The purpose of situation and impact assessment is to infer and approximate the critical characteristics of the environment in relation to the particular goals, capabilities and policies of the decision makers. The process of situation and impact assessment involves dynamic generation of hypotheses about the states of the environment and evaluation of their plausibility via reasoning about situational items, their aggregates at different levels of granularity, relationships between them, and their behavior within a specific context. This paper addresses the problem of reasoning for situation and impact assessment to support early-phase crisis management. Special attention is paid to "inference for best explanation" aimed at discovery of the underlying causes of observed situational items and their behavior, an important component of situation and impact assessment. The presented method of discovery of underlying causes is illustrated by the discovery of an unreported HAZMAT incident within an early-phase earthquake response scenario
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