispersion could
involve the development of new infrastructure capacity or the shifting of critical goods and
services among existing infrastructure. Some transportation analysts, for example, have proposed
shipping containers through Mexican ports and then on to the United States by rail as a means of
reducing cargo traffic in Southern California’s ports.64 Shifting concentrations of critical supplies
and services to alternative infrastructure already in place (and not itself concentrated) may be one
way to alleviate geographical vulnerabilities relatively quickly. If the alternative infrastructure
lies outside the United States, however, such a strategy may create new vulnerabilities since it
might no longer be under U.S. protection or administration.
While encouraging infrastructure dispersion through federal policy may be helpful, doing so may
be challenging. It may be difficult, for example, to identify and prioritize geographic
infrastructure concentrations amenable to such dispersion. Predicting the long-term effects of
such polices on market economics, especially the effects on market competition, may also be
uncertain. If incentives are involved, dispersion policies may also be costly to the federal
government, potentially drawing resources away from other federal programs. Furthermore, since
infrastructure development is mostly in private and regional government (state and local) hands,
ensuring that regional infrastructure projects are consistent with federal objectives may also be a
problem. As the Congressional Budget Office has stated,
The federal government’s most important role in infrastructure provision is as a source of
finance.... Thus, for infrastructure to be managed in a way that furthers national objectives,
federal agencies must offer incentives for local managers to align their choices with the
welfare and equity goals of federal programs. Choices for infrastructure systems that aim at
such broad objectives must similarly be based on wide searches among new investments,
rehabilitation efforts, or operational changes. They must also be derived from consistent
evaluations of the long-term effects of these possible choices on the efficiency of activities
using the infrastructure.65

Infrastructure owners and regional governments are also likely to have vested interests in existing
concentrations of critical infrastructure and may oppose dispersion on competitive or other
64
65

R.C. Mireles, “A Cure for West Coast Congestion.” Logistics Today. January 2005.
Congressional Budget Office (CBO). Federal Policies for Infrastructure Management. June 1986. p xi.

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economic grounds. State and local governments may also have concerns about federalism,
particularly where federal policies affecting infrastructure dispersion may supercede local
infrastructure priorities.
Notwithstanding the challenges of promoting infrastructure dispersion, Congress appears to be
pursuing such policies with respect to the siting of new energy infrastructure, including LNG
import terminals, oil refineries, electric transmission lines, and an Alaska gas pipeline. Even
where such federal policies may be implemented successfully, however, it may still take years or
decades to achieve dispersion objectives because critical infrastructure often develops slowly. For
example, industry experts project that it would take five to seven years, absent community
opposition, to construct a new U.S. oil refinery. 66 It would take at least nine years to build the
Alaska natural gas pipeline. 67

Ensuring Infrastructure Survivability
For geographic concentrations of critical infrastructure that are difficult to diversify, or that may
take a long time to diversify, Congress may wish to ensure their near-term ability to function, or
“survivability,” during and after a major geographic disaster. Particularly where resource location
provides few geographic alternatives (as in the case of ports) reducing vulnerability through
infrastructure protection may be effective. Such an approach would broadly align with the
President’s existing strategy for protecting critical infrastructure from terrorist attack as stated in
the NIPP, although it would incorporate explicitly geographic vulnerabilities. In the context of the
NIPP or other emergency management programs, geographic vulnerability could be viewed as a
distinctive type of infrastructure vulnerability and therefore considered in federally mandated risk
assessments.
Increasing standards for design, construction, and operation, and retrofitting existing
infrastructure to higher standards may also enhance infrastructure survivability. While there are
numerous industry and government building standards for protection from earthquakes,
hurricanes, and floods in regions where such hazards exist, such standards may not account for
the critical nature of certain types of assets. In particular, the degree of general survivability these
standards impose on critical assets may not appropriately reflect the economic and social costs
that might arise should such an asset fail. Federal authority to change such standards may be
limited, however, if they fall primarily under state or local jurisdiction.
A principal challenge to alleviating geographic infrastructure vulnerabilities is incorporating the
geographic dimension appropriately into the broader infrastructure risk management and
decision-making process. One key question is whether survivability measures in place to protect
against a facility-specific event would be effective against a regional event. Backup supply
networks, redundant control centers, and other systems intended to “harden” infrastructure may
themselves be subject to disruption from a geographic hazard. Although history does provide
some guidance as to the likelihood of disruptive natural events and their potential effects,
quantifying such geographic vulnerabilities in a way that allows comparison to a broader set of
vulnerabilities may be analytically complex. Predicting the likelihood of future terrorist attacks,
66

O’Conner, T., ICF Consulting. Testimony before the House Government Reform Committee, Subcommittee on
Energy and Resources. “Petroleum Refineries: Will Record Profits Spur Investment in New Capacity?” October 19,
2005.
67
Energy Information Administration. Annual Energy Outlook 2008. DOE/EIA-0383(2008). June 2008. p. 39.

