[Senate Hearing 113-711]
[From the U.S. Government Publishing Office]
S. Hrg. 113-711
EXTREME WEATHER EVENTS: THE COSTS OF NOT BEING PREPARED
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HEARING
before the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
----------
FEBRUARY 12, 2014
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Available via the World Wide Web: http://www.fdsys.gov/
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
S. Hrg. 113-711
EXTREME WEATHER EVENTS: THE COSTS OF NOT BEING PREPARED
=======================================================================
HEARING
before the
COMMITTEE ON
HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
UNITED STATES SENATE
ONE HUNDRED THIRTEENTH CONGRESS
SECOND SESSION
__________
FEBRUARY 12, 2014
__________
Available via the World Wide Web: http://www.fdsys.gov/
Printed for the use of the
Committee on Homeland Security and Governmental Affairs
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
U.S. GOVERNMENT PUBLISHING OFFICE
88-275 PDF WASHINGTON : 2015
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Washington, DC 20402-0001
COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
THOMAS R. CARPER, Delaware Chairman
CARL LEVIN, Michigan TOM COBURN, Oklahoma
MARK L. PRYOR, Arkansas JOHN McCAIN, Arizona
MARY L. LANDRIEU, Louisiana RON JOHNSON, Wisconsin
CLAIRE McCASKILL, Missouri ROB PORTMAN, Ohio
JON TESTER, Montana RAND PAUL, Kentucky
MARK BEGICH, Alaska MICHAEL B. ENZI, Wyoming
TAMMY BALDWIN, Wisconsin KELLY AYOTTE, New Hampshire
HEIDI HEITKAMP, North Dakota
Richard J. Kessler, Staff Director
John P. Kilvington, Deputy Staff Director
Kristine V. Lam, Professional Staff Member
Keith B. Ashdown, Minority Staff Director
Christopher J. Barkley, Minority Deputy Staff Director
William H.W. McKenna, Minority Investigative Counsel
Laura W. Kilbride, Chief Clerk
Lauren M. Corcoran, Hearing Clerk
C O N T E N T S
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Opening statements:
Page
Senator Carper............................................... 1
Senator Johnson.............................................. 4
Senator Begich............................................... 4
Prepared statements:
Senator Carper............................................... 37
WITNESSES
Wednesday, February 12, 2014
Hon. David F. Heyman, Assistant Secretary for Policy, U.S.
Department of Homeland Security, and Caitlin A. Durkovich,
Assistant Secretary for Infrastructure Protection, National
Protection and Programs Directorate, U.S. Department of
Homeland Security.............................................. 7
Mark E. Gaffigan, Managing Director, Natural Resources and
Environment Issues, U.S. Government Accountability Office...... 12
Collin P. O'Mara, Secretary, Department of Natural Resources and
Environmental Control, State of Delaware....................... 21
Paul H. Kirshen, Ph.D., Research Professor, Environmental
Research Group, Department of Civil Engineering, and Institute
for the Study of Earth, Oceans, and Space, University of New
Hampshire...................................................... 24
Lindene E. Patton, Chief Climate Product Officer, Zurich
Insurance Group, Ltd........................................... 26
Alphabetical List of Witnesses
Durkovich, Caitlin A.:
Testimony.................................................... 7
Prepared statement........................................... 40
Gaffigan, Mark E.:
Testimony.................................................... 12
Prepared statement........................................... 51
Heyman, Hon. David F.:
Testimony.................................................... 7
Prepared statement........................................... 40
Kirshen, Paul H., Ph.D.:
Testimony.................................................... 24
Prepared statement........................................... 71
O'Mara, Collin P.:
Testimony.................................................... 21
Prepared statement........................................... 64
Patton, Lindene E.:
Testimony.................................................... 26
Prepared statement with attachment........................... 79
APPENDIX
Statement for the Record from National Electrical Manufacturers
Assocation..................................................... 110
Additional information submitted by Ms. Patton................... 112
Reports submitted by Mr. O'Mara.................................. 117
Responses for post-hearing questions for the Record from:
Mr. Heyman/Ms. Durkovich..................................... 415
Mr. Gaffigan................................................. 421
Ms. Patton................................................... 426
EXTREME WEATHER EVENTS: THE COSTS OF NOT BEING PREPARED
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WEDNESDAY, FEBRUARY 12, 2014
U.S. Senate,
Committee on Homeland Security
and Governmental Affairs,
Washington, DC.
The Committee met, pursuant to notice, at 10:03 a.m., in
room SD-342, Dirksen Senate Office Building, Hon. Thomas R.
Carper, Chairman of the Committee, presiding.
Present: Senators Carper, Begich, and Johnson.
OPENING STATEMENT OF CHAIRMAN CARPER
Chairman Carper. Well, welcome one and all. Great to see
our witnesses. Great to be here with Senator Johnson, and we
will call this hearing to order. I appreciate the effort of all
of you to get here today. I am glad we are having the hearing
today and not tomorrow, because if we were having it tomorrow,
we might not be having that hearing.
Today's hearing, as you know, is focused on the costs of
not being prepared for extreme weather events and exploring the
ways that our Federal Government can increase resiliency in our
communities--and I would just underline this--and save money in
the long haul. Deficits are coming down--they are still too
much-- from $1.5 trillion, I think, 4 years ago, and this year
we expect to be down to only $550 billion. That is still way
too much, and we have to continue to look in every nook and
cranny and figure out how do we save more money, and that is
the focus of today's hearing.
But I will try to take about 5 minutes for my opening
statement and yield to Senator Johnson. I am delighted that he
is here. And then we will recognize our first panel of
witnesses. Each witness will have about 5 minutes to offer your
statement to our Committee. Following your statements, we are
going to have a question-and-answer period. And then a second
panel of witnesses will come forward, and we look forward to
hearing from you as well.
Unfortunately, extreme weather appears to be the new norm.
Events like Superstorm Sandy, which came to my shores and our
shores in the Mid-Atlantic a year or so ago, recent wildfires
in other parts of the country, dangerous tornados, and historic
droughts may well be just the tip of the iceberg of what is to
come.
And even today, the East Coast is preparing for yet another
snow storm while the West Coast is experiencing a historic
drought and increased fire danger with no end in sight. I have
a friend who is from Australia, and he tells me that they had
the hottest weather in their history. So go figure. It is just
sort of a crazy world that we live in right now.
For years, I have been working with a number of our
colleagues to address the root causes and unfolding effects of
what I believe is one of the biggest challenges of our
generation, and that is, climate change.
According to the U.S. Global Change Research Program,
extreme weather events have increased in frequency over the
past 50 years or so and are expected to become even more
common, more intense, and more costly.
But let me just make a point and I will underline this, if
I could: Today's hearing is not intended to hash out climate
science. That is not what we are trying to do. Instead, it is
about trying to find common ground.
As our country debates how to address our changing climate
and the extreme weather I believe it is likely causing, our
witnesses will deliver to us a clear message, and that is, put
simply, the increase in frequency and intensity of those
extreme weather events are costing our country a boatload of
money--not just the cost that is measured in lives that are
impacted but in economic and financial costs as well.
For example, the damage from a storm still fresh in many of
our minds, Superstorm Sandy, which impacted, again, my home
State of Delaware and many of our neighbors, is estimated to
have cost our economy $75 billion--think about that--$75
billion in financial damages. And that is enough to run a
number of departments of our Federal Government and have money
left over. That is just one storm.
We are also hearing reports about the devastating effects
of California's severe drought and how it is impacting the
wildfire season in that State and across the West. Not only are
wildfires growing in frequency and severity, but we are now
seeing severe fires and wildfire conditions in winter and
spring, well beyond the traditional wildfire season of summer
and early fall. These fires are enormously expensive to fight
and to recover from, and they pose serious threats to lives and
property, damaging homes and businesses alike.
According to a 2013 report by insurance company Munich Re,
the nearly 40 wildfires last year in the United States cost our
economy over $1 billion.
These economic damages can deliver a devastating blow to
many local communities, to States, as well as to our own
Federal Government.
The Federal Emergency Management Agency (FEMA) alone has
obligated, I am told, over $80 billion in Federal assistance
for disasters declared in fiscal years (FY) 2004 through 2011.
However, the cost to the Federal Government is not just
limited to disaster relief. As an insurer of both property and
crops, the government faces additional significant fiscal
exposure.
For example, since the creation of the National Flood
Insurance Program (NFIP) in 1968, through December 2013 FEMA's
debt from insurance payments to that program have totaled
approximately $24 billion. And even before Superstorm Sandy,
the total debt from payments through the National Flood
Insurance Program was almost $18 billion.
The costs of these weather events keep going up at a time
when we are trying to bring our government spending down. That
is one of the reasons why, for the first time, the Government
Accountability Office (GAO) last year listed climate change as
one of the biggest fiscal risks facing our country in its high-
risk list report.
Just to remind us all, every 2 years, at the beginning of
every Congress, GAO gives us a high-risk list. Senator Johnson,
you have heard me say this before. We use that as our to-do
list on this Committee, to figure out other new ways or old
ways to save money and get better results for less money, and
we are thankful for that to-do list.
But in response to this historic GAO announcement, House
Oversight and Government Reform Committee Chairman Darrell Issa
stated, and this is a quote from Darrell: ``the Comptroller
General has made it very clear that we have not prepared
properly, that the Federal Government has a financial risk that
we have not properly mitigated, I think is a wake up call to
all of us.''
I could not agree more. GAO's report is a call to action
for both Congress and the Administration, warning us that our
country must start thinking now about how to better prepare and
adapt to a new climate reality. Today, our witness from GAO
will further detail these financial risks to our communities
and to our taxpayers and, hopefully, offer some commonsense
solutions that my colleagues and I can work with the
Administration to see implemented.
Fortunately, this Administration, along with a number of
State and local governments, are starting to focus their
efforts on preparing for the very real threats posed by extreme
weather events and climate change.
Last fall, President Obama issued an Executive Order (EO)
on Climate Preparedness that incentivizes investments in more
robust roads and buildings that may be more expensive, but can
hold up during more intense storms.
I commend the President's approach and believe it is very
timely as rebuilding efforts continue from Superstorm Sandy and
other recent natural disasters.
I look forward to hearing more about the President's
efforts and efforts by States like Delaware and a bunch of
other States to do a better job protecting our communities and
our taxpayer dollars from these challenges.
As we continue to debate how to reduce our deficits, I
believe we cannot afford to ignore the impacts these weather
events are having on Federal spending.
A little extra planning--combined with prudent, targeted
investments--can go a long way in saving both lives and
taxpayers dollars. I believe this is a perfect example of that
very wise maxim I used to hear from my grandmother all the
time: An ounce of prevention is worth a pound of cure.
Thanks again to our witnesses for being here. We are eager
to hear your testimony.
With that, I am going to turn it over to our Acting Ranking
Member, Senator Johnson from Wisconsin, for any thoughts, Ron,
that you would like to offer. I am delighted that you are here.
Thanks for coming.
OPENING STATEMENT OF SENATOR JOHNSON
Senator Johnson. Thank you, Mr. Chairman. Of course, I am
mindful the reason I am sitting in this chair is because Dr.
Coburn is not here, so he is in our thoughts and prayers.
Chairman Carper. He sure is.
Senator Johnson. I want to thank you and I want to thank
our witnesses, and I am looking forward to the testimony.
When it comes to this issue, the questions I am going to be
looking to have answered is, first and foremost, since I have
been here and have been looking into this issue, we are really
declaring Federal disaster declarations on a much more frequent
basis. Now, is that because we really have a higher incidence
of the types of disasters that require that, or are we just too
quick to declare those disasters?
I am afraid that if we have an overreliance on the Federal
Government's help, is that restraining the mitigation--the new
word I am hearing is ``resilience''--in terms of how we
prepare? Are we being penny-wise and pound-foolish by not
spending the money up front to mitigate? And, again, is the
overreliance on Federal help when these disasters hit,
everybody is expecting the Federal Government to come in and
pay for things as opposed to actually mitigating these risks
ahead of time?
And so from my standpoint, coming from the private sector,
I certainly understand that a private insurance market provides
very strong discipline in terms of mitigating risks, whether it
is fire risk in a plant, basically insurers come in there and
say, listen, if you put in sprinkler heads every 6 feet apart
versus every 24 feet apart, you are going to be able to
mitigate that risk, and you are going to be able to lower your
insurance price. So I really have not experienced that private
sector insurance market is a very good discipline to those risk
mitigation efforts, and, those are the kind of questions I am
asking in terms of how can we certainly utilize the Federal
Government in the most efficient way, because, like you said,
Mr. Chairman, we do not have the money to do all these things.
So, again, I look forward to the testimony.
Chairman Carper. Senator Johnson, thanks so much.
We have been joined by a fellow from a little State,
Alaska. [Laughter.]
A little State with a big population, and a couple of great
Senators.
Senator Begich. Yes, there you go.
Chairman Carper. Mark, would you like to say a word or two?
OPENING STATEMENT OF SENATOR BEGICH
Senator Begich. You bet. Small population, but a State with
a big punch. But I would say in Homer, Alaska, I think last
week we had green grass, so things are definitely changing.
First, Mr. Chairman, I would like to read a statement for
the record, if that is OK, and I apologize I will not be able
to stay. This is a fairly important issue, especially when you
talk about extreme weather events and how to prepare for them.
But first let me say, Mr. Chairman, I want to thank you and
I appreciate you holding this hearing to examine what I
consider the true costs of not being prepared for impacts of
extreme weather. We are about to feel it. As I drove in today,
I drove across salt, because they are waiting for snow to fall,
to melt it. In Alaska, that would be unheard of. But that is
the way it works.
Now, the weather conditions will also change, and I am sure
we will have power outages and many other things. We understand
very extreme conditions in Alaska. A normal winter day in
Barrow or Fairbanks, we will get to below zero many times, and
in some cases that would be extreme down in the lower 48 but
not in Alaska.
Alaska truly is on the front lines in terms of changing
climate. The effects of extreme weather and existing challenges
facing our communities, including retreating sea ice, rapidly
eroding shorelines, thawing permafrost, ocean acidification,
are impacting our economy on many different levels. This
reality puts many communities at risk throughout our State.
The U.S. Army Corps of Engineers (USACE) and the GAO have
both released reports identifying Alaska villages imminently
threatened by erosion. Many of these villages have experienced
incredible extreme weather, 30-plus villages at risk of
literally falling into the ocean or disappearing totally.
Flooding wiped out a village in Alaska called Galena,
totally. We had a whole village wiped out by flooding and no
place to evacuate. The closest place was 270 miles away. It all
had to be done by air in order to move these people out
quickly, and now they are trying to rebuild in a very short
time, and the winter set in, and it was also very difficult.
I know when people talk about climate change, they get
nervous. Do they want to debate the science? I am telling you,
climate change is occurring. My State is the example of it, of
what the impacts are, and it is extreme. And we are seeing the
impacts economically and from all levels.
Our State has the longest coastline in the United States.
It has incredible beauty but also has economic value. It also
has enormous vulnerabilities in the sense of the impacts it
has. Alaska's unique position as an Arctic State presents a
variety of advantages to leverage and challenges to overcome.
I have to tell you, Alaska is clearly on the front line
with dealing with the issue of climate change. We have our own
task force set up. We have been active in it. We have focused
on what we can do to mitigate the issues and these extreme
changes in weather patterns that are impacting us on a day-to-
day basis in Alaska.
Let me say that, as the President's Climate Action Plan
moves forward and the State and local and tribal leaders' task
force on climate change preparedness begins to develop
recommendations, I am confident investing in mitigation is the
right decision. We always spend the time, Mr. Chairman, always
after the fact, picking up the pieces and the costs are huge.
We had a hearing in Alaska through the Subcommittee that I
chair here with FEMA and the Corps talking about what we can do
before these situations occur when we know they are going to
happen. We have 30-some villages on the list. We know they are
going to fall into the ocean. Now, we can do something now, or
we can wait until something bad happens, and then we are going
to call FEMA, and FEMA is going to be writing some checks. That
is the worst approach in the sense of dealing with this issue.
We can do this in a much better way.
I know, Mr. Chairman, you invited an individual, Mike
Williams, Sr., who is an Iditarod musher but also an incredible
native leader from Aniak who was going to be on the panel
today, but I know he could not attend. If I could just ask for
the Committee to insert his comments and his testimony into the
record, if that is OK.
Chairman Carper. Without objection.
Senator Begich. Let me just end and say, Mr. Chairman, as
the Chair of the Subcommittee on Emergency Management that
deals with disaster relief, emergency preparedness, first
responders, mitigation in this Committee, we have had several
hearings on these issues, and I have sat here with insurance
folks that talk about how they are adjusting their risk
analysis, how they are making sure that they are now seeing
more severe weather patterns, and they are not here to debate
science. What they were here to say was that risk is greater.
Patterns are changing. They are more compacted, and they are
much more severe. So, therefore, the risk analysis goes into
play and, therefore, rates go up. I know this as an owner of
commercial property. I know my rates have not been flat for the
last 10 years, because they are analyzing the risk and I get
that. But there is a risk that everyone is paying today for the
lack of action in regards to mitigating these situations.
So I want to again say to the Chairman, thank you for
holding this hearing. It is a hard issue to grapple with
because there are political views on climate change, but that
is not the issue. The issue is it is happening. We can argue
over it all we want. But in my State, we see it every single
day. We have disaster after disaster. We have huge costs that
are associated with it. And even though we are far away, 5,000
miles away, small villages, literally their buildings and
houses are falling into the ocean. This is not a hypothetical
situation or theory. It is real.
So I really appreciate the work you are doing here, and I
hope the Committee continues to talk about this. I know and I
agree that we cannot bear all of the costs. That is just
reality. But how we manage it, from everything from our
building codes all the way up to what we do here on the Federal
level, is critical to understand how we are going to manage
this so we do not have these huge costs borne by the private
sector, individuals, or the government.
So I look forward to this, and thank you very much.
Chairman Carper. We are just glad that you could join
Senator Johnson and me. Thanks so much for coming and for your
comments.
Ron, when Senator Begich was speaking, I was reminded of,
of all people, Senator Mike Enzi from Wyoming. And as my
colleagues know, I oftentimes cite him. He may be here later
today. But he has his 80/20 rule that is one of his guiding
principles in terms of how to get things done. And the 80/20
rule is basically we agree on 80 percent of the stuff here in
Congress, we disagree maybe on 20 percent. Let us just focus on
the 80 percent that we agree on, and we will set the other 20
percent aside until another day. And today I think we are going
to focus on the 80 percent that we can agree on and help chart
a path for not just the Congress but for our country.
One of the people who is not here yet--he will probably be
here in a little bit--is the Senator from Arkansas, Mark Pryor,
and they have a saying in Arkansas: Whenever you see a friend--
and Mark Pryor said this to me about a million times. He will
say, ``Hey, man.'' And your name is Heyman. [Laughter.]
And I was just hoping Mark would get here so he could
introduce you. He could say, ``Hey, man.'' But, David Heyman,
we are happy to see you, Assistant Secretary for Policy at the
Department of Homeland Security (DHS). Mr. Heyman heads the
office that is responsible for strengthening our Nation's
homeland security by developing and integrating department-wide
policies, planning, program, and strategies.
Caitlin Durkovich is the Assistant Secretary for
Infrastructure Protection at the Department of Homeland
Security. In this role she leads the Department's efforts to
strengthen the public-private partnerships and coordinate
programs to protect the Nation's critical infrastructure,
assess and mitigate risk, build resilience, and strengthen
incident response and recovery. It is nice to see you again.
Welcome.
And last but not least, Mark Gaffigan. Mark is the Managing
Director for the U.S. Government Accountability Office's
Natural Resources and Environmental Team. The Natural Resources
and Environmental Team is responsible for GAO's assessments of
Federal efforts to manage our Nation's land and water
resources, protect the environment, ensure food safety, manage
agricultural programs, ensure a reliable and environmentally
sound energy policy, and meet our Nation's science challenges
and address the United States and international nuclear
security and cleanup. That is a lot to do for one person.
Each of you has about 5 minutes to read your opening
statement. If you run a little bit over that, that is OK. If
you go way over that, we will have to rein you in. The full
content of your written statement will be included in the
record, and with that, we are going to recognize Mr. Heyman,
also known, as ``Hey, man.'' Welcome.
TESTIMONY OF THE HON. DAVID F. HEYMAN,\1\ ASSISTANT SECRETARY
FOR POLICY, U.S. DEPARTMENT OF HOMELAND SECURITY, AND CAITLIN
A. DURKOVICH, ASSISTANT SECRETARY FOR INFRASTRUCTURE
PROTECTION, NATIONAL PROTECTION AND PROGRAMS DIRECTORATE, U.S.
DEPARTMENT OF HOMELAND SECURITY
Mr. Heyman. Well, thank you. A quick aside. Senator Pryor
has said that to me for now over 30 years as I served as his
vice president when he was a student government leader in my
high school. His political career has skyrocketed because of my
service to him. [Laughter.]
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\1\ The joint prepared statement of Mr. Heyman and Ms. Durkovich
appears in the Appendix on page 40.
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Thank you, Chairman Carper----
Chairman Carper. This story just keeps getting better.
[Laughter.]
Mr. Heyman. Thank you, Chairman Carper, Senator Johnson,
and distinguished Members of the Committee. And my best wishes
to Senator Coburn and his family. It is a pleasure to be here
this morning to discuss the impact of extreme weather and what
the Department of Homeland Security is doing to improve the
preparedness and resilience of our communities and Nation. This
represents one of the most significant areas where we can all
agree, I think. Investment today will help us save billions in
the future.
Over the past decade, an unprecedented number of weather-
related disasters--hurricanes, floods, droughts, wildfires,
crop freezes, and winter storms--have hit the United States,
leaving devastated communities and billions of dollars of
damage in their wake. In 2011, we experienced 14 natural
catastrophes exceeding $1 billion in cost each. That is a
record number. We had a record 98 presidentially declared
disasters. In 2012, we faced Hurricane Sandy, the largest
Atlantic hurricane on record and the second costliest to the
Nation, damaging or destroying more than 300,000 homes in New
York, 72,000 in New Jersey, and costing billions in damage.
According to Munich Re, the world's largest risk insurer,
weather-related catastrophes over the past three decades have
hit North America much harder than the rest of the world. Total
economic losses in the United States total approximately $1.15
trillion over the last 30 years. Without a concerted effort,
national resilience effort, the trend is likely to continue.
