Public Service Electric and Gas Company (PSE&G), New Jersey’s oldest and largest regulated gas and electric delivery utility, recently became the first utility in the United States to secure liability protections under the Support Anti-Terrorism by Fostering Effective Technologies Act (SAFETY Act) of 2002 for its internal physical security program. The July 9, 2018 decision granting PSE&G SAFETY Act protections is significant because it signals that the U.S. Department of Homeland Security (DHS), which administers the Act, is taking concrete steps to recognize and bolster the energy industry’s critical contributions to national security. It also sends a message that the SAFETY Act is available to help other utilities limit their liability exposure to lawsuits that claim they should have done more to prevent or respond to a terrorist attack on their generation, transmission or distribution systems.
After the September 11, 2001 terrorist attacks, Congress enacted the SAFETY Act as an incentive for private companies to develop and deploy effective anti-terrorism technologies and services. The Act offers awardees significant liability protections from lawsuits in the event that a terrorist attack impacts their “Qualified Anti-Terrorism Technology,” or QATT. This includes: limited or no liability to third persons, the elimination of punitive damages, and exclusive jurisdiction in federal court over any lawsuits arising from such an attack. Importantly, a company’s internal program for securing its own assets may seek protection under the Act; the company need not “sell” its anti-terrorism technology to be granted coverage.
To qualify for protection under the SAFETY Act, companies must file an application with DHS that, among other criteria, demonstrates the “substantial utility and effectiveness” of their anti-terrorism security deployments. The application process involves an intensive review of the applicant’s technology, and the process can often take several months. DHS may award three possible levels of SAFETY Act coverage: (1) Developmental Testing and Evaluation Designation, (2) Designation, or (3) Designation and Certification (“Certification”). All three levels of protection grant liability protections to companies that sell or deploy qualified anti-terrorism technologies, including liability caps at DHS-determined insurance levels and prohibitions on the recovery of punitive damages or prejudgment interest. The highest form of coverage ─ Certification ─ also entitles a company to the added liability protection of presumptive immunity from suit.
According to DHS’s SAFETY Act website, the decision granting liability protections to PSE&G covers the company’s customized internal security program, which is designed to identify and reduce risks based on comprehensive planning processes and protocols and physical security measures protecting critical energy infrastructure and assets at five critical sites within the New Jersey PSE&G Service Area. The PSE&G security program consists of the following core components: infrastructure risk-rating tool and vulnerability assessment processes; business interruption management model; industry liaison security model; threat level advisory system; enterprise security plans and plans; security awareness training program; background checks and insider threat mitigation; security command centers; physical security measures and equipment; procurement processes for physical security services and equipment; and physical security exercises and assessments. The SAFETY Act protections granted to PSE&G will last five years (i.e., until July 31, 2023). In the event of a lawsuit arising from a declared act of terrorism, the company will be able to assert the SAFETY Act as an affirmative defense.
As one of the Country’s sixteen critical infrastructure sectors, the U.S. energy industry is and will continue to be a target for terrorism ─ as evidenced by the 2013 Metcalf sniper attack and other attacks on critical energy infrastructure around the world. The industry has taken significant steps over the past decade to strengthen its collective ability to detect, protect against, and respond to such attacks and many leading electric and gas utilities have been at the forefront of those efforts. DHS’s recent decision to grant PSE&G liability protection under the SAFETY Act is, in many ways, a recognition of the industry’s progress and should serve as a powerful incentivize for other utilities to consider pursuing SAFETY Act coverage for their own internal security programs.
Covington has one of the Nation’s preeminent SAFETY Act practices and assisted PSE&G in preparing and filing its successful SAFETY Act application with DHS.