Week Ending August 28, 2020

Hurricane Laura Hits Gulf Coast After Industry Prepared, Braced for Impact

This Article Appears as Published in Foster Report No 3314
Hurricane Laura Hits Gulf Coast After Industry Prepared, Braced for Impact

With a storm surge that was a bit less than predicted and a Gulf Coast energy complex that has learned lessons from past storms, Hurricane Laura slammed into the Louisiana coast early August 27, after production and refinery operations had been limited to protect equipment and workers from harm.

During an August 27 media briefing, officials with the American Petroleum Institute (API) and other industry groups noted that the forecast for the storm provided the industry with enough notice to prepare facilities for outages, with orderly shutdowns that will ease returns to service. The industry took advantage of the early warnings and used lessons learned from past storm experiences, including Hurricane Sandy that struck the Northeast in 2012, Hurricane Harvey that pummeled Houston in 2017 and Hurricanes Katrina and Rita that hit Louisiana and the Gulf Coast in 2005, officials said.

Hurricane Laura followed a path similar to Hurricane Rita and it made landfall near Cameron, Louisiana, as a Category Four hurricane, with winds topping 150 mph and a storm surge that was predicted to be around 20 feet in some areas. The storm surge and saltwater damage to equipment and facilities is the major concern for production and refinery operations, and the storm surge with Laura appeared to be much less than predicted, said Suzanne Lemieux, manager of operations security & emergency response at API. At about 11 feet, the storm surge of Laura “while still significant, actually spared a lot of infrastructure and communities as it pushed through” and into northern Louisiana, Lemieux said.

Initial damage assessments were still being done August 27, when the industry officials spoke and President Donald Trump held a media briefing at the White House. A common theme at both events was that it looked like the energy sector avoided major damage, though full reports had yet to come it from many locations at press time.

President Trump said he considered postponing his speech at the Republican National Convention August 27, but decided to hold it as planned and then visit Louisiana, Texas, or other affected states on the weekend. Officials from the Federal Emergency Management Agency, Department of Homeland Security, National Hurricane Center and other agencies spoke at the White House, along with Trump and Vice President Mike Pence, who commended Trump for signing emergency declarations early and providing federal support for state and local resources.

“We were ready for the worst. But, by all accounts from the experts, it sounds like while this was obviously a major storm with devastating impacts, it was not as bad as it could have been,” said Pence.

“We got a little bit lucky. It was very big, it was powerful, but it passed quickly,” said Trump, who praised the agency leaders for their efforts ahead of the storm making landfall, including evacuations of families and protecting businesses.

Road closures, power outages and other hazards may hinder accurate damage assessments for a few days, but companies have made use of drones to provide damage assessments when workers were not able to stay on site, said Jeff Gunnulfsen, senior director of security and risk management at the American Fuel and Petrochemical Manufacturers (AFPM).

“With every storm there are lessons learned,” and the energy sector has improved resiliency for facilities to withstand hurricanes and recover quicker once it is safe to do so, Gunnulfsen said during the media briefing. Protecting facilities from flooding, having backup power generators to keep refineries operating during power outages, pumping water out of equipment and other steps have been refined and improved over the years, he and others said.

“Each storm is unique,” but producers and refiners have done a lot to harden their facilities and learn from past experiences, Lemieux said. Having several days to secure facilities and perform warm shutdowns at refineries enables the return to service to be more smooth, since a restart can take several days or more than a week, depending on the facility, said Susan Grissom, chief industry analyst at AFPM. At refineries during a restart “you’re not just flipping a switch. The unit has to work its way back to operational status,” Gunnulfsen said.

Sometimes hurricanes and production shut-ins can result in price spikes for oil, natural gas, gasoline or other fuels, but with the amount of oil in the market, commodity prices had not climbed, similar to the limited price effects seen after Hurricane Harvey, Lemieux said.

Environmental protection has also improved, the pre-storm actions to make sure equipment can withstand a storm limiting damage from fuel leaks at different facilities, Lemieux added. A fire at a chlorine manufacturing chemical plant near Lake Charles, Louisiana, was mentioned as a potential environmental hazard, but the plant owner is not an API member, speakers said during the media briefing.

The Gulf Coast region around Beaumont, Texas, Houston and Lake Charles is a spaghetti bowl of pipelines, with shipping ports, refineries, oil storage terminals, the Strategic Petroleum Reserve, LNG terminals operating and under construction and offshore production facilities directly in the path of Hurricane Laura. Offshore production was shut-in and refineries were shut down once the hurricane forecasts called for Laura to strengthen as the eye of the hurricane approached the region and became more organized.

No oil storage terminals had damage reported by mid-day August 27, but assessments were still being done, officials noted. After Hurricanes Katrina and Rita, API created new storage tank design standards, illustrating the learning curve the industry has made, Lemieux said.

Another learning experience on the resilience front is seen in Louisiana after Hurricane Katrina resulted in nearly 2,000 deaths and brought destruction exceeding $161 billion. In an August 26 post online, Environmental Defense Fund’s Steve Cochran said in the two years following Katrina and Rita, Louisiana created the Coastal Protection and Restoration Authority, a state agency overseeing protection of communities, infrastructure and wildlife.

A Coastal Master Plan is updated every six years to account for climate adaptions and the latest science and modeling, which has been supported by governors and legislators from both parties, said Cochran, associate vice president of coastal protection at EDF.

Since Louisiana has lost about 2,000 square miles of wetlands, which provided a buffer zone for storms, the state developed a program called Louisiana’s Strategic Adaptions for Future Environments, which works on resilience that includes floodproofing homes and protecting fishing businesses and communities, Cochran noted.

Governor John Bel Edwards also recently signed two executive orders, with one calling for resilience to be a centerpiece of state government, with an appointed chief resilience officer, and the other establishing a climate task force to help Louisiana achieve net zero carbon emissions by 2050, Cochran pointed out.

At the federal level, the Department of Energy (DOE) and Bureau of Safety and Environmental Enforcement (BSEE) tallied some of the effects ahead of Hurricane Laura and afterwards. Offshore production had been shut in, with nearly 300 platforms evacuated out of 643 manned platforms in the Gulf of Mexico. Shutting in production can frequently be accomplished from a remote location, BSEE noted.

Roughly 1.56 million barrels/day of oil production, or 84.3 % of offshore production, was shut in on August 26, and 1.65 Bcf/d of natural gas production, or 60.9%, was shut in, BSEE said.

Source: Bureau of Safety and Environmental Enforcement

 As part of the offshore production platform evacuation process, valves are closed and other facilities are secured to prevent the release of oil or natural gas, said Erik Milito, president of the National Ocean Industries Association.

With the COVID-19 pandemic, returning workers to production sites will require screening and other protocols that companies have in place to protect against the spread of the coronavirus, Milito said.

Most companies conduct COVID-19 tests for employees before sending them back to production platforms, added Lemieux.

Colonial Pipeline on August 27 said it is using aerial patrols to assess facilities and rights-of-way, and communicating with refiners and suppliers to meet their needs. Colonial Lines 1 and 2 are operating downstream of the affected area as scheduled, but those facilities were impacted by the storm, mainly in the Lake Charles, Louisiana area. The company also is communicating with local power suppliers about progress to restore power to pipeline facilities.

Not all facilities are accessible for damage reports, but “once conditions are determined to be safe, in compliance with local emergency management, crews will be dispatched to various Colonial facilities to inspect and assess any impacts from the storm,” Colonial said.

Power outages were reported at about 500,000 by DOE, using reports from utilities and others. Utilities have pre-staged equipment and activated mutual assistance networks to aid restoration efforts, and companies will perform damage assessments and restoration efforts as allowed by the conditions, DOE said.

The ports of Lake Charles, Beaumont, Port Arthur, Houston, Galveston, Freeport and Texas City were closed due to the hurricane, and all refineries in the Beaumont, Port Arthur and Lake Charles areas were closed ahead of the storm. The shut-in refinery capacity amounted to about 2.4 million b/d, which is about 13% of the total U.S. refining capacity, DOE said.

With most fuel supplies well above the five-year average level, the production and refinery outages are not expected to cause any immediate supply issues, DOE said.

Retail gasoline stations need power to operate their pumps, and while some station owners have backup generators, Louisiana has a program to deliver generators to stations after disasters, said Sherri Stone, vice president at the Petroleum Marketers Association of America. Roads may need to be cleared for fuel deliveries to gasoline stations, although the Department of Transportation opened a regional hotline to help drivers navigate the best route to make deliveries to gasoline stations, Stone said.

By Tom Tiernan ttiernan@fosterreport.com

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