The Department of Homeland Security is responsible for
providing the coordinated, comprehensive Federal response in
the event of a terrorist attack, natural disaster, or other
large-scale emergency while working with State, Federal, local,
tribal, territorial, and private sector partners so that we can
ensure swift and effective recovery.
Over the past several years, we have made a significant
shift in our thinking and in our practice of preparing for,
mitigating against, and responding to disasters. And I can
summarize that in one word: ``resilience.'' Resilience is the
ability to anticipate, prepare for, and adapt to changing
conditions and withstand, respond to, and rapidly recover from
disruptions.
In May 2009, President Obama took a significant step toward
facilitating and institutionalizing national resilience when he
merged the Homeland Security Council and National Security
Council into a single structure and created a Resilience
Directorate within the National Security Council. This
Directorate manages resilience policy and operates alongside
the Counterterrorism Directorate. This action established
resilience as a Homeland Security pillar and priority which was
called out for the first time in the President's National
Security Strategy.
DHS affirmed this prioritization in its Quadrennial
Homeland Security Review (QHSR), in 2010, promoting insurance
of resilience to disaster as one of the Department's core
missions and responsibilities.
But the question is: How do you create and foster
resilience? Establishing the concept of resilience in doctrine
is an essential first step, but it is only one piece of
proactively preparing for potential disasters and readily
responding to a situation as it occurs.
Across the Department, from FEMA to the National Protection
and Programs Directorate (NPPD) to Science and Technology
(S&T), we work with a wide array of government, private and
nonprofit, and faith-based organizations to build and foster
resilience--not as a concept but as an applied reality. FEMA is
leading implementation of the National Preparedness System. My
colleague here today will discuss our critical infrastructure
security and resilience programs. And in my office, the Office
of Policy, we coordinate resilience initiatives and policy
across the Department and are working to create the framework
that fosters resilience and gives a coherent baseline. I would
like to share one example of some of the important work that we
have been doing.
We are creating a program called ``Resilience STAR'' based
on the Energy STAR concept, which you probably are familiar
with for appliances in your own home. In this case, it will
help ensure that homes will be built to voluntary standards,
stronger standards that will incur far less damage by
disasters, protecting lives, livelihoods, and helping
communities respond to and recover from disasters much more
quickly. Ultimately, DHS aims to extend the Resilience STAR
program beyond homes and facilities, and into critical
infrastructure, helping to recapitalize the built environment
across America in the long term, one home, one building, one
bridge at a time. Our investments in resilience will pay
significant dividends for the country. It is efficient and it
is cost-effective.
Homeland Security in the end is simply not about government
action; rather, it is also about collective strength of the
entire country. It is a shared responsibility that requires the
participation of individuals, communities, the private sector,
as well as State, local, and the Federal Government to be truly
effective. The Department's Ready.gov website serves as a
resource for citizens and businesses and communities so they
can stay informed and take appropriate prepared measures.
This is, as I said, a shared responsibility that requires
that we all work together to marshal all the resources to
withstand whatever threats and hazards we may face. It is truly
the actions of each of us that in the end will ensure the
safety and security for all of us.
I look forward to your questions. Thank you.
Chairman Carper. Mr. Heyman, thank you very, very much.
Ms. Durkovich, please proceed.
Ms. Durkovich. Thank you, Chairman Carper, Senator Johnson,
and distinguished Members of the Committee. I, too, extend my
thoughts and prayers to Senator Coburn and his family.
It is a pleasure to appear before you today to discuss the
Department's efforts to enhance the resilience of the Nation's
critical infrastructure to extreme weather. Our daily life,
economic vitality, and national security depend on critical
infrastructure. Infrastructure provides essential services and
functions, but it is easily taken for granted. Often it is only
when an incident occurs and service is disrupted that attention
is drawn to the importance of the infrastructure itself.
Threats to our critical infrastructure are wide-ranging,
including aging and failing components, cyber threats, acts of
terrorism, and climate change and extreme weather. The
consequences of these threats to the public and private sectors
can be seen in the events over the last decade. Hurricanes
Katrina and Sandy, the tornados in the Midwest, wildfire and
flooding across the Western States, the California drought, the
extreme cold in the Northwest all demonstrate how weather can
disrupt the availability of lifeline functions and other
critical services.
Just as terrorist attacks threaten our communities, extreme
weather disrupts the security of our Nation. Extreme weather
strains our resources, diverts attention from counterterrorism
efforts, serves as a threat multiplier that aggravates
stressors both at home and abroad, and destabilizes the
lifeline sectors on which we rely. Higher temperatures and more
intense storms can cause inefficient infrastructure operations
and damaging disruptions that can result in cascading effects
across our communities.
Hurricane Sandy is a vivid example of the potentially
devastating impacts extreme weather can have on critical
infrastructure and demonstrates how interdependencies between
infrastructure systems can magnify impacts and delay
restoration.
Additionally, the increasing role of cyber and
communication networks creates new vulnerabilities and
opportunities for disruption. Two years ago, high temperatures
and high demand tripped a transformer and transmission line in
Yuma, Arizona, starting a chain of events that shut down the
San Onofre nuclear power plant, disabling automated switching
and distribution Supervisory Control and Data Acquisition
(SCADA) systems, leading to a large-scale power outage across
the entire San Diego distribution system. Strides have been
made to address vulnerabilities that lead to such outages, but
additional progress is needed to protect our interrelated
systems.
The Nation must take a long-term perspective and account
for evolving threats and hazards, including those caused by
extreme weather that are linked to changes in climate,
especially with regards to building resilience for critical
infrastructure. Built infrastructure has a 10-year design build
phase and a life span of 50 years or more and is expected to
operate under stressor conditions that sometimes we cannot even
imagine.
As a result, it is a prudent investment to incorporate
resilience into asset and system design, promote mitigation and
built infrastructure, and to empower owners and operators with
decisionmaking tools rather than to rebuild or redesign
infrastructure after incidents occur.
To achieve infrastructure resilience, owners and operators
must be able to minimize the disruption to essential services
provided to our communities regardless of the hazard or threat;
and when a disruption occurs, ensure essential services and
functions are brought back to full operations as quickly as
possible.
One year ago today, President Obama issued Presidential
Policy Directive (PPD) 21, Critical Infrastructure Security and
Resilience, and Executive Order 13636, Improving Critical
Infrastructure Cybersecurity. PPD-21 directed DHS to develop an
update to the National Infrastructure Protection Plan (NIPP),
which was released in 2013. The NIPP 2013 envisions a nation in
which physical and cyber critical infrastructure remain secure
and resilient. Essential services and products continue to be
delivered in the face of incidents, and communities and
businesses adapt to changing conditions and rapidly recover
from potential disruptions.
The Office of Infrastructure Protection (IP) is leveraging
our core capabilities, such as information sharing, capacity
development, vulnerability assessments, and situational
awareness, to support owners and operators' efforts to
strengthen resilience to weather.
As a part of the Hurricane Sandy Rebuilding Task Force, IP
and other Federal partners worked to develop the Infrastructure
Resilience Guidelines, which are sound investment principles to
guide Federal infrastructure investment as we modernize and
adapt infrastructure--simple things such as consistent
application of comprehensive science-based data and a regional
cross-jurisdictional focus for selecting projects.
Additionally, I co-chair the new Infrastructure Resilience
Work Group with the Department of Energy under the White House
Council on Climate Preparedness and Resilience. Through this
working group, we are coordinating interagency efforts on
climate preparedness and resilience for the Nation's
infrastructure. The working group is studying infrastructures
most vulnerable to climate impacts throughout the United States
and identifying risk-based mitigation and adoption strategies.
This will inform and aid the critical infrastructure community
with planning and decisionmaking regarding climate preparedness
and resilience.
IP also works with State and local partners through the
Regional Resiliency Assessment Program to examine a particular
industry, region, or municipality's dependence on key lifeline
sectors and to mitigate the hazards that could disrupt these
complex ecosystems. This year, we are partnering with the State
of Maine to produce the first Climate Change Adaptation Plan
for the Portland metropolitan area.
In closing, by increasing the resilience of our critical
infrastructure in our communities, we are better prepared as a
Nation to the myriad of threats and hazards we face. Leveraging
the partnership framework we have established over the past 10
years, IP will continue to work with owners and operators of
critical infrastructure to understand the impact of extreme
weather and to take steps to enhance resilience.
Thank you very much, and I look forward to answering your
questions.
Chairman Carper. Ms. Durkovich, thank you so much for your
testimony. Stick around. We will have some questions.
Mr. Gaffigan, very nice to see you. Please proceed.
TESTIMONY OF MARK E. GAFFIGAN,\1\ MANAGING DIRECTOR, NATURAL
RESOURCES AND ENVIRONMENT ISSUES, U.S. GOVERNMENT
ACCOUNTABILITY OFFICE
Mr. Gaffigan. Senator Carper, good to see you again,
Senator Johnson, thank you for inviting me here. Let me also
extend best wishes to Senator Coburn and his family. I had the
fortune to attend one of Senator Coburn's first hearings when
he was on the Hill, and he told us afterwards he was going to
do some oversight. And I think he has followed through on that,
so I am very sorry he is not able to join us today.
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\1\ The prepared statement of Mr. Gaffigan appears in the Appendix
on page 51.
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Chairman Carper. And he has announced he is going to step
down at the end of the year, and while he has some health
challenges right now, he said that has nothing to do with
those. It is just a personal decision he and his family have
made. But I have said to him, ``Well, you are still on the
payroll for another 10-1/2 months, so I know you want to finish
strong. And we are going to make sure that you do,'' and he is
determined to. So plenty more oversight to come.
Mr. Gaffigan. Great.
I want to make three points. First, there is a lot at
stake. We have all talked about the numbers in your opening
statement. There are significant costs from extreme weather;
not only to the Federal Government, but also to State, local,
and tribal governments, businesses, farmers, individuals--in
short, everyone.
Second, there is uncertainty about the specific risks we
might face from extreme weather and how we can adapt to those
changes and manage those risks. Complicating this uncertainty
is that the risks faced and the appropriate adaptation is
particular to the situations and the locations of those facing
the risks. To borrow from the phrase ``All politics is local,''
all adaptation is local.
Third, the challenge is to strive for the best, most
updated information to help inform specific preparation,
resilience, and adaptation so that the investment, preparation,
and resilience is most effective. And, as we have explained,
funds are tight.
So let me illustrate what is at stake and describe
challenges in four areas that are particular to the Federal
Government.
First, the Federal Government has a great deal at stake as
an insurer of property and crops. In 2012, the National Flood
Insurance Program had property coverage of over $1.2 trillion
while the Federal Crop Insurance Corporation covered $120
billion in crops. That is a fourfold increase in the crop
insurance coverage since 2003.
However, the National Flood Insurance Program has a debt of
$24 billion as of December 2013, as you pointed out, and the
Nation's crop insurance annual costs have more than doubled
from $3.4 billion in 2001 to $7.6 billion in 2012.
Back in March 2007, GAO did a study and found that both of
these programs' exposure to weather-related losses had grown
substantially and that FEMA and the U.S. Department of
Agriculture (USDA) had done little to develop the information
necessary to understand what those risks were. They have since
developed reports. Now, those reports--USDA released its report
in 2009. The National Flood Insurance Program released its
report in 2013. They recognized the potential risks. They
recognized the uncertainty. But it is still unclear what
actions these programs are going to take in the future, and
that will have a lot to say for the financial solvency of these
programs going forward.
But, also in 2012, Congress passed the Biggert-Waters Flood
Insurance Reform Act, which, among many things, required the
use of information on coastal erosion areas, future change in
sea levels, and intensity of hurricanes to update its flood
maps. Implementation of this law will be key in making changes
to the National Flood Insurance Program.
Second, the Federal Government is a significant provider of
disaster aid. The number of Federal disaster declarations
increased from 65 in 2004 to a peak of 98 in 2011, and, as has
been mentioned, FEMA has provided over $80 billion in disaster
aid during those years. And after Superstorm Sandy, Congress
provided about $60 billion in budget authority for disaster
assistance.
The Federal Government could do a couple things. It could
start by fully budgeting for these costs to address the fiscal
exposure that is largely outside of the budget process. And
FEMA could also develop an updated formula--the formula has not
been updated since 1986--to determine the capacity of
jurisdictions to respond to those disasters.
Third, the Federal Government is the owner and operator of
significant infrastructure. The Department of Defense (DOD)
alone has over half a million buildings and facilities
throughout the world, including some in vulnerable coastal
areas. In addition, the Federal Government manages about 30
percent of the Nation's lands, forests, and wildlife. These
natural resources face threats from extreme weather.
DOD has recognized the risk to its facilities and is trying
to assess the potential impacts and consider what adaptation
may be necessary at facilities in many different environments.
And regarding Federal lands, the Federal resource agencies are
also trying to incorporate climate-related information at the
local level to decide what to do.
Fourth, the Federal Government is both an investment
partner in public infrastructure and a potential provider of
technical assistance. The Federal Government invests billions
annually in public infrastructure projects. For example, the
Congressional Budget Office (CBO) estimates that total public
spending on transportation and water infrastructure is about
$300 billion annually, with about 25 percent of that coming
from the Federal Government and the rest from State and local
governments.
Our work has found that incorporating considerations about
climate into the planning of this infrastructure that may be in
place for 50 to 100 years can help avoid the need for
assistance in the future because the infrastructure can
withstand extreme weather. However, responsibility for planning
and prioritizing these projects is primarily at the State and
local level. And they may not have the information or expertise
they need to incorporate climate considerations into their
site-specific local projects. Thus, the Federal Government is
in a position to be a provider of technical assistance, helping
State and local officials identify and use the best available
information that is specific to their circumstances while also
enhancing access to experts who could help translate that
information at the local level.
That concludes my opening statement. I welcome your
questions. Thank you.
Chairman Carper. Thanks. Thanks so much, Mark, for the work
that you--anybody here on your team, anybody in the audience
from GAO, would you all raise your hand?
Mr. Gaffigan. The gentleman right behind me, yes. And there
are plenty more back in the building.
Chairman Carper. Well, we just want to say on behalf of Dr.
Coburn and myself how much we value the work that you do and
appreciate the opportunity to partner with you.
Mr. Gaffigan. Thank you, Senator.
Chairman Carper. I want to first talk a little bit more,
about the Flood Insurance Program. Senator Johnson and I both
voted against, as did Dr. Coburn, we voted against the flood
insurance corrections bill that passed the Senate not very long
ago, just earlier this month or late last month. And I go back
in time to about 1990. I was a House Member on the Banking
Committee and worked, believe it or not, I think with a guy
named Tom Ridge, who was the ranking Republican on the
Subcommittee that I chaired, and one of our focuses was the
National Flood Insurance Program because we were concerned that
the program was underwater. And here all these years later, it
still is. And given the kind of changes we are seeing in
weather, it is getting to be more underwater. And we adopted
some changes to the legislation in the last year or two, and
the costs as they come to bear on people who live in areas that
are prone to flooding are in some cases very steep. There are
concerns about flood mapping and so forth that people who were
not living in areas where they used to have flooding, now they
do. And so the question is: What do we do, if anything, in
response to those conditions, those changing conditions, and to
try to be humane but also to realize that there is a lot of
money at stake here? I think doing nothing is not an option.
So the Senate has passed a bill--it is over in the House,
and we are not sure what, if anything, the House is going to
do, but my guess is that there will be an opportunity here to
find a principled compromise that actually makes progress
toward reducing this unfunded liability that is not cruel or
heartless with respect to people whose homes, whose businesses
are at risk.
I know how closely you have been following what the Senate
has done, the state of play, but if any of you have any advice
for us as to how to proceed and what might be a principled--
some of the elements of a principled compromise, I would
welcome hearing those. And my guess is that we are going to
have the opportunity later this year to work more closely with
you and with the Administration. The Administration, the
President is not crazy about this bill that the Senate has
passed, as you know. So there is an opportunity for the
Administration to weigh in and be part of the solution.
Any thoughts you have with us on that?
Mr. Gaffigan. Just very quickly, and, again, flood
insurance is not necessarily in my portfolio. I have a lot of
issues, but not that one. I think it is a tradeoff between the
affordability of the program and the individuals who have to
pay the premiums. At the end of the day, someone has to pay for
this, and it is a question of the balance between the taxpayer
and the individual businesses, and homeowners, who own flood
insurance.
I think some of the things talked about in Biggert-Waters
relate to building in consideration of future risks. Trying to
build in some resiliency going forward in that program would
help minimize the risks so that we do not have to pay the
higher premiums because we did not anticipate that high risk
down the road. I think that is where the area of compromise is
probably best sought.
Chairman Carper. OK. Ms. Durkovich, Mr. Heyman, anything
you want to mention on that before we go to another question?
You do not have to. If you have something you want to say, go
ahead.
Mr. Heyman. I just want to say that FEMA has actually been
working closely with both the House and Senate on this. This is
obviously a concern that we hear about, and I know that there
are possibly going to be amendments down the road.
Right now, our authority is only to complete a study on
affordability. We have no authority to address the
affordability of actual flood insurance. But we are happy to
work with you to help try to think this through.
Chairman Carper. All right. Thanks.
I am going to come back to Mark Gaffigan for my next
question. This deals with prioritizing risks. I think in your
testimony you may have mentioned three or four areas where the
government could limit its fiscal exposure when it comes to
climate change and to extreme weather events. And within those
three or four areas, which stands out to you for maybe the
biggest fiscal concern?
Let me just add to that. This is kind of a P.S. Are there
high-risk areas that cannot be addressed by the Executive
Branch and should be maybe of higher priority for my colleagues
and me here in the Congress?
Mr. Gaffigan. Well, you mentioned the National Flood
Insurance Program. That is one in terms of fiscal risk, and I
think it is hard to pick one that is more significant than
others. And I just touched upon four areas. There are a lot of
other potential impacts to the Federal Government.
We think the disaster assistance program, stands out,
Congress authorized $60 billion for one storm, Superstorm
Sandy.
Right now, as an owner of infrastructure, the agencies are
trying to assess what is at risk. The Department of Defense has
some serious concerns. They have at least 30 major facilities
that are in coastal areas that are vulnerable to flooding. They
have to be concerned about dry docks, making sure those are not
exposed. So I think that it is hard to pick a ``most
important'' out of all those.
Chairman Carper. All right. A question for either Mr.
Heyman or Ms. Durkovich or both, but in Mr. Gaffigan's
testimony, he mentioned, as I recall, that infrastructure
decisionmakers have not necessarily incorporated potential
climate change impacts in planning for roads, in planning for
bridges, in planning for waste management systems because they
face challenges identifying and obtaining available climate
change information best suited for their locations and for
their projects.
Could one or both of you take a minute or two and just talk
a little bit about how your agency is addressing this concern?
In particular, I would like to hear how your agency is
coordinating with other agencies to make sure that local
planners have the best data possible, especially related to
Superstorm Sandy rebuilding efforts?
Ms. Durkovich. Thank you very much for that question. In
our unique role within the Office of Infrastructure Protection,
we both have the ability to convene and coordinate with owners
and operators, but with other members of the Federal
interagency. Let me speak to that latter point first and two
topics related to that.
First, I was in front of you a few months ago talking about
Federal facility security, and I happen to chair a group called
the Interagency Security Committee that works with 53 different
departments and agencies to set standards related to Federal
building safety and security. Climate change is an issue that
this Interagency Security Committee is addressing and is
working to incorporate it into its design basis threat
scenarios, which are over three dozen scenarios that Federal
buildings think about when incorporating protective and
mitigation measures to, again, ensure the safety and security
of those facilities.
So this is a group of physical security officers who are
looking at how we address climate change when it comes to the
over 300,000 Federal facilities that are in the area. We are
dependent, though, as a Federal interagency on other lifeline
sectors, and in the Office of Infrastructure Protection, we
have the ability to convene our 16 sectors and partners both on
the government side but also on the private sector side to talk
about what they are doing to raise awareness, to look at best
practices, to identify best practices, to help share those best
practices to understand where the gaps are and to look at the
comparative advantage that the Federal Government has and to
think through what are some of the capabilities that we can
bring to bear to help this effort.
And then just to speak briefly to the work that we are
doing within the Infrastructure Resilience Working Group, this
is, again, a unique opportunity to look across the Federal
interagency and to look at the programs that are available to
State and local communities to the owner/operator community,
and to, again, understand what is working, where the gaps are,
where we need to remove those barriers so that we can enable
planning, that we can bring consistent comprehensive data to
our partners so they can begin to incorporate it into their
planning.
So a lot going on this front that I think we can continue
to harness.
Chairman Carper. All right. Before I yield to Senator
Johnson, Mr. Heyman, do you want to add anything to that? Thank
you for those comments.
Mr. Heyman. Sure. Thank you. As part of the National
Preparedness Plan, we work very closely with States and
communities to help them assess the threats and hazards and
risks that they face. This is called the Threat and Hazard
Identification and Risk Assessment (THIRA). Every State is
required to do this. FEMA has a policy of making the best
available data available, so that is to say, whatever is sort
of the top-line scientific data that is available, FEMA tries
to facilitate to the best of their ability.
Two years ago, there were only 15 States that had Climate
Action Plans. Today there are 36 that have Climate Action
Plans. They are incorporating the best data and the risk
assessments to develop an action plan to better prepare their
communities.
Chairman Carper. Thanks very much. Senator Johnson.
Senator Johnson. Thank you, Mr. Chairman.
I am a big fan of a fellow named Bjorn Lomborg, who
basically issues his report--I think it is called the
``Copenhagen Project,'' and I believe he is an adherent of
climate change, but he is also pretty good at prioritizing with
limited resources where we should be spending our dollars. So I
think my first set of questions really goes toward that
prioritization. How do we do that? And are we doing it
effectively? And can we be, for example, killing two birds with
one stone?
I will start with you, Ms. Durkovich. You talked about
cybersecurity, which brings to mind power grids, which brings
to mind the attack at the Metcalf transmission station in, I
believe, San Jose, California. There are a number of things
that could affect our infrastructure: obviously natural
disasters, weather disasters, as well as manmade terrorist
attacks. Are we trying to combine these and take a look at that
from the standpoint of prioritization of trying to mitigate
problems?
Ms. Durkovich. Our role within the Office of Infrastructure
Protection is to help owners and operators understand the range
of threats and hazards they face, and as they look across their
enterprise to manage risk, to provide them with information,
with tools, with best practices so they can be both efficient
and effective in application of how they go about managing
these risks.
Part of the reason that we have moved to a more all-hazards
focus within the Department of Homeland Security and across the
Homeland Security enterprise is that we find as you work to
adapt preventive measures and mitigative measures to a range of
threats and hazards, they are applicable not only to just one
particular hazard but to many hazards. And so we work very
closely with the owner and operator community to think through
this. But let me touch briefly, for example, on the substation
issue.
So as we think about security but also incorporate climate
change and extreme weather into that conversation, as owners
and operators are looking to invest in upgrades and to
modernize that infrastructure, as they make improvements
related to security, we can also have conversations with them
about whether these assets and these facilities are in flood-
prone areas, are in areas that are susceptible to sea rise. So
as they start to make the multi-million-dollar investments that
you are seeing, again, to enhance their security and
resilience, we are thinking about these things in parallel, in
an integrated fashion, and ensuring that the money that is
invested in these enhancements and these mitigation measures is
used effectively.
But again, our role is really to help them understand the
range of threats and risks and consider measures and options
that allow an efficient and effective application of resources.
Senator Johnson. Mr. Heyman, in terms of prioritization,
are there lists being prepared? We talk about it. We talk about
prioritization. But is there any product that is actually ever
produced?
Mr. Heyman. There is. The National Preparedness System has
about five parts to it. One is to identify the risks. Two is to
get a sense of where the gaps are, looking at communities based
upon what capabilities are required for preparedness, then to
do the resource assessment and ultimately resourcing followed
by training and exercises, and you do that cycle again.
At the end of that exercise, there is a list of
capabilities that are prioritized for communities, for States.
Those States then apply for grants to FEMA based upon that gap
analysis, and that becomes the basis for the next year's
preparedness planning and evaluation, and so that is a regular
cycle that is done. The National Preparedness Report is an
annual report, and its last release was last year.
Let me just talk a little bit about prioritization as a
concept because I think that everyone has said that mitigation
is critically important, and I think that is right. There was a
study done a few years ago by the Multihazard Mitigation
Council which said a dollar's worth of investment up front in
mitigation led you on the back end to $4 back in terms of
return on your investment. And, similarly, the Louisiana State
University Hurricane Center evaluated what kind of benefit
mitigation would have done in Hurricane Katrina, and they came
back with a figure of $8 billion would have been saved.
So how do we do that? One way of doing that, because the
Federal Government does not own and operate most of the
infrastructure and it does not own the residential housing or
the buildings that are out there, is to try to incentivize and
encourage raising standards as it pertains to the built
environment. And the program I mentioned, Resilience STAR,
which we are piloting in the residential environment this year,
provides a basis for trying to look at how we can do that on a
broader scale across infrastructure so that people are
motivated and incentivized either through self-preservation,
because their house will be the one standing, or through other
incentives, whether it is mortgage reductions or perhaps
premium reductions on insurance. And so we are looking at that,
and I think that is something that this Nation should take a
serious look at.
Senator Johnson. Well, let us talk--because you are using
the word I wanted to get to next is ``incentivize.'' Where are
those incentives best--where do they best come from? Private
insurance market where you have basically millions of different
decisions being made or from some centralized entity like the
Federal Government trying to do it with a one-size-fits-all
approach?
Mr. Heyman. So there are a number of different actors in
this world. When you go to buy a house, there are the builders.
Are they going to build it to code-plus standards? How do you
get them engaged in that? As we are going ahead with the pilot,
what we are seeing is that a lot of builders are interested in
this because they see a market advantage. And so there is a
benefit to being labeled, for example, Resilience STAR.
The insurance industry is interested in this because it
saves them a whole lot of money on the back end with possible
claims for damage, if you are looking at the life cycle of a
house, every 40 years. And residential owners may see a benefit
because----
Senator Johnson. Let me just stop, though. Wouldn't the
insurance industry itself have a vested interest to develop
these standards? And if they developed them themselves in the
private sector, wouldn't it be more effective than a
government-run solution?
Mr. Heyman. So insurers have looked at this. In fact, we
are partnering with the insurance industry to try to develop
this pilot project. And I think for various reasons, possibly
because there are so many different fractured--you have a
fractured insurance market, you have a number of different
State players and all. I think one of the benefits that the
Federal Government can bring is a national perspective, which
is not something any individual insurance company can do.
Senator Johnson. Can I ask just one more question?
Chairman Carper. Yes.
Senator Johnson. Because I have a great deal of concern. If
the Federal Government is the 800-pound gorilla and everybody
in the private sector is looking--or at the State level or
local level is looking for the Federal Government to bail them
out, is that a real disincentive to do the resiliency, do the
mitigation efforts? If we have a big flood, if we have a big
hurricane, the Fed is going to come in there and cover our
losses and then some? To what extent are we witnessing that
really throughout the country?
Mr. Heyman. Well, you are not, unfortunately, witnessing
that. In many places, you have communities that are devastated,
that people have packed up their bags and left, and you are
losing your tax base. You are losing your ability to attract
individuals to come to your community. And the Federal
Government cannot help in that regard when people move with
their feet.
So this is one of those issues that I think local
governments or urban communities will probably take a good look
at, because if you are a resilient community sitting next to a
zone which has a risk, people may want to be there because in
the long run you are safer, more secure, and, frankly, the
funds that you would have to pay in building your community can
be paid to other priorities like public safety and education.
Senator Johnson. Of course, that is the point, isn't it,
that we need to raise the price for individuals that are
building in very risky environments, correct? We do not want to
continue to incentivize people to be building in areas that we
know are going to flood every year or get wiped out every 10
years.
Mr. Heyman. And that is why it is important to have the
best available data so that people actually are cognizant of
where they are building or living or moving to. FEMA has tried
to get that as a basis for getting data out, and then, frankly,
when we work with communities to do their Threat and Hazard
Identification Risk Assessment, that is all--with your eyes
wide open, looking at what the highest risks are, and then
asking if there is a way that we can partner together to reduce
those risks.
Senator Johnson. OK. Thank you. Thank you, Mr. Chairman.
Chairman Carper. I wish we had time for another round of
questioning. We have just learned that a series of votes starts
at 11:30, and I want to make sure we have good ample time to
hear from our second panel.
I just want to followup, though, on what Senator Johnson is
saying. We have had some demonstrations already on STAR
programs, Energy STAR and some others that we are aware of, and
just to make sure that we use those as laboratories of
democracy, that we can figure out why they work and may be just
as important as some that were attempted that did not work out.
And I am one, like Senator Johnson, I am always interested in
how do we align incentives in order to get the kind of behavior
that we are interested in encouraging.
The other thing I like to do here, sometimes I quote David
Osborne, who wrote a book back in, oh, I think the early 1990s
called ``Reinventing Government,'' and he talked about the role
of government and the role of the private sector. And he used
boats as the analogy. He said that the role of government is to
steer the boat, the role of everybody else is to row the boat,
so to actually do the work and to make it work. And so there is
a good role for both, I think an important role for both, and
hopefully we can find the good balance.
I just want to say to each of you, thanks for the work you
do. Thanks to the folks who work with you, and to say
especially with respect to flood insurance, we will look
forward to maybe working very closely with GAO and with DHS and
others to try to find a principled compromise that makes a lot
of sense. My father would say, if you looked at it from above,
he would look at our final work on flood insurance and say,
``Well, they used some common sense.'' So hopefully we will do
that.
So, with that, you are excused, and we thank you for
joining us, and there will be some followup questions. We just
hope you will respond to those in a prompt way. Thank you so
much.
[Pause.]
Collin O'Mara, all the way from--I want to say San Jose,
California. Did you used to live in San Jose?
Mr. O'Mara. We did.
Chairman Carper. We stole him. Governor Jack Markell stole
him from San Jose at the tender age, I think, of 29 or 30 to
come all the way to Delaware to be our Secretary of Natural
Resources and Environmental Control.
Ron, if I had half the energy of this guy, I would be
President and Vice President. He is an amazing guy. I love
working with him, very proud of the work that he does, and
thank you for joining us today.
Our second witness is from a bigger State than ours--New
Hampshire. Kelly Ayotte cannot be with us this morning. She
sends her best. And Dr. Kirshen, research professor at the
University of New Hampshire--what is your mascot there?
Mr. Kirshen. It is the Wildcats.
Chairman Carper. The Wildcats, yes. We have had some rough
football Saturdays against the Wildcats, and the Blue Hens, but
we are always happy to welcome you here. I understand your
research focuses on water resources engineering and management
as well as climate change vulnerability assessment and
adaptation planning. So that is a mouthful, but we are happy
that you could join us. Thanks so much for coming.
And Ms. Lindene Patton--my mother was a Patton--chief
climate product officer for Zurich International Group. In this
role, Ms. Patton, I am told, is responsible for policy and risk
management related to climate change. A member of my staff said
that you might actually have a member of your family here or
two. Is that true?
Ms. Patton. I do.
Chairman Carper. Would you turn your mic on and just
introduce whoever is here from your family? Maybe they will
stand up or something.
Ms. Patton. My daughters Amelia and Zoe.
Chairman Carper. Amelia, would you raise your hand? Hi,
Amelia. Zoe, would you raise your hand? All right. And who is
in the middle?
Ms. Patton. A friend of hers, Sharon.
Chairman Carper. Hi, Sharon. Nice of you to come.
Ms. Patton. And our au pair, Gosia.
Chairman Carper. All right. Ladies, thanks for bringing
your mom.
OK. You heard me say to the first group take about 5
minutes or so, if you will, and then we will ask some
questions. But we are delighted that you have come. Thank you
so much. This is an important hearing, and I am happy to be
here along with Senator Johnson to welcome you.
Collin, would you please proceed? Secretary O'Mara.
TESTIMONY OF COLLIN P. O'MARA,\1\ SECRETARY, DEPARTMENT OF
NATURAL RESOURCES AND ENVIRONMENTAL CONTROL, STATE OF DELAWARE
Mr. O'Mara. Senator Carper, Senator Johnson, our thoughts
also go out to Senator Coburn. Thank you so much for holding
this hearing today. I think your timing is good, and it is a
critically important topic to Delaware as the lowest-lying
State and one of the most vulnerable to these kind of storms.
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\1\ The prepared statement of Mr. O'Mara appears in the Appendix on
page 64.
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Senator Carper and I spent a lot of time in helicopters and
on the ground looking at the damage after the fact. That is in
Delaware. We have actually probably done a better job preparing
than almost any other State because of the way we are looking
at it.
What I would like to do in my testimony is talk a little
bit about Delaware's approach but then also offer some, I
think, very commonsense solutions that should be part of the
conversation going forward about shifting the focus to
preparedness and resilience and a little less on the money on
the back end.
In Delaware, our approach has been fairly simple. Start
with the science and the economics and make sure you have good
science and economics to know your vulnerabilities and the
tradeoffs. it is easy in a political environment to move toward
the thing that gets the most attention, but it is not always
necessarily the thing that has the best economic imperative.
And so we have done extensive analyses of our flood plains, and
we have looked at sea level rise. I have a particular here that
I will introduce into the record with the Chairman's consent.
We have looked at 75 different types of infrastructure in
the State and the vulnerabilities of each. Then we took that
data to actually begin making infrastructure investments. We
have looked at other climate impacts from temperature to more
precipitation to more extreme storms, and really having that
data drive our decisionmaking in a way that takes the politics
out of it and really has the types of lists that Senator
Johnson was asking about, having that strict priority list to
make sure the limited dollars are going into places that make
sense.
