EO 13920 Published – Protecting the Grid

The White House published EO 13920 in Monday’s (available online Saturday) Federal Register (85 FR 26595-26599) addressing “Securing the United States Bulk-Power System”. The EO provides the Secretary of Energy the authority to prohibit the use of foreign made electric equipment in the US bulk-power system.

To justify the authority, the EO explains that:

• The bulk-power system is a target of those seeking to commit malicious acts against the United States and its people; and

• The unrestricted acquisition or use in the United States of bulk-power system electric equipment designed, developed, manufactured, or supplied by persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries augments the ability of foreign adversaries to create and exploit vulnerabilities in bulk-power system electric equipment.

The President then states:

“I therefore determine that the unrestricted foreign supply of bulk-power system electric equipment constitutes an unusual and extraordinary threat to the national security, foreign policy, and economy of the United States, which has its source in whole or in substantial part outside the United States. This threat exists both in the case of individual acquisitions and when acquisitions are considered as a class. Although maintaining an open investment climate in bulk-power system electric equipment, and in the United States economy more generally, is important for the overall growth and prosperity of the United States, such openness must be balanced with the need to protect our Nation against a critical national security threat. To address this threat, additional steps are required to protect the security, integrity, and reliability of bulk-power system electric equipment used in the United States. In light of these findings, I hereby declare a national emergency with respect to the threat to the United States bulk-power system.”

Prohibitions

Section 1(a) of the EO prohibits “any acquisition, importation, transfer, or installation of any bulk-power system electric equipment” where the Secretary of Energy (in consultation with the Director of OMB) finds that “the transaction involves bulk-power system electric equipment designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary” and the transaction:

• Poses an undue risk of sabotage to or subversion of the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of the bulk-power system in the United States;

• Poses an undue risk of catastrophic effects on the security or resiliency of United States critical infrastructure or the economy of the United States; or

• Otherwise poses an unacceptable risk to the national security of the United States or the security and safety of United States persons.

Designated Actions

Section 1(b) allows the Secretary to “design or negotiate measures to mitigate concerns identified under section 1(a)” and use such measures as a precondition to approvals of transactions that would otherwise be prohibited.

Section 2(a) authorizes the Secretary to:

• Direct the timing and manner of the cessation of pending and future transactions prohibited pursuant to section 1 of this order,

• Adopt appropriate rules and regulations, and

• Employing all other powers granted to the President by the International Emergency Economic Powers Act (50 USC 1701 et seq.; IEEPA) as may be necessary to implement this order.

Section 2(b) directs the Secretary to issue rules and regulations implementing this EO. Those would include rules or regulation that would:

• Determine that particular countries or persons are foreign adversaries exclusively for the purposes of this order;

• Identify persons owned by, controlled by, or subject to the jurisdiction or direction of foreign adversaries exclusively for the purposes of this order;

• Identify particular equipment or countries with respect to which transactions involving bulk-power system electric equipment warrant particular scrutiny under the provisions of this order;

• Establish procedures to license transactions otherwise prohibited pursuant to this order; and

• Identify a mechanism and relevant factors for the negotiation of agreements to mitigate concerns raised in connection with subsection 1(a) of this order.

Section 2(d)(i) directs the Secretary to “identify bulk-power system electric equipment designed, developed, manufactured, or supplied, by persons owned by, controlled by, or subject to the jurisdiction or direction of a foreign adversary that poses an undue risk of sabotage to or subversion of the design, integrity, manufacturing, production, distribution, installation, operation, or maintenance of the bulk-power system in the United States” that:

• Poses an undue risk of catastrophic effects on the security or resiliency of United States critical infrastructure or the economy of the United States, or

• Otherwise poses an unacceptable risk to the national security of the United States or the security and safety of United States persons.

Task Force Established

Section 3 establishes the Task Force on Federal Energy Infrastructure Procurement Policies Related to National Security. The Task Force will be chaired by the Secretary and include representatives from at least six listed federal agencies. The Task Force will:

• Develop a recommended consistent set of energy infrastructure procurement policies and procedures for agencies, to the extent consistent with law, to ensure that national security considerations are fully integrated across the Federal Government, and submit such recommendations to the Federal Acquisition Regulatory Council (FAR Council);

• Evaluate the methods and criteria used to incorporate national security considerations into energy security and cybersecurity policymaking;

• Consult with the Electricity Subsector Coordinating Council and the Oil and Natural Gas Subsector Coordinating Council in developing the recommendations and evaluation described in subsections (c)(i) through (ii) of this section; and

• Conduct any other studies, develop any other recommendations, and submit any such studies and recommendations to the President, as appropriate and as directed by the Secretary.

Definitions

Section 4 provides definitions for key terms used in this EO. The terms defined include:

• Bulk-power system,

• Bulk-power system electric equipment,

• Entity,

• Foreign adversary,

• Person,

• Procurement, and

• United States person

Most of these definitions are generic descriptions of standard regulatory terms. The interesting exception is the term ‘Bulk-power system electric equipment’. This definition starts off with a lengthy list of industrial power equipment that includes:

• Reactors,

• Capacitors,

• Substation transformers,

• Current coupling capacitors,

• Large generators,

• Backup generators,

• Substation voltage regulators,

• Shunt capacitor equipment,

• Automatic circuit reclosers,

• Instrument transformers,

• Coupling capacity voltage transformers,

• Protective relaying,

• Metering equipment,

• High voltage circuit breakers,

• Generation turbines,

• Industrial control systems,

• Distributed control systems, and

• Safety instrumented systems.

The definition then concludes by stating that: “Items not included in the preceding list and that have broader application of use beyond the bulk-power system are outside the scope of this order.” Thus, communications equipment, security software and access control systems, for example, could not be addressed under this Executive Order.

Commentary

It seems clear to me that this EO is primarily directed at limiting the spread of Chinese equipment in the bulk-power system; certainly the President is not concerned with US companies using equipment made in North Korea or Iran, or designed by Hezbollah. Unfortunately, failing to actually name the Chinese government as the intended foreign adversary paves the way for this EO to be used in a wide variety of trade disputes around the world.

It is particularly odd that the President is providing the Secretary of Energy with broad powers (employing all other powers granted to the President) under IEEPA. Those authorities include levying economic sanctions and taking control of foreign owned property and assets within the United States. Those authorities are typically limited to the State Department or Treasury Department. Providing blanket authority to the Secretary of Energy in this way greatly expands the reach of the Energy Department well beyond that defined by Congress.

One final oddity here, the distressing lack of discussion of cybersecurity issues. There is only a single mention of cybersecurity in the EO and that is in describing the duties of the Task Force; “evaluate the methods and criteria used to incorporate national security considerations into energy security and cybersecurity policymaking”. Certainly, a major portion of the perceived threat is via cyber attacks on components of the bulk-power systems. Failure to specifically require the Secretary to address those concerns in consultation with the Cybersecurity and Infrastructure Security Agency is a major oversight in this EO.