Isaac’s Winds Test Energy Grid Upgrades After Katrina

Photographer: Nick Tomecek/Northwest Florida Daily News/AP Photo

Waves from the Santa Rosa Sound crash over the Navarre Beach causeway in Navarre, Fla., on Aug. 28, 2012 as Isaac approaches the Gulf Coast. Close

Waves from the Santa Rosa Sound crash over the Navarre Beach causeway in Navarre, Fla.,... Read More

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Photographer: Nick Tomecek/Northwest Florida Daily News/AP Photo

Waves from the Santa Rosa Sound crash over the Navarre Beach causeway in Navarre, Fla., on Aug. 28, 2012 as Isaac approaches the Gulf Coast.

Hurricane Isaac is providing the biggest test of power grid fortifications made in the wake of Hurricane Katrina to prevent storms from crippling pipelines, refineries and other critical U.S. energy facilities.

Phillips 66 (PSX) and Colonial Pipeline Co. are prepared to lean on upgraded emergency power generators if the lights flicker out. They’re among energy companies that have reassessed power supplies to avoid the disruptions caused when Hurricanes Katrina and Gustav slammed into the heart of the Gulf Coast energy industry near New Orleans in 2005 and 2008, respectively.

Refineries and pipelines were vulnerable to the storms because they were dependent on the electrical grid to run their plants and pump stations.

“These energy resources are all interconnected,” said Daniel Aldrich, a Purdue University professor who studies disaster recovery efforts. “The risk is of what we call a cascading failure.”

Energy and power companies including Entergy Corp. (ETR) and Southern Co. (SO) raced to complete preparations ahead of Hurricane Isaac’s overnight landfall. Entergy, Louisiana’s largest utility owner, was bracing for the slow-moving storm to bring a foot (30.5 centimeters) of rain and sustained winds near 75 miles per hour (120.7 kilometers per hour) that could last 30 hours or more.

Emergency Workers

Entergy requested 3,750 emergency utility workers from neighboring states to help respond to inevitable blackouts, said Mike Burns, a spokesman. The New Orleans-based company yesterday began shutting down its 1,250-megawatt Waterford 3 nuclear reactor located 25 miles west of New Orleans.

“We have spent a significant amount of money improving the system since Katrina,” Charles Rice, chief executive officer of Entergy New Orleans, said at a press conference yesterday. “The system is in about as good of shape as it could be. However, when you have winds of 50, 60, 70 miles an hour, I don’t care how storm-hardened the system is, there will be outages.”

Entergy said 409,000 customers were without power at 5 a.m. local time today. The storm’s “high winds and slow trek through southeastern Louisiana have caused extensive outages to Entergy’s power grid,” the company said in a statement. Entergy’s work crews are unable to work fully until winds drop below 30 miles an hour.

About 499,289 customers were without power in Louisiana, Mississippi and Alabama today, according to utility websites.

The storm prompted oil companies to shut in about 93 percent of crude production and 67 percent of natural gas from the Gulf of Mexico, the U.S. Bureau of Safety and Environmental Enforcement said in a statement on its website yesterday.

Biggest Threat

With Isaac moving past offshore drilling platforms and other infrastructure, the storm’s biggest threat to U.S. energy will probably be flooding at refineries near the coast, Christian O’Neill, senior analyst with Bloomberg Industries, said in a report yesterday. About 17 percent of U.S. refining capacity lies in the projected path of the storm.

Hurricanes Katrina and Gustav each disrupted oil and gas supplies throughout the U.S., sending prices skyrocketing. After Katrina blacked out New Orleans and much of southern Louisiana on Aug. 29, 2005, gasoline prices spiked 17 percent between Aug. 30 and Sept. 5, according to data compiled by Bloomberg. Natural gas reached a record high of $15.378 per million British thermal units in the months after the storm.

The U.S. tapped its Strategic Petroleum Reserve after Katrina halted 91% of production in the Gulf of Mexico and knocked out eight refineries due to flooding or power loss. Five more refineries in states as far north as Illinois and Ohio ran at reduced rates because of the loss of crude supply.

Delaying Recovery

Prolonged blackouts delayed the restoration of refineries, pipelines, gas processors and other energy facilities that depended on the grid for power, according to a 2009 Energy Department report that studied the storms’ impact.

Millions of people were left in the dark as the storms knocked down thousands of miles of power lines and forced hundreds of substations and two nuclear plants to shut, according to the report. On its worst day, Hurricane Katrina left an estimated 2.7 million customers to stew without power or air conditioning across four states, and Gustav cut power to about 1.3 million.

Yesterday, a total of about 6,000 workers were stationed outside Hurricane Isaac’s “cone of impact” to help with power recovery efforts, Eric Skrmetta, a commissioner with the Louisiana Public Service Commission, said in a phone interview. Restoration may be delayed with Isaac because of the slow pace of the storm, which was moving northwest at 6 miles per hour, according to the National Hurricane Center.

“The challenge will be patience,” Skrmetta said.

Mobile Generators

Katrina knocked out power to five of Colonial Pipeline Co.’s 60 pump stations in 2005, crippling the company’s ability to deliver refined fuels to East Coast markets. Colonial now has eight truck-mounted generators stationed in Mississippi, each with enough power to run about 1,600 homes. The company can have the generators onsite within 24 hours to restore operations, Steve Baker, a spokesman for Alpharetta, George-based Colonial, said in an e-mail.

Phillips 66, the biggest U.S. refiner by market capitalization, added 4,000 kilowatts of backup power at its Alliance refinery in Belle Chase, Louisiana, after the storms blacked out the plant in 2005, Rich Johnson, a spokesman, wrote in an e-mail.

Kinder Morgan Inc., the biggest U.S. pipeline operator, staged diesel-powered generators for its facilities on the Gulf Coast along with smaller generators for its employees to use, Richard Wheatley, a company spokesman, said in an e-mail.

Weak Spot

With a newer, stronger power infrastructure following Katrina and Gustav, the main vulnerability may be in maintaining communications between the utility companies and local, state and federal officials including the Federal Emergency Management Agency, said Barry Scanlon, president of Witt Associates, a Washington-based disaster-management consultant. Improvements have been made in that area as well, he said.

“We’ve got, from top and bottom, a much more prepared Louisiana and, frankly, a better FEMA,” Scanlon said.

To contact the reporters on this story: Julie Johnsson in Chicago at jjohnsson@bloomberg.net; Mike Lee in Dallas at mlee326@bloomberg.net; Mark Chediak in San Francisco at mchediak@bloomberg.net

To contact the editor responsible for this story: Susan Warren at susanwarren@bloomberg.net

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