Two Cheers For America's Energy Infrastructure
Bernard Weinstein, associate director of SMU's Maguire Energy Institute, writes about how the U.S. energy infrastructure held up to Hurricanes Harvey and Irma.
By Bernard L. Weinstein
The southern United States has just experienced two of the most severe storms of the century: Hurricanes Harvey and Irma. The economic damage wrought by these disasters may approach $150 billion. While the loss of life has been fairly low considering the severity of these storms, the human cost in terms of individual suffering can only be imagined.
But if history is a guide, the economies of Houston and other communities along the Texas Gulf Coast, as well as Florida cities hit by Hurricane Irma, will rebound quickly as huge flows of private property and car insurance, charitable contributions, flood insurance, business interruption insurance, FEMA disaster aid and other federal assistance pour into the region. In retrospect, the two storms should appear as mere blips on America's economic radar screen.
Already, the oil and gas industry is on the rebound. Days before Hurricane Harvey made landfall, oil and gas production platforms in the Gulf of Mexico were shut down. Now most of them are back on stream.
As a precaution, all 20 refineries along the Texas and Louisiana Gulf Coast, representing 25% of national capacity, were temporarily taken offline during Harvey. But within days of the storm's passing, 14 of the 20 were operating between 50% and 100% of capacity while the other six should be rebooted and fully operational by the end of this month. Import and export terminals in the Ports of Corpus Christi and Houston are also back in business.
Similarly, the huge Colonial Pipeline that runs from Houston to Linden, New Jersey, and supplies gasoline and other refined products to more than a dozen states, was only out of service for a few days, ensuring that fuel shortages in the northeast and southeast are unlikely to occur.
Yes, about a half-million gallons of gasoline leaked from a dozen storage tanks in Houston, but these spills were along the ship channel far away from the city's fresh water supply. Keep in mind that there are more than 4,500 storage tanks in the Houston area. So 99.7% of Houston's storage tanks didn't rupture. By contrast, Hurricane Katrina littered the coast with tens of thousands of drums, storage tanks, and other containers holding oil, chemicals, and other hazardous materials. This didn't happen with Harvey.
Florida has no oil refineries but it does have more than 20 petroleum product storage terminals in coastal communities and 30 chemical companies. So far, it appears that none of these facilities suffered damage or leaks from Hurricane Irma. Half of Florida did lose electricity in the aftermath of Irma though, surprisingly, most of Houston didn't lose power — probably because Harvey was mainly about flooding and not wind.
There have been a handful of benzene leaks detected at Houston area refineries, and one small chemical plant that lost power experienced several explosions. But overall, the refining and petrochemical industries along the Gulf Coast, as well as pipelines and offshore production platforms, proved to be extraordinarily resilient as more than 50 inches of rain inundated Houston and Beaumont-Port Arthur over four days.
Another testimony to the integrity of America's energy supply chain is that while the national average gasoline price jumped about 30 cents a gallon between Aug. 28 and Sept. 7, it started declining even as Hurricane Irma was making landfall in Florida and should soon be back to "prestorm" levels.
The untold story is that after Hurricanes Rita, Katrina and Ike the energy industry spent billions upgrading their facilities along the Gulf Coast so they could withstand future catastrophic storms. With huge investments in new chemical plants, refinery expansions, industrial facilities and export terminals currently underway in Texas and Louisiana, even more resources will be expended by industry and public entities to protect this infrastructure, so critical to America's economic prosperity, from future natural disasters.
- Weinstein is associate director of the Maguire Energy Institute and an adjunct professor of business economics in the Cox School of Business at Southern Methodist University in Dallas.