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for which history provides little guidance, adds considerable uncertainty. Attempting to allocate
limited public resources for critical infrastructure survivability based on geographic
considerations may also be challenging. In particular, it could complicate the use of quantitative,
risk-based formulas to distribute federal support for critical infrastructure protection.68 Increasing
the private costs of infrastructure through new construction standards to improve survivability
could also be controversial.

Ensuring Infrastructure Recovery Capabilities
In addition to policies promoting geographic dispersion and survivability, Congress may consider
infrastructure recovery as a means of mitigating the impacts of geographic hazards on
concentrated critical infrastructure. The federal government, through the Federal Emergency
Management Agency (FEMA) and other agencies, provides a range of emergency aid programs
for communities affected by disasters such as hurricanes, earthquakes, or terrorist attacks. Among
other assistance, these federal programs can provide grants, loans, loan guarantees, food, and
shelter to disaster victims. They may also provide long-term infrastructure assistance, such as
repair of public utilities, to affected communities. 69
While the evolving objectives of federal emergency assistance programs are a topic of ongoing
debate in Congress, the programs traditionally have been intended to assist primarily in the
recovery of an immediate disaster area.70 However, if a natural disaster, terrorist attack, or other
regional incident disrupts critical infrastructure, it may have serious social or economic
consequences far beyond the area where the disaster occurs. The loss of concentrated natural gas
supplies in the Gulf of Mexico after hurricanes Katrina and Rita, for example, sharply increased
U.S. energy prices and threatened to create significant shortages of fuel for home heating and
electric power generation in New England.71 These natural gas shortages prompted congressional
calls to increase federal aid for low income households nationwide facing high natural gas bills. 72
In light of the far-reaching impacts like these, Congress may wish to incorporate into existing
federal infrastructure recovery plans and aid programs measures that account for the distinctive
vulnerabilities of concentrated critical infrastructure. Measures related to the restoration or
alternative provision of critical infrastructure services away from the immediate area of a
geographic incident may warrant particular attention.

Conclusions
Geographic concentrations of critical infrastructure exist across a number infrastructure sectors.
Although such concentrations often provide substantial economic and social benefits, they may
68

For further discussion see CRS Report RL32348, Selected Federal Homeland Security Assistance Programs: A
Summary, by (name redacted).
69
See CRS Report RL31734, Federal Disaster Recovery Programs: Brief Summaries, by (name redacted).
70
Federal Emergency Management Agency, “Federal Aid Programs for Louisiana Disaster Recovery,” Fact sheet HQ08-182, September 2, 2008; P.M. Prah, “Is the U.S. Ready for Another Major Disaster?,” CQ Researcher, vol. 15, no.
41, November 18, 2005.
71
R. Adams, “A Hard Winter, A Thin Natural Gas Pipeline,” CQ Weekly, October 7, 2005.
72
See, for example: Senator Edward M. Kennedy. “Sen. Kennedy, Colleagues Urge Bush Administration to Include
Low Income Home Heating Funds in Budget.” Press release. November 21, 2006.

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also be distinctly vulnerable to catastrophic geographic disruption. Any public policy addressing
critical infrastructure concentration must try to balance these benefits and potential costs. Both
government and industry have taken steps to try to protect critical infrastructure from natural
disasters, epidemics, and terrorist attacks. Nonetheless, questions remain as to whether these steps
appropriately address such geographic vulnerabilities. If Congress concludes that more federal
intervention is needed to alleviate vulnerabilities due to geographic concentration, it may employ
a number of policy options to encourage geographic dispersion (including eliminating policies
that encourage concentration ), ensure survivability, or ensure that effective infrastructure
recovery capabilities are in place to mitigate impacts of concentrated infrastructure disruption.
Because geographic hazards exist today, and geographic dispersion would likely take decades to
achieve, addressing geographic vulnerabilities may call for a combination of options.
In addition to these issues, Congress may assess how geographic infrastructure vulnerability and
survivability fit together in the nation’s overall infrastructure policies. As Congress evaluates
diverse proposals with the potential to affect critical infrastructure development—directly or
indirectly—Congress may consider whether such proposals are likely to relieve or exacerbate
geographic vulnerability. The economic or social benefits of adding capacity (e.g. refinery,
airport, shipping) to an existing concentration of critical infrastructure, or developing additional
infrastructure in a new location, may be outweighed by the increased geographic risk implicit in
such an expansion. Fiscal implications, especially related to the economic efficiency of public
critical infrastructure and the efficient use of federal funds for infrastructure projects, may also be
an important consideration. Reviewing how such infrastructure priorities fit together could be an
oversight challenge for Congress.

Author Contact Information
(name redacted)
Specialist in Energy and Infrastructure Policy
[redacted]@crs.loc.gov, 7-....

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/crs%3ARL33206. Public record. Not legal advice.