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Royal Dutch Shell Plc .com: Lessons from Katrina


Lessons from Katrina, Rita foster changes by energy businesses

By Kevin G. Hall
McClatchy Newspapers

DEER PARK, Texas – With weather forecasters expecting an “above-average” hurricane season, government regulators and major players in the energy sector hope errors made last year during Hurricanes Katrina and Rita won’t be repeated.

Mistakes and mechanical failures coupled with last year’s unprecedented back-to-back severe storms disrupted U.S. oil production and gasoline distribution and sent global oil prices soaring past $70 a barrel and gasoline above $3 a gallon. Natural gas prices also doubled.

Here in the suburbs of Houston, the nation’s energy capital, oil producers, refiners and pipeline operators report that Katrina and Rita punched holes in what they’d thought were water-tight emergency plans. Energy companies couldn’t communicate with government responders or even internally.

Now the National Oceanic and Atmospheric Administration believes there’s an 80 percent chance of an above-average hurricane season this year.

“If we see some major storm in the Gulf of Mexico, we could see crude above $80” a barrel, said Phil Flynn, vice president of Alaron Trading Corp., a Chicago company that trades in contracts for future delivery of oil. “It’s going to take longer to bounce back, since we’re still not bounced back from last year.”

Energy companies have spent months honing their response plans to include the hard lessons learned from Katrina and Rita.

“We know we can’t rely on cell phones and computers,” said David McKinney, a community outreach director for Royal Dutch Shell’s Deer Park refinery, outside Houston.

The inability to communicate with key personnel and the authorities was a principal problem last year. Now, at Shell’s Texas and Louisiana onshore operations, key personnel are armed with satellite phones and BlackBerries, which allow text messaging even when cell towers have been destroyed.

Shell’s Gulf Coast refineries also learned that sending personnel home three days before landfall didn’t leave them enough time to prepare for a storm.

“The biggest lesson we learned is we need to start earlier,” said Colleen Hutchings, the health and safety director at Deer Park. Critical employees now will be sent home five days before a storm’s potential landfall to prepare their homes and move their families so that they can return to work and focus on storm plans that could affect national fuel supplies.

Refineries had trouble getting critical personnel back into the Houston area after Rita prompted an unprecedented mandatory evacuation. That affected the restart of operations and thus the production and distribution of gasoline.

This year, critical energy employees in the Houston area have been given special ID badges. Law enforcement agencies have been instructed to recognize these badges and allow their holders back in.

Failures by the Federal Emergency Management Agency and the Department of Homeland Security were well documented after Katrina. The American Petroleum Institute, the industry’s trade group, has hosted numerous meetings in Washington, D.C., with government agencies to create clearer communication guidelines. Energy companies want federal officials to give priority to the restoration of electric grids or alternative power sources to keep refineries and pipelines operating.

After both hurricanes, gasoline supplies reaching Georgia, the Carolinas, and mid-Atlantic states were insufficient because emergency responders confiscated generators that pipeline operators had booked for use. The generators were intended to maintain the pressure needed to keep pushing large volumes of gasoline northeast.

“It’s not industry’s decision to say it is more appropriate to have a generator at a pipeline or refinery than a hospital, but what we do need is a more improved prioritization system,” said Cindy Gordon, API’s refining-issues manager.

Kevin Kolevar, who heads the Department of Energy’s Office of Electricity Delivery and Energy Reliability, said that “there was a heck of a lot of confiscation going on” by local, state and federal agencies. His office is working to improve the way responders and the private sector interact during natural disasters and better track vital resources like generators.

“We’re working to make sure there are clear lines of communication,” Kolevar said.

Colonial Pipeline, headquartered in the Atlanta suburbs, isn’t taking chances. It’s made key investments to change its hurricane preparations.

“The most concrete of these acknowledges the importance of portable generators in the event that commercial power is lost. We tested and bought 12 and are stationing them in Mississippi and Alabama in time for the `06 hurricane season,” said spokesman Steve Baker.

Katrina and Rita also confirmed that new pipeline technologies stood up to the storms, as there were no significant oil or gas leaks.

The wallop to the Gulf Coast temporarily knocked out almost 75 percent of offshore oil and natural gas production. The last estimate from the Interior Department’s Mineral Management Service said 113 of the nation’s 4,000 offshore oil platforms were destroyed. And 457 undersea pipelines that brought oil and natural gas to shore were damaged.

One of the biggest hits was to the Mars platform, a giant offshore facility operated by Shell that accounts for about 5 percent of all Gulf Coast production.

Its mooring and anchoring system, spreading down 2,700 feet to the ocean floor, performed admirably. But while the platform withstood sustained winds of 175 mph, its 1,000-ton derrick collapsed and sunk when a clamping system couldn’t stand up to 70-foot waves. Mars resumed oil production in late May and is nearing pre-Katrina production levels, after high-tech equipment was used to repair the derrick and replace damaged pipe.

As tough as Katrina and Rita were, they taught important lessons.

“We all have a new measure for what storms are,” said Fred Palmer, a spokesman for Shell’s offshore oil exploration division. “Going forward, this all becomes part of net ocean data so that we design new structures … that will take into account these more recent conditions.”

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