Are Oil Companies Ready for the Next Katrina?

, lead analyst, Center for Science and Democracy | August 27, 2015, 2:39 pm EDT
Bookmark and Share

Ten years ago this week, a hurricane was gaining strength in the North Atlantic.  Meteorologists worked around the clock to understand and predict its future path and strength. That path and strength, it turns out, would make the record books. Hurricane Katrina was the costliest natural disaster in U.S. history and the third most intense landfalling of a hurricane on U.S. soil. It left 1,833 people dead and caused $108 billion in property damage. As my colleague Rachel Cleetus points out, these impacts disproportionately affected already marginalized communities. My other colleague Erika Spanger-Siegfried wrote an excellent account of whether communities are prepared for another Katrina. So I wondered … are companies ready?

Exxon Mobil's Baytown refinery--the largest petrochemical complex in the US--may be vulnerable to storm surge impacts. The company has only minimally disclosed physical risks to its facilities from climate change impacts. Photo: UCS Stormy Seas, Rising Risks.

Exxon Mobil’s Baytown refinery–the largest petrochemical complex in the US–may be vulnerable to storm surge impacts. The company has only minimally disclosed physical risks to its facilities from climate change impacts. Photo: UCS Stormy Seas, Rising Risks.

When Katrina hit, the economy certainly took one too. In addition to direct costs and damages, the nation saw gas prices jump, as 23 percent of U.S. oil refining capacity went offline.  Companies in charge of these refining facilities saw significant losses in Katrina’s wake.  Some refineries were down for months.  When Hurricane Rita also struck the gulf just a few weeks later, many of the same facilities were further damaged along with others that had been spared by Katrina.

So did we learn from Katrina’s destruction?

At least one oil refining company seemed to recognize the potential for another destructive hurricane in the Gulf of Mexico.  Murphy Oil’s Meraux facility was inundated by Katrina. Damaged tanks spilled 25,000 barrels of oil, covering over a square mile of neighborhood and contaminating 1,700 homes. Murphy Oil paid $330 million to settle 6,200 claims, buy contaminated property, and perform cleanups.

Subsequently, Murphy Oil disclosed to the public that this facility faced threats from climate change, including the possibility of more intense storms. The company wrote, “The physical impacts of climate change present potential risks for severe weather (floods, hurricanes, tornadoