[Senate Hearing 113-711]
[From the U.S. Government Publishing Office]




                                                        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]









                                                        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 

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        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

                                 ------                                
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

                              ----------                              


                      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.]
---------------------------------------------------------------------------
    \1\ The joint prepared statement of Mr. Heyman and Ms. Durkovich 
appears in the Appendix on page 40.
---------------------------------------------------------------------------
    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.
---------------------------------------------------------------------------
    \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.
---------------------------------------------------------------------------
    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.]
    
    
    
    
    
    
    
    
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