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Operators were returning to Gulf of Mexico oil and gas platforms and rigs to restore operations following Hurricane Isaac, the US Bureau of Safety and Environmental Enforcement reported.

As of information received from industry by 11:30 a.m. CDT on Sept. 5, BSEE said 680,749 b/d, or 49.33%, of the gulf’s crude oil production and 1.15 bcfd, or 25.71%, of its gas production remained shut in. The shut-in production figures are estimates based on historic production reports.

Offshore operator reports showed personnel were evacuated from 18 production platforms, or 3.02% of the manned platforms in the gulf, and 1 rig, or 1.32% of the rigs working there.

Previously, industry had shut in most gulf offshore crude production before Hurricane Isaac made its first landfall in Plaquemines Parish, La., Aug. 28 as a slow-moving Category 1 hurricane.

Louisiana received the brunt of Isaac’s 70 mph winds and heavy rain as it veered west of New Orleans 7 years to the day after Hurricane Katrina and subsequent flooding devastated New Orleans (OGJ Online, Aug. 29, 2012).

In early September, BSEE said that inspectors were flying offshore to the platforms and rigs. The agency said it received reports of mainly minor damage from some operators and would continue to issue daily updates.

About 100,000 b/d of production was restored from Sept. 2 to Sept. 3, according to the Louisiana Oil & Gas Association. Some 1.3 million b/d of production was off-line at the storm’s height.

LOGA cited a DOE report that nine refineries in Isaac’s path are restarting or operating at reduced rates and most employees have returned to work.

Phillips 66 Co.’s Alliance refinery at Belle Chasse, La., remained shut down as of Sept. 5 because its power has not been restored, the association said.

US President Barack Obama, as he visited St. John the Baptist Parish on Sept. 3, commended work by federal and local governments and volunteers in recovering from the storm.

Citing Louisianans and Missippians’ resilience in responding to disasters, he said: “When disasters like this happen, we set aside whatever petty disagreements we may have. Nobody is a Democrat or a Republican—we’re all just Americans looking out for one another.”

Meanwhile, Republican presidential nominee Mitt Romney visited Louisiana Aug. 31 to survey the storm’s damage and local recovery efforts a day after the party’s convention ended in Tampa, Fla.

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Lessons learned from past tropical storms and hurricanes helped reduce the amount of pollution released during Hurricane Isaac’s sweep through Louisiana, officials at the state Department of Environmental Quality said this week.

However, environmental groups countered there is still too much pollution released from industrial sources during hurricanes. They said better preparations are needed in advance of a storm’s arrival.

“Every year, we get better and better at our response,” said Peter Ricca, emergency response manager with DEQ.

At 72 hours before landfall, he said, DEQ staff and other agency staff start calling industries reminding them about shutdown procedures and getting prepared. It appears to be working, he said, considering that the state saw fewer containers floating away from businesses after Hurricane Isaac when compared to the floating debris during Hurricanes Katrina and Rita.

Still, some spills and releases were reported during Hurricane Isaac because of flooding, rainfall and wind.

The incidents ranged from the spill of .003 gallon of crude oil into a private canal in Galliano to a barge sinking that released 2,178 tons of petroleum coke to the Mississippi River, according to information reported to the National Response Center. The National Response Center is where oil and other spills and releases are required to be reported.

There were problems reported during shut downs and start up of some industries in Hurricane Isaac’s path. For example, ConocoPhillips in Belle Chasse reported the release of an unknown amount of sulfur dioxide into air during the final stages of the planned shutdown of the refinery on Aug. 27.

In another shutdown the same day, Chalmette Refining LLC in Chalmette reported the release of 200 pounds of hydrogen sulfide and 46 tons of sulfur dioxide from a flare.

Ed Ballow, DEQ Incident Commander for Hurricane Isaac, said pollutants are sometimes released during shutdown operations, but it’s much more important for them to go through that process rather than not shut down their operations for a storm.

Ballow said that all the reports DEQ has received say no one has had any serious problems in the startup process.

“We couldn’t get to all of the facilities to monitor, but the few we did didn’t show any problems,” Ballow said.

Environmental groups, though, say more needs to be done to protect the environment.

During a news conference Thursday, the Louisiana Bucket Brigade, Gulf Restoration Network and the Sierra Club called for industry to improve their hurricane preparedness activities and for regulatory agencies to make companies pay fines for hurricane-related accidents.

“Some of them (releases) were small and some of those reports are just the tip of the iceberg,” said Anne Rolfes, director of the Louisiana Bucket Brigade, of incidents reported to the federal National Response Center.

Rolfes said storms are known to occur in Louisiana and industry should be prepared to deal with them.

Don Briggs, president of the Louisiana Oil and Gas Association, said oil and gas production has been operating in the state and in the Gulf of Mexico for decades and that the industry doesn’t prepare properly for storms are unfounded.

Briggs said more than 4,000 facilities in the Gulf of Mexico and thousands of pieces of equipment need to be secured, all of which would be subject to damage in a storm environment. If the Louisiana Bucket Brigade has counted 93 incidents from Hurricane Isaac, he said, that shows industry is doing a good job of being prepared.

“In reality, when you have storms like that, it’s not just the oil industry that gets impacted,” Briggs said.

One item that received numerous reports to the National Response Center was of the release of oil from electrical transformers around the hurricane-affected area. The use of PCBs in the oil was discontinued some years ago, but some transformers still contain the material so it is also reported to the National Response Center, Ricca said.

“We take those seriously when they spill,” Ricca said.

After a storm has passed, DEQ staff work with State Police to do quick assessments of affected areas Ricca said.

“We make sure they’re on the grid and that they had no leaks or discharges,” Ricca said, referring to facilities and operations that are a part of this first response. After that, a parish is cleared to allow assessment teams to do a more detailed look at the facilities and operations in an area along with flights over affected areas, he said.

One spill area that DEQ is monitoring occurred in the Myrtle Grove area in Plaquemines Parish.

“A storage tank got damaged from flooding and wave action,” Ballow said. There is no estimate yet about how much material from the oil production facility was released, he said.

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Offshore oil and gas operators in the Gulf of Mexico continue to restore production following Tropical Storm Isaac. 

The Bureau of Safety and Environmental Enforcement (BSEE) Hurricane Response Team is activated and monitoring the operators’ activities. The team will continue to work with offshore operators and other state and federal agencies until operations return to normal.

Oil and gas operators continue to assess their facilities and are submitting damage reports to BSEE as required. Reports continue to indicate mainly minor damage.

Evacuations update

Based on data from offshore operator reports submitted as of 11:30 a.m. CDT September 5, personnel remain evacuated on a total of 18 production platforms, equivalent to 3.02 percent of the 596 manned platforms in the Gulf of Mexico. 

Personnel remain evacuated from one rig, equivalent to 1.32 percent of the 76 rigs currently operating in the Gulf.

Shut-in procedure activated

As part of the evacuation process, personnel activate the applicable shut-in procedure, which can frequently be accomplished from a remote location. This involves closing the sub-surface safety valves located below the surface of the ocean floor to prevent the release of oil or gas.

During previous hurricane seasons, the shut-in valves functioned 100 percent of the time, efficiently shutting in production from wells on the Outer Continental Shelf and protecting the marine and coastal environments. Shutting-in oil and gas production is a standard procedure conducted by industry for safety and environmental reasons.

From operator reports, it is estimated that approximately 49.33 percent of the current daily oil production in the Gulf of Mexico has been shut-in. It is also estimated that approximately 25.71 percent of the current daily natural gas production in the Gulf of Mexico has been shut-in. 

Shut-in production information included in these reports is based on the amount of oil and gas the operator expected to produce that day. The shut-in production figures therefore are estimates, which BSEE compares to historical production reports to ensure the estimates follow a logical pattern. The remaining shut-in oil and gas production has been slow to return due to damage at onshore processing facilities.

Facilities under inspection

Offshore oil and gas facilities are currently being inspected. Once all standard checks have been completed, production from undamaged facilities will be brought back on line immediately. Facilities sustaining damage may take longer to bring back on line.

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Roughly $320 billion. That’s where University of North Texas economist Bernard Weinstein put the economic cost from Hurricanes Katrina and Rita in a 2006 report. From tattered oil rigs offshore and devastated property along the Gulf Coast, the costs rippled out across the country, even denting monthly U.S. industrial production.

No such figure has been estimated for Hurricane Isaac, whose economic toll probably will amount to just a fraction of what befell the region and country seven years ago.

But economists, experts from the insurance industry and government officials are bracing for costs in the billions of dollars, hoping that the construction work that follows the storm will help offset the economic setback in part.

Officials with the Louisiana Department of Agriculture & Forestry fanned out in small planes Friday to map the effect on cotton and sugarcane crops.

Rig operators returned to hundreds of offshore platforms that have been idle for days, probably resulting in a brief but palpable uptick in gas prices in the region.

Forecasting companies put sophisticated computer models to work estimating insurance claims. One firm, EQECAT Inc., put insured losses on land at somewhere between $500 million and $1.5 billion, with the total perhaps doubling when offshore assets are included

Some losses might never be fully documented. Who can say how many tourists canceled plans to fly in for the Southern Decadence Festival, or how much money that attendees for the canceled American Political Science Association convention would have lavished on restaurants and gift shops downtown?

The owner of Rouses Supermarkets couldn’t say exactly how much it costs to power locations on diesel generators around the clock, or how much food spoiled at two stores in Jefferson Parish that lost power completely.

“We saved a lot,” said Donny Rouse. “But at some point you just have to take a loss.”

Putting a round dollar figure on all of this is an inexact science, to say the least, in part because many who suffered property damage will file successful insurance claims, resulting in a temporary boost for the construction industry.

“I don’t know that it will hark back to the days after Katrina, but very soon we’ll probably see a shortage of labor and materials,” said Jon Luther, head of the Home Builders Association of Greater New Orleans. “It may take a few days but all of a sudden it’ll click on.”

Luther predicted the work might even exceed the aftermath of Hurricane Gustav, a stronger storm. “What makes this different than Gustav or Ike is we’ve got areas that have historically never flooded. You saw what’s going on out in LaPlace — that’s never happened before.”

But economist Loren Scott warned that flooding in areas that have typically remained dry could mean businesses and homeowners run into the same trap that devastated many residents after Katrina: the fine print of insurance policies cover some damage, but not flooding.

“To the extent that these poor folks did not have flood insurance, that is where the really bad effects come along,” said Scott, who runs an economic consulting firm in Baton Rouge. “The probability seems high because they’ve never flooded before.”

Barring government assistance or philanthropy, uninsured losses could mean that homes are never rebuilt and businesses never return.

Tom Larsen, senior vice president at EQECAT, the claims forecaster, estimates property damage could run as high as $5 billion; he used computer models that combine historical data on past hurricanes with local property assessments to derive that figure. Of the $5 billion, perhaps only $1 billion or $2 billion will turn out to be insured losses, Larsen said.

For some industries, it will take some time to put a figure on the damage. Mike Strain, head of the Louisiana Department of Agriculture & Forestry, said that Isaac flattened somewhere between 15 percent and 20 percent of the state’s annual $1 billion sugarcane crop, though it’s still possible some of the injured crop can be salvaged.

He said the state’s cotton plants are in what’s called the “boll stage,” when the cotton is exposed to the air and is susceptible to damage from heavy wind and rain. The state, along with the LSU Agriculture Center, began sending planes out Friday to map the storm’s impact.

Offshore, the storm might have had less of an effect. “Compared with Katrina and Rita, where we’re talking 100-foot waves, there’s just a huge difference, and we hope there won’t be much damage,” said Don Briggs, president of the Louisiana Oil and Gas Association.

But Isaac certainly brought extra costs. “When you evacuate 346 platforms, you don’t know how many helicopters you have going at thousand of dollars an hour,” Briggs said. “That’s a number I don’t think anyone has ever come up with before.”

For consumers, Briggs said, the pause in oil production could mean a “short-lived” increase at the pump of anywhere between 5 cents and 15 cents per gallon.

Gary LaGrange, head of the Port of New Orleans, expressed relief Friday that the Mississippi River had been reopened by the Coast Guard. The port estimates that $300 million in losses pile up each day the river is closed to shipping.

After about the fourth day, LaGrange said, “that number grows exponentially” as shortages drive price increases upriver in places like Indiana, Ohio and Pennsylvania. At the same time, ships piling up at the mouth of the river head elsewhere.

There are also the hundreds of thousands of workers who rely on the port for weekly paychecks. LaGrange said 160,000 workers in Louisiana, including 60,000 in the New Orleans area, have port-related jobs, from dock workers to truck drivers to railroad employees.

“The ILA union halls were packed with people waiting to go back to work,” LaGrange said, referring to the International Longshoremen’s Association. “Those are people who rely on this port to be open.”

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Motorists paid the highest pump prices ever for the Labor Day weekend, according to AAA, a result of the largest August increase in seven years and a lingering Tropical Storm Isaac hike.

It’s unclear when gas prices will decline, but they’ve decreased five of the past 10 Septembers, AAA said. Thirty-three million Americans traveled 50 miles or more this Labor Day weekend, AAA said, and 28.2 million traveled by car.

“It has been a really tough summer for drivers nationwide with high gas prices breaking daily records,” AAA spokesperson Avery Ash said in a news release. “Every week there seems to be something new driving up gas prices, whether it is a major refinery fire, a pipeline closure or a Gulf Coast hurricane.”

In Lafayette, the average price for a gallon of unleaded gasoline was $3.67 Monday, according to AAA. That did not deter Myrica Lafleur of Baton Rouge from making the trek to Houston this weekend with a vehicle full of children. She stopped in Lafayette to fill up her tank.

“When you’re traveling, you don’t have a choice in the matter, so you just pay what it is, especially when you’re traveling with children,” she said.

Driving is still cheaper than flying, she said: “If I just take my two little ones, I still have to buy a seat for each of them.”

Nationwide, gasoline prices rose 30.8 cents in August. The three main factors driving gas prices in August were crude oil costs, regional supply problems in the Midwest and West Coast caused by refinery and pipeline disruptions, and Gulf Coast refinery closures forced by Isaac, according to AAA.

Prices have been so high that all Mallory Olivier could do was shrug at the price at the pump.

“It’s not much higher. It’s been as high as $3.69,” he said.

Isaac pushed the national average gasoline price up 10 cents per gallon in one week, including a 5 cent gain Wednesday that was the biggest one-day gain since February 2011.

Gas prices everywhere rose because of Isaac, with the price per gallon increase between 5 and 15 cents depending on the area, said Don Briggs, president of the Louisiana Oil and Gas Association.

“The key point to keep in mind is that this was not a prolonged crisis. It doesn’t take the refineries that long to get back up to full speed,” he said.

Contrary to popular belief that prices always rise during major holiday weekends, a GasBuddy.com analysis of Labor Day weekend prices from 2001 through 2011 showed that the national average price of gas actually declined in 10 of the last 11 years, said Gregg Laskoski, senior petroleum analyst for the website.

In three of those years, the decline was nominal, by 0.5 cents per gallon or less. In 2006, prices fell 3.3 cents per gallon from Friday through Monday. In 2002, gasoline rose 2.6 cents over the Labor Day Weekend. That was the only year when prices increases, according to the GasBuddy.com analysis.

Experts were unsure how long it will take prices to fall.

“It is difficult to say how gas prices will fluctuate,” Briggs said. “We are moving into a season where the refineries will be changing out the types of fuels that are used. With gas prices, there are many different contributing factors. However, Labor Day is around the time that refineries begin looking at the winter blends of gas, moving away from the summer blends that tend to be pricer to the consumer.”

AAA expects prices to drop this month as refineries resume operation, and gasoline demand decreases following the end of the summer driving season and refineries transition to the production of less-expensive winter-blend fuels.

“While prices should drop in September barring any major developments, we expect gasoline to remain at or near-record highs through the end of 2012,” Ash said.

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Most oil and gas companies in the U.S. Gulf Coast region on Thursday prepared to gradually restart installations there following Hurricane Isaac, while one refinery reported flooding and scrambled to prevent further damage.

Isaac, now a much weaker tropical depression moving north, posed no further threat to most energy infrastructure.

Phillips 66 said its 247,000 barrel per day (bpd) Alliance refinery in Belle Chasse, Louisiana, had been partially flooded. It offered no estimate on when the plant could restart and said personnel were trying to prevent damage by pumping water out.

Isaac caused flooding after hitting Louisiana at hurricane strength on Tuesday. The storm has since been downgraded to a tropical depression, but it left a soggy mess across widespread areas of the U.S. Gulf Coast and could still bring heavy downpours and more flooding as it moves into the central United States.

Royal Dutch Shell and Anadarko were among companies that said they could begin restarting idled offshore production platforms as early as Friday.

Ninety-five percent of oil production and 73 percent of natural gas production in the Gulf of Mexico remained shut, U.S. government figures showed on Thursday. Around 936,500 bpd, or 5.5 percent, of total U.S. refining capacity was still idle.

Even though damage looked minimal, it will likely take several days or a week to restore around 1.3 million bpd of offshore oil output and 3.2 billion cubic feet per day of natural gas production, experts said. Refineries are also expected to restart gradually to ensure safety.

“This was not a storm that bent metal, like Hurricanes Katrina or Ike,” said Tim Evans, energy analyst at Citigroup in New York. “I expect refineries that shut down completely to take time to come back after thorough inspections. Offshore production will be restored gradually over several days.”

Shell said late Thursday it restarted the Capline pipeline, which carries crude between Louisiana and refiners as far north as Illinois.

U.S. oil futures fell 0.9 percent to settle at $94.62 a barrel. Natural gas futures rose 2.3 percent.

The Henry Hub terminal, a Louisiana delivery point for benchmark NYMEX gas contracts, was operating normally, a spokesman from NYMEX owner CME said.

“Now it’s just a case of the actual production coming back online,” said Matt Smith, an analyst at Summit Energy in Louisville, Kentucky.

“We’ll probably see a temporary drop in crude imports due to Isaac and a drop in crude demand from refineries that have been closed,” he added.

ISAAC’S WAKE

Around 1 million Gulf Coast customers were still without electricity as of Thursday afternoon, according to the U.S. Energy Information Administration.

Gulf Coast physical market gasoline prices moved lower, despite the flooding at Phillips 66’s refinery.

Most regional refineries appeared unscathed by Isaac. Independent refiner Valero said it detected no structural damage at two Louisiana plants it operates. It was unclear when they would restart.

The Louisiana Offshore Oil Port (LOOP), a crude terminal that typically handles 13 percent of U.S. imports, could resume activities at its onshore crude storage facilities on Thursday and start up tanker loadings offshore by Saturday, according to the Department of Energy.

LOOP’s facilities had a power outage linked to a downed transmission line that requires repair, but spokeswoman Barb Hesterman said LOOP’s offshore facilities have diesel generators and its onshore works can operate on backup power.

A crude distribution terminal at St. James, Louisiana was not damaged by Isaac and will restore full operations by Saturday, said operator NuStar.

St. James is also home to rail terminals that receive crude from other U.S. regions. Rail shipments should resume on Thursday after they were cut on Wednesday, said U.S. Development, a terminal operator.

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By Don Briggs

President, Louisiana Oil & Gas Association

With the threat of a tropical storm or hurricane like Isaac churning in the Gulf of Mexico, citizens scurry to the gas stations to fill up their vehicles as well as any spare cans they have in their possession. This practice has been taking place for years thanks to the over-arching fear that there will be a supply shortage in gasoline.

While a shortage can take place, price gouging cannot. Price gouging is regulated, thanks to the Louisiana Attorney General’s Office. Attorney General Buddy Caldwell released the following statement on August 26th when the Governor declared a state of emergency: “Price gouging occurs when a seller prices merchandise much higher than is reasonable or fair. The price gouging statute prohibits the raising of prices above the pre-emergency levels unless there is a national or regional market commodity shortage. This means that sellers of gasoline and petroleum products, hotels, motels, and retailers are prohibited from raising prices during this state of emergency unless they incur a verifiable spike in the prices they have to pay as part of doing business. The price gouging laws carry both civil and criminal penalties.” This state of emergency for Louisiana will last from August 26^th through Tuesday, September 25^th, 2012 unless cancelled early.

Much discussion is had during these severe weather occasions over whether the oil and gas industry can spike the prices at the pump. This is simply false. The oil and gas industry clearly falls under the statute regulated by the Attorney General’s Office, and will not support any persons or companies not abiding by these regulations.

The only exception during a state of emergency is when an actual shortage in fuel supply does take place due to a sharp increase in demand. When the stations quickly sell out of gas, and the refineries close down temporarily due to the storms, then a supply shortage naturally raises the price of gasoline. While this can be seen as price gouging, there is a clear distinction between a supply shortage which is regulated, and simple price gouging when specific gasoline stations jack their prices up to take advantage of the emergency need for fuel.

If there is any suspicion of price gouging, the authorities are encouraging the public to contact the Louisiana Attorney General’s Office at 1-800-351-4889.

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Hurricane Isaac continued to batter the Gulf Coast on Wednesday, causing flooding in Southern Louisiana but no discernible damage to refineries. The storm’s passage left offshore oil and gas platforms largely unscathed.

Isaac, currently a Category 1 hurricane, was centered 40 miles (70 km) southwest of New Orleans as of 9:00 a.m. (1300 GMT), provoking a dangerous storm surge and pelting coastal Louisiana with heavy rain that could prompt flooding through the day, the National Hurricane Center said.

Louisiana’s Plaquemines Parish reported flooding after storm waters flowed over a levee designed to protect the area. The 247,000-barrel-per-day Phillips 66 Alliance refinery, which is located in the parish, reported no damage, but had shut down to brace for the storm.

Isaac lingered on the Gulf Coast, packing winds up to 80 miles (130 km) per hour and raising the specter of further flooding. But the storm’s passage left the Gulf’s offshore oil and gas platforms without reported damages, which could allow production to restart in coming days following sharp cuts in recent days as oil firms evacuated them.

The flooding in coastal Plaquemines “is horrible for the people there, but I do not think this affects any oil and gas infrastructure,” said Kenneth Medlock, an energy expert at Rice University’s Baker Institute in Houston.

“The rigs offshore should be up in about a week,” Medlock said. “The offshore facilities should be OK with regard to major damage … I would not expect a prolonged production outage.”

Offshore production in the U.S. Gulf of Mexico, which accounts for nearly one-fourth of domestic oil production and 7 percent of the nation’s natural gas output, was largely shut down in recent days as crews evacuated rigs to brace for Isaac. U.S. government figures showed 93 percent of offshore Gulf oil and around two-thirds of gas output offline as of Tuesday.

Early Wednesday, U.S. oil futures fell by 1 percent to $95.40 a barrel. U.S. gasoline futures were down 0.2 percent as many traders bet that Isaac would not cause major damage to regional refineries.

“It is expected that oil production in the Gulf of Mexico will quickly return to normal,” said oil analyst Carsten Fritsch of Commerzbank in Frankfurt.

Initial reports on refinery operations in Louisiana did not indicate damage to plants, although energy analysts said that could remain a concern through Wednesday.

Emergency management officials in Garyville, Louisiana, said there were no reports of flooding or damage at Marathon Petroleum Corp’s 490,000 bpd refinery.

Louisiana typically processes around 3 million bpd in its plants, many of which are located in low-lying areas near the coast. The broader Gulf Coast region is home to a refining hub with 7.8 million bpd capacity, or 45 percent of the U.S. total.

As of Tuesday afternoon, about 12 percent, or 936,000 bpd, of Gulf Coast refining capacity was closed down due to Isaac, the U.S. Department of Energy said.

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