We have done an extensive analysis with Tony Pratt, who is
behind me, who is our Administrator of Shoreline and Coastal
Protection, looking at all of our bay beaches, and these are
areas that do not really qualify for Federal assistance, and
looking at the economics and who gets the benefit. And it turns
out that most of the benefit is just the private owners, not to
the broader population, which suggests that the private owner
should pay rather than the broader community.
We have also looked at the economic contribution of the
coast and try to figure out the economic benefits of having
protections. So having that kind of analytic rigor behind our
decisionmaking is critically important because it then allows
us to invest strategically. And we have a strong preference on
natural systems. Senator Carper and I have seen places that
have healthy dunes, healthy wetlands, places that build above
code standards, are the ones that turn out very well after
these storms. We see it time and time again. The communities
that are not as prepared do not do nearly as well.
We are also taking a lot of steps to try to build
resiliency into everything we do going forward, so modernizing
storm water--we do not want to make the problem any worse. We
want to stop the bleeding, and make sure that new developments
are more resilient so now that we have this kind of data, that
we are not exacerbating the problem and exacerbating the cost.
So because of all this, the Governor was actually invited
to be on the President's Climate Task Force and really with a
focus on this natural infrastructure and the natural resource
projects that we have been doing across our State, whether it
is in Wilmington or down in our inland bays and everywhere in
between, we really are piloting projects that we believe can be
a national model. So, with that, here are some commonsense
recommendations for the Committee's consideration.
One, resiliency needs to be built into every single Federal
investment. We do not need a new bureaucracy around this. We
are spending billions of dollars every year on transportation,
on wastewater, on community development block grant projects.
If we build resiliency standards into those projects, we can
make sure that money is spent a lot better. There is nothing
more painful than seeing a project that has 80 percent Federal
money and 20 percent local money wash away in a storm when it
is only 10 years old, when we know if it was built better that
would have survived. It is just throwing good money after bad.
The second is that we need to invest more in protection. We
are spending $5 billion in the Army Corps protection line
through the Sandy supplemental. That is almost 50 years' worth
of investment compared to what they normally get for their
protection line. It is about $100, $150 million. We are
spending $5 billion in one year. If we spent $300 or $400
million a year on coastal protection, we could save ourselves
tenfold that money in the years ahead. It just has become
easier to pay for it after the fact as opposed to investing
annually, and we continue to cut these lines.
Third, we really need to break this disaster-rebuild-
disaster cycle that we have. It is still easier to rebuild to
the old infrastructure standard that was there before the
storm. You can get your money quicker through FEMA if we do
that, as opposed to building something at a more resilient
standard. We have seen it in Delaware with the dike repairs we
are making in the northern part of the State, and there has
been a lot of conversation about this, great recommendations
coming out of Georgetown and some other places. But we need to
make sure we are building to a higher standard when we are
rebuilding, and I think there has been some good progress, but
we need to figure out how to institutionalize and make sure
money can move quickly as we are rebuilding to higher
standards.
We also need to prioritize comprehensive projects. Right
now, as we have talked about the Water Resources Development
Act (WRDA) context, you can have two projects by the Army
Corps: a navigation project that is taking a bunch of sediment
out of a waterway, but it is cheaper to put that in a landfill
than it is to put it on the beach next to it or the wetland
next to it that actually could provide a protection project.
The Army Corps right now will choose the lowest-cost option,
and so they will not actually put it on the beach. They will
move it somewhere else. We need to combine this. This is
absolutely ludicrous. We could be saving tens of millions of
dollars a year easily by putting those projects together and
looking at the overall cost.
We need to make sure that sound science is continuing to
drive the decisionmaking, particularly with our flood plain
mapping. We are doing a better job. There is a lot of progress
there.
We need to update the NFIP regulations. They really have
not been updated since 1989. We have been focused on the money
side. But the cost of the insurance becomes a lot cheaper if
the standards are higher. And so it is a way to actually
mitigate the challenge that all of you are facing with
constituents complaining about the high cost.
We need to prioritize natural infrastructure. We see the
wetlands, the dunes, the living shoreline projects. They work.
They work exceptionally well. They should not be the exception
or the pilot projects anymore. They need to become the default.
We need to stop rewarding communities that fail to prepare.
Right now, a State like Delaware that has spent a lot of State
money and a lot of local money does not receive as much after a
disaster because our systems work, where a community adjacent
to us might have spent very little money, they get everything
paid for, they get all the new shiny infrastructure. It is
completely crazy, and we need to make sure that there are
incentives and priority given to folks that have made their own
investments and are really doing the hard work to hold
themselves accountable and not relying on the Federal
Government, as Senator Johnson said, where they are expecting
the windfall after the fact without doing the work themselves.
The very two last points. We need to ensure that public
expenditures produce a public benefit, making sure that we are
not just subsidizing private activity but really prioritizing
things that do have a broader benefit to all taxpayers.
And then we need to have a much greater focus on hazardous
sites. We talk a lot about coastal communities and residences
and businesses along the coast. We have old Army landfills. We
have national priority list sites, Superfund sites. When those
sites wash out, the potential for catastrophic damage from
these storms is massive. So we have been focusing on these in
Delaware, but they are not receiving nearly enough attention,
and there are issues right now; if you want FEMA to help you
acquire a parcel, if the parcel actually is contaminated, FEMA
will not touch it for Federal liability reasons. And so you end
up buying another parcel that, will be less important. These
are very commonsense things that we could change.
We are so grateful, Senator Carper, for you looking at
these issues, because I think our experience in Delaware shows
that if you do prepare, that ounce of prevention can be worth a
pound of cure. So thank you, sir.
Chairman Carper. All right. Thank you so much. Boy, he got
a lot in in 6 minutes and 50 seconds. Didn't he?
Mr. O'Mara. I apologize for going over. I always talk
quick.
Chairman Carper. That is all right. I was watching the body
language of the co-panelists here, and Dr. Kirshen nodded his
head up and down a whole lot. I think he may have agreed with
one or two things that you said, but we will find out now.
Dr. Kirshen, thanks so much.
TESTIMONY OF PAUL H. KIRSHEN, PH.D.,\1\ RESEARCH PROFESSOR,
ENVIRONMENTAL RESEARCH GROUP, DEPARTMENT OF CIVIL ENGINEERING,
AND INSTITUTE FOR THE STUDY OF EARTH, OCEANS, AND SPACE,
UNIVERSITY OF NEW HAMPSHIRE
Mr. Kirshen. Thank you very much. Thank you, Mr. Chairman,
Senator Johnson, for giving me the opportunity to talk in front
of this Committee.
---------------------------------------------------------------------------
\1\ The prepared statement of Mr. Kirshen appears in the Appendix
on page 71.
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I do agree very enthusiastically with everything Secretary
O'Mara is proposing, and I hope to take some of his ideas back
with me to New Hampshire.
With the support of my colleagues at the University of New
Hampshire and other institutions, I have conducted several
studies on the long-term economic consequences of New England
cities being impacted by, first of all, extreme amounts of
precipitation and, second of all, coastal flooding from large
coastal storm surges. Here I am going to talk about the long-
term costs of not being prepared for these present and future
events and compare them to the benefits of being prepared.
Because of the changing climate, climate change impacts have
always been part of my analyses.
I also want to point out that while the case studies are
particular to New England, the findings are relevant to many
parts of the United States--in fact, the world.
One of the first studies I am going to talk about was the
impacts of coastal surge flooding on the eastern coast of
Massachusetts, the region stretching from north of Boston to
almost Cape Cod. This is an area of large cities like Boston
but also suburbs. And there we looked at the total damages from
surge flooding from storms to residential, commercial, and
industrial buildings over the next 100 years assuming several
moderate, plausible sea level rise scenarios, and we looked at
the damages and compared them with where the damages were
reduced if adaptation had taken place, and we measured the
benefits of adaptation by damages avoided and measured the cost
by the cost of adaptation, and we found benefit/cost ratios
ranging from 6 to 30 for urban areas and 9 to 13 for suburban
areas. So what that means, for example, a benefit/cost ratio of
6:1 means that every dollar invested in adaptation reduces
long-term damages by 6 times. So these are, again, showing the
true benefits of preparing for these present and future events.
Our second case study was the Hampton-Seabrook-Hampton
Falls area of New Hampshire. It is a coastal area of New
Hampshire with many second homes, particularly on the barrier
beaches of Hampton and Seabrook. And here we looked at the
benefits and costs of protecting privately owned buildings--in
other words, homes and commercial facilities--and also key
public assets, such as sewage treatment plants, schools, fire
and police stations, from present and future coastal storms by,
again, developing adaptation plans to protect to 2050 under low
and high sea level rise scenarios of approximately 1 feet to 2
feet. And, again, we found very large benefit/cost ratios
ranging from 11 to 16 for private assets and 7 to 8 for public
assets.
The last case study is managing storm water in the Winter
Hill section of Somerville, Massachusetts. This town is located
north of Boston and Cambridge on the tidal Mystic River and is
one of the most densely populated municipalities in New
England. This area is served by a combined sewer system which
carries both storm water and sanitary waste. Presently, the
storm system--the sewer system only has the capacity to handle
all the wastewater and a small amount of the storm water. But
when a larger storm occurs, like only 1 inch of rainfall, some
of the extra combined sewage is treated at the regional
wastewater treatment plant, but most of the combined waste is
discharged partially treated into the Mystic River, and there
is flooding in the streets with raw untreated sewage. And this
performance of the system is going to be further stressed by
increases of extreme rainfall of 10 to 30 percent by 2070 and
higher sea levels in the Mystic River.
So, again, we did a benefit/cost analysis comparing the
cost of adaptation and preparing the sewer system to handle
more waste with the benefits to be avoided by adaptation, and
we found benefit/cost ratios of about 4:1, again, showing the
advantages of dealing with these problems now rather than
later.
So to summarize, I have talked about some of my recent
research on the benefits of urban adaptation to climate change
compared to the costs of damages. Actually, the costs I talk
about may actually be underestimated because I do not include
in my costs such items as human deaths and injury, damages to
ecosystems, indirect costs such as lost employment and business
activities, and community displacement and disruption. But even
with these costs not included, we found that over many
scenarios of climate change and sea level rise, adaptation paid
off in terms of damages avoided. And undertaking no adaptation,
no action, in all cases was the worst thing to do. And, also,
with these benefit/cost ratios so high, all greater than 4,
this to me would indicate that these actions are useful even if
we did not have climate change. These are so-called no-regret
actions.
So I just want to say a couple more comments. First of all,
one of the first steps we can take to better control these
threats from climate change is to control emission of
greenhouse gases. That will make a big difference whether we
have 3 feet of sea level rise by the end of the century or 6
feet, also whether we have a 10-percent increase in extreme
rainfall or 30 percent. But because we cannot reverse climate
change, we cannot change climate change, climate change is
going to continue for centuries, we have to adapt, be prepared.
And like everyone else here, I really support we undertake
planning now to start dealing with these threats; otherwise, we
are going to be suffering large human, social, and
environmental consequences.
Thank you for your time.
Chairman Carper. Thank you for coming all the way from New
Hampshire to be with us today. Tell those Wildcats we said
hello, and thanks for sending you down to spend some time with
us.
Ms. Patton, your whole statement will be made part of the
record. Please proceed.
TESTIMONY OF LINDENE E. PATTON,\1\ CHIEF CLIMATE PRODUCT
OFFICER, ZURICH INSURANCE GROUP, LTD.
Ms. Patton. Thank you very much. Chairman Carper, Ranking
Member Johnson, thank you very much. My name is Lindene Patton.
I serve as the chief climate product officer for Zurich.
---------------------------------------------------------------------------
\1\ The prepared statement of Ms. Patton appears in the Appendix on
page 79.
---------------------------------------------------------------------------
Zurich is a global insurer providing insurance and risk
management solutions to customers in 170 countries. We have
been serving customers in the United States since 1912 and
today stands as the third largest commercial property casualty
insurer in the country, with over 8,000 employees nationwide.
I would like to thank you for holding this timely hearing,
and I am pleased to share with the Committee an insurance
industry perspective on the current State of our Nation's
resilience to extreme weather events and the economic
importance of investing today in improving resilience.
Zurich observes that the United States is increasingly
reliant on disaster recovery funds to respond to extreme
weather events and is underinvested in resilience--both
physically and economically.
Data show that the number of loss-relevant weather
catastrophes has increased from an average of 400 per annum in
1980 to over 1,000 per annum in North America today. The
Federal disaster relief expenditures alone over the last 3
years have risen to $400 per household. That is more than a
fourfold increase over the past 30 years. In other words, the
resilience gap is large and growing.
How large? In 2010, Professor Cummins projected that over
the next 75 years costs for the Federal Government share of
unfunded response costs for weather-related disasters would
grow to more than US $1 trillion and might be as much as US
$5.7 trillion.
Unfunded exposures of the State catastrophe funds are in
addition to this number and have been projected to be at $3
trillion.
Taxpayers are bearing the burden of this increasingly
unbudgeted risk and associated loss costs. Without decisive
risk reduction action by government as well as insurers,
economically unsustainable accretive unbudgeted disaster
management costs can be expected to continue on an upward
trajectory.
Insurance has a unique capacity to facilitate resilience,
providing risk assessment, risk management, and risk-based
price signals, all of which help inform stakeholders about risk
magnitude and risk reduction priorities. A study by the Bank of
International Settlements found uninsured and underinsured
economies are more likely to suffer long-term macroeconomic
damage. Some may believe that ex post disaster recovery funding
takes the place of insurance, but it does not.
One of the many critical differences is that disaster
recovery funds typically are delivered more slowly than
insurance payments, resulting in slower recovery and even
longer-term negative economic impacts. But assuring resilience
to extreme weather events requires risk management before,
during, and after a loss event. If our response to extreme
weather events is only after they occur, society has squandered
its best opportunity to control risks and costs related to
these events.
So should resilience be prioritized over other disaster
response costs? Absolutely. Why? Investment in resilience saves
taxpayers billions of dollars, provides greater protection to
the public in the face of increasing extreme weather events,
reduces human suffering, and creates domestic jobs and promotes
domestic manufacturing in building more resilient housing and
infrastructure.
Zurich understands the importance of pre-event investments
in resilience and acts accordingly. We are very proud of our
efforts. Here are but a few examples.
Zurich has supported the following institutions and work
focused on resilience improvement including: the World Economic
Forum, the Business Continuity Institute, the Institute for
Building and Home Safety.
Over the years, we have worked with progressive customers
like Marriott and Verizon to demonstrate by design and
implementation cost-beneficial extreme weather event risk
mitigation solutions. Zurich has committed to purchase $1
billion U.S.D. of green bonds focused specifically on
resilience, making Zurich a global leader in the purchase of
such resilience-supporting instruments at a scale that really
matters.
What action might the government take in the short term,
medium term, and long term to close this resilience gap?
Develop a national priority plan for resilience investment.
Promote increased government and private investment in
infrastructure resilience, educate society on the true costs of
extreme weather, and promote and enforce stronger building
codes.
Two specific actions Congress could take to improve
resilience might include:
Use the language of the Extreme Weather of the Water
Resources Development Act as a template to improve resilience
requirements framing the billions the Federal Government
invests annually in water, port, highway, transit, and aviation
infrastructure.
They also might expand the Resilience STAR pilot currently
proceeding at DHS to include commercial applications and, most
importantly, entire community resilience ratings.
How much should be budgeted? It might be logical to take a
portion of the predicted emergency disaster appropriations and
use it to improve resilience in assets. From a practical
perspective, funding resilience is a fundamentally wiser
investment than spending on disaster relief and recovery. The
Multihazard Mitigation Council found that funding resilience
provides a 4:1 return on investment. Our co-panelists noted
other studies which have indicated similar or improved returns
on investment.
As the incidence and costs to the Federal Government of
extreme weather events increase, so does the budget imperative
to make greater investments in resilience.
In conclusion, Zurich believes that we have an opportunity
to dramatically improve the resilience of our Nation's homes,
businesses, and critical infrastructure and that this can be
achieved in a manner that will ultimately save Federal, State,
and local governments billions of dollars annually while
providing citizens greater protection from extreme weather
events. Zurich is extremely encouraged by this Committee's
efforts to improve our Nation's resilience and looks forward to
working with the Committee in any way that we can help.
Chairman Carper. Great testimony. Thank you very much for
that.
I am going to slip out of the room and take a phone call,
and Senator Johnson is going to lead off with the questions for
this panel. I will be right back. Thanks.
Senator Johnson. [Presiding.] Thank you, Mr. Chairman.
Ms. Patton, I would like to start with you. You mentioned a
growing resilience gap. How much of that gap, especially the
growth of it, would you attribute to the fact that we have just
continued to build in very risky areas in this country?
Ms. Patton. I am not in a position here to identify the
percentage or a precise number, but it is substantial. We
simply have more assets in harm's way. We have a history and
there is a lot of data and research which indicates that we
have a migration to coasts. We have a migration to locations
which have limited water supplies. We have migration to the
wilderness-urban interface (WUI).
Under all of those circumstances, you put more assets in
harm's way, so the suggestion is that at least that is a
portion of the driver, but we also have other suggestions that
the climate is changing. There is no question.
Senator Johnson. Now, when society subsidizes private
individuals taking those types of risks, that increases that
type of behavior, correct?
Ms. Patton. And there is research, which I have cited in my
written testimony, which does demonstrate that. In fact, if
there is an interference with risk-based price signals and a
subsidy which basically provides information to an individual
that moving to this location is not that cheap and if there is
a disaster it will be subsidized, then yes.
Senator Johnson. Well, we have that interference, correct?
Ms. Patton. We do.
Senator Johnson. What would cause that interference, from
your standpoint?
Ms. Patton. Well, there are a multitude of things. Some of
it is actual funding and some of it is perceptive. So in the
case of actual funding, there are programs which come in and
provide subsidies for government-run insurance programs. There
are also circumstances where there are perceptions--and there
was a study done by a Federal task force after Hurricane Sandy
which was trying to look into what people understood about
their insurance, and what that study revealed was that people
really did not understand what was insured and what was
underinsured. And their assumption was that Federal disaster
funds would be delivered kind of like insurance.
Senator Johnson. They were correct, weren't they?
Ms. Patton. Well, the reality is, in fact, the priorities
for Federal disaster funding is to really look at getting
critical infrastructure up and started, but not necessarily
always focused on an individual asset, which is the purview of
private insurance. And they are a not a 100-percent substitute,
and I have cited research in my written testimony that affirms
that, that demonstrates that, in fact, disaster recovery funds
do not have the same economic value that you have from private
insurance and that you can have longer-term negative
macroeconomic impacts if you are underinsured versus having
adequate insurance.
Senator Johnson. As necessary as Federal help is in those
circumstances, it creates moral hazard, does it not?
Ms. Patton. It is very clear that under circumstances the
Federal Government must respond under disaster. It is a
political imperative.
Senator Johnson. Right.
Ms. Patton. It is a social imperative. But how you manage
and structure that is very important, and as some of the other
co-panelists have suggested, there are ways to prioritize that
spending, and there are ways to structure programs in terms of
providing information and risk-based price signals that are
consistent. There have been recommendations that have been made
by the Wharton School as to how some of those risk-based price
signals might be adjusted in a way for certain Federal
insurance programs. There are other suggestions that exist in
terms of prioritizing infrastructure investment so that
resilience is baked into the design.
Senator Johnson. Do you think people would build $1
million, $2 million homes right on the beach if they had to pay
the full cost of the risk on their insurance?
Ms. Patton. I do not think I am in a position to know that.
[Laughter.]
Senator Johnson. You come from the insurance business. Is
it a fantasy to think that we could over time privatize the
Flood Insurance Program?
Ms. Patton. I think that that will be a question that I
will have to return to you on in terms of responding in full. I
would tell you that I think it is very important for us to send
consistent risk-based price signals in this context and let the
market work.
Senator Johnson. And that is not happening right now with
the National Flood Insurance Program, correct?
Ms. Patton. There are changes to that flood insurance
program----
Senator Johnson. Which we suspended.
Ms. Patton. Which are designed to allow that.
Senator Johnson. OK. And, again, that is not a good thing
in terms of reduction of that moral hazard of----
Ms. Patton. The position of Zurich is----
Senator Johnson. And you are really creating the incentive
for risk management and risk mitigation and resiliency
creation, correct?
Ms. Patton. Absolutely. I could not agree with you more. It
is very important that the risk-based price signal and the
insurance functionality be permitted to make sure that risks
can be assessed, the asset owners can be fully informed about
what, not only the actual functional risk is, but what the cost
of that risk is so that they can make cogent decisions about
how they invest. Not only where they invest, but when they put
structures together, how much they invest.
Senator Johnson. OK. Now, we are talking about private
individuals, private property. But at the same time, government
has property which they also purchase insurance for, correct?
Ms. Patton. Well, there is something called the ``self-
insurance rule'' under government, and there are--it depends on
whether you are talking about local, State, or Federal
Government. And in general, the Federal Government is primarily
a self-insurer, and when it----
Senator Johnson. Does that reduce their incentive to
mitigate risk----
Ms. Patton. It is their money.
Senator Johnson [continuing]. In your opinion? I mean, if
they were forced to buy insurance, not self-insure, would they
potentially--because within their budgets, if they are building
and not mitigating risk, would that help mitigate risk?
Ms. Patton. The only thing I can point you to is that there
is a longstanding Comptroller General's opinion, which dates
back to the 1700s, which indicates that the Federal Government
is supposed to be a self-insurer by rule, and there are policy
reasons for that. But the functionality of private insurance,
you are absolutely correct, is to send a risk-based price
signal to encourage people to mitigate risks so that they can
control those costs over time.
Senator Johnson. Well, as you said in your testimony, the
insurance industry has a unique capacity to provide that
discipline.
Do either of you two gentlemen want to comment on that line
of questioning?
Mr. O'Mara. I think I would just add that the problem that
we are seeing kind of continuously is that folks see themselves
as libertarians until they need help because they have not
taken care of the private markets. And so, we are trying to
figure out ways in Delaware, particularly in one of our
counties where they do not have some of the more protective
policies in place, to not have State government in this case be
the backstop because they are not getting private insurance and
you do not have the policies in place, and then they are coming
to us and saying, ``Will you fix this drainage issue, this
erosion issue?'' So trying to realign those incentives is the
same issue whether you are local or national.
Senator Johnson. OK. Dr. Kirshen.
Mr. Kirshen. I am not an expert on insurance, but I know if
water rates go up, people start to conserve. So I think it is
very important we send the right market signals for climate
change preparedness as well.
I also want to say that I think the engineering and the
science community and the social science community, I think we
know how to do adaptation, and we need to send the right
signals to the market to give us the opportunity to work with
stakeholders to implement adaptation.
Senator Johnson. OK. Again, thank you all for your
testimony. Thank you, Mr. Chairman.
Chairman Carper. [Presiding.] Thank you.
I just asked my staff to double-check to see when we passed
the omnibus appropriations bill, if there was a 2-year stay on
the effective implementation of the flood insurance, changes to
the laws that were--was it Biggert-Waters legislation? And my
understanding is that there is a 1-year stay, but I think it
expires at the end of this fiscal year. So there is a great
opportunity for us to take some of what you said here today and
to work with the Administration, who is not wild about the
legislation that the Senate has passed on flood insurance, and
to work especially on this Committee and to see if we cannot
make sure that we are properly aligning the incentives to
advise folks to do what they need to do so that it does not all
fall on the taxpayers.
I notice out in the audience Tony Pratt. Collin O'Mara
referenced him by name, and, Tony, it is great to see you.
Thank you so much for all the good you do for the people of our
State and really the example that I think you help set for
folks in other States as well.
You said something, Ms. Patton, in your testimony--I think
you mentioned some actions that Congress could take to improve
resilience, and you said--I am just going to read it. The first
one is pretty short. It says, ``Use the language of the Extreme
Weather Title of the Water Resources Development Act as an
example of what could be applied to improve the resilience
requirements framing the hundreds of billions of dollars the
Federal Government invests annually in water, port, highway,
transit, and aviation infrastructure.'' And I think at that
point, I looked at both of your colleagues as witnesses, and
they were both vigorously nodding their heads up and down. I
think I know why, but I am going to ask them. Secretary O'Mara,
why were you so effusive in your response to Ms. Patton's
testimony at that point?
Mr. O'Mara. Right now, I mean, there is a significant
disconnect--and it is not just within WRDA; I mean, it is also
kind of other appropriation bills--where the design standards
have not kept up with the risks. And we saw this, frankly, in
Delaware at the Indian River Bridge where we built a beautiful
new bridge, $150 million, but we were not successful working
with the Army Corps to bring the protection necessary through
our cost sharing--we were happy to pay our share--of a dune
system to protect that asset. And so either having a better
design or more protection, kind of across business lines and
across agencies, is critical. And so whether it is the
authority through WRDA or just additional language in the
authorizations and making sure that the designs are stronger
across all those--it is not just transportation, but wastewater
and the community development block grant in particular, I
mean, those are the lifeblood of many municipalities and States
in terms of delivering projects. And having that especially
with the cost share, having more accountability in there, could
save a lot of money in the long run.
Chairman Carper. All right. Thanks. Dr. Kirshen.
Mr. Kirshen. I am not going to say too much because I am
not a real expert on this, but just like----
Chairman Carper. That never stops us from weighing in.
[Laughter.]
Mr. Kirshen. But I am going to say that from my
observations working with communities, there are many
institutional barriers to adaptation, and we have to address
them as well as the financial ones. This is an example of some
of them.
Chairman Carper. OK. Thanks.
The next question will be for, I think, probably Secretary
O'Mara and Dr. Kirshen. Mitigation can, as we know, be very
cost-effective in reducing lives lost and damages caused by
natural disasters. I believe we have had a lot of success with
mitigation in Delaware, in part because of the fellows that are
sitting here in front of us today. I think we have done it with
a relatively small investment, saving our State a lot of money.
And I would just ask a question, if I could, of you, Dr.
Kirshen, and then one of Secretary O'Mara. But, Dr. Kirshen,
based on your research, how beneficial is extreme weather
mitigation, especially long-term planning and when it comes to
saving money?
Mr. Kirshen. Well, I think, as I said earlier, we are
getting extraordinary benefit/cost ratios, if we really look at
the benefits of adaptation versus doing nothing, benefit/cost
ratios of, 4 up to 30 in some cases. So it is extremely
beneficial to do this. And I think communities realize this. I
am working with quite a few local communities in Massachusetts
and New Hampshire on adaptation. Communities get it because
they are in charge of infrastructure, and they are looking for
help in how to do this. I mean, it is more than just giving
them the data. They also need people to help them interpret the
data and also think about how to use the data in planning for
climate change. The problem with climate change is the
uncertainty. We are not exactly sure what the future climate
is, but we know how to deal with uncertainty through scenario
analysis and other decision and analytical techniques.
So I think we have to provide support to the communities to
do planning, which is relatively cheap compared to the huge
costs we are going to face if we do not do good planning. Thank
you.
Chairman Carper. OK. Thank you.
And, Secretary O'Mara, just to followup on that, based on
your experiences, what needs to be done to encourage and
support State and really local governments, too, to support
individuals and businesses to adopt mitigation measures such as
adapting or adopting updated building codes to better address
the threats of extreme weather?
Mr. O'Mara. Yes, I think there are kind of two pieces to
the equation: one deals with something Senator Johnson was
raising about the economics and making sure the economics of
inaction are very clear to folks; and then also, kind of
toughening up a little bit and making sure if folks do not take
those actions, that government does not, come in and bail them
out after the fact, which is obviously always the easier
political outcome, and if we are able to do those things, you
will see behavior change fairly quickly. I mean, the money is
going to drive a lot of these investments.
I do think that there are significant opportunities for the
Federal Government to incentivize and reward those communities
that take the types of actions that we have all been talking
about. And so whether that is earlier consideration for Federal
resources, whether it is, you know, competitive grants, or even
having a slightly higher percentage for either percentage
allocations for match or other types of Federal assistance,
where if you have done the hard work, it is going to save the
Federal Government money in the long run. Because, for example,
in Delaware, we did not have individual assistance claims that
met the FEMA threshold after Sandy because most of our systems
worked. Our dunes worked. Rehoboth was intact. We were not hit
as hard as some other States, but there are States to the south
of us that received a lot of Federal money, and we did not
really receive any from the Housing and Urban Development (HUD)
because our systems were successful. We should be either
rewarded or incentivized in some ways. And the other States
that do not take those actions should be penalized in some
ways.
And I think aligning those incentives, as you have often
talked about, is some work that this Committee I think could
really lead on and really align some incentives to drive great
investments at the local level.
Chairman Carper. All right. Thanks for saying that.
Ms. Patton, if I could, a question for you. With the
insurance companies having a long history of risk management
when it comes to extreme weather events, are there ways to
create more public-private partnerships to help share the
knowledge between Federal and State and local governments?
Ms. Patton. I believe that there are, and I think it is
very important to continue those and to take those exemplars
that you have which are ongoing and expand them. As I mentioned
earlier in my testimony, I am very excited about the Resilience
STAR pilot at DHS. It provides a framework----
Chairman Carper. So am I. Let the record show so am I.
Ms. Patton. It provides a framework in which we can
actually and we are collaborating in a public-private
partnership context. We are just at the beginning of this
pilot, but I can see it very easily extended to the commercial
and infrastructure context. And when that happens and you can
actually create a resilient community, it would enable other
private sector opportunities. Other types of incentives may
present themselves. If you have a resilient community, it may
be obvious that that might be a really good place to invest. It
might be obvious that the risks where loans are placed under
those circumstances are reduced. It is not just about
insurance. It is about the long-term functionality and economic
resilience of that community to be able to survive and thrive
even before, during, and after extreme weather events.
That is just one example. I think that to the extent that
some of the other recommendations of the panel can be followed
through in terms of providing opportunities with infrastructure
investment and matching funds, that will provide other
opportunities for private sector to inject themselves into the
process.
Chairman Carper. All right. Thanks.
One final question, and I am going to ask you to make just
real brief answers because our votes have begun. As you know,
we are at a time when we are trying to further reduce our
Federal spending. It is down from a $1.4 trillion deficit 4
years ago to this year it will be about $550 billion. But as a
result, some of my colleagues have been critical of extreme
weather mitigation efforts because they cost the Federal
Government money, such as beach replenishment for coastal
communities, but other things as well.
What are the counterarguments to those who say that taking
the steps needed to build resilience are really too costly and,
therefore, should not be taken? And do you have any parting
advice to us on how we can better plan for extreme weather
events and reduce financial risks to our government? I would
ask you to wrap it up fairly briefly, but, Secretary O'Mara,
would you close us out with that?
Mr. O'Mara. Sure. I think we let the economics speak for
themselves. I think that, if we can say that an extra dollar
invested in the Army Corps' protection line is going to save
you $5 or $10 on the FEMA budget, that is a compelling
argument. I will take a 5:1 return any day.
The same thing can be said for many other types of
infrastructure investments today, and I think there is a huge
opportunity right now because we do have data that we could
collect fairly easily between communities that were well
prepared before Hurricane Sandy and ones that were not as well
prepared before Hurricane Sandy. We should be collecting that
data as we speak to make sure we know the costs to the Federal
Government for communities that were not prepared.
Now, you have two communities in New Jersey, for example,
one had healthy dunes, one did not. The one without healthy
dunes is getting significantly more money. We should be
quantifying that because that could help make your case to your
colleagues about the cost savings from making the investments
up front.
Chairman Carper. Good. Thanks. Very briefly, Dr. Kirshen?
Mr. Kirshen. I agree with Secretary O'Mara, but, again, as
everyone said, an ounce of prevention is worth a pound of cure.
Chairman Carper. You have got it.
Mr. Kirshen. And I think that is the solution.
Chairman Carper. Good. Thank you. Ms. Patton.
Ms. Patton. I would also agree that economics do speak for
themselves. I think it is not just about the expense. It is
about the potential interruption to the gross domestic product
(GDP) for the impacted regions and about the potential for
actual communities to no longer exist or to be severely
interrupted not just for weeks but for years and to not be
restored to what they were before. So the investment and
resilience has both direct economic value, but it also has
social value in the short term and long term.
Chairman Carper. Let me conclude. First of all, thank you,
thank you all. You have a lot going on in your lives, but we
are grateful that you took some time to spend this morning with
us.
The other thing, I go back to what I said as we were
beginning this hearing--Mike Enzi, the Senator from Wyoming,
one of my favorite colleagues, I think everybody loves Mike
Enzi here. But his 80/20 rule, and how do you get a lot done?
Focus on the 80 percent where we agree, set aside the 20
percent where we do not agree. There is a lot of agreement
here.
One of the things I love, this could have been a fairly
controversial hearing or a combative hearing. It was not at
all. Senator Johnson came, and I am grateful that he stayed,
and he stayed a lot longer than he had actually frankly
anticipated staying because he thought it was worthwhile. And
there is a good deal that we can agree on and work together on,
and that is what the people of America sent us here to do.
So I just thank you for helping us to find that 80 percent,
find the middle, and we are going to have some more questions
that folks will ask of you. Some who were here, some Senators
who were not here will submit those questions, and I think they
have about 15 days to do that. And if you receive any of those
questions, if you could respond promptly, we would be most
grateful.
And with that, this hearing is adjourned. Thank you so
much.
[Whereupon, at 11:47 a.m., the Committee was adjourned.]
A P P E N D I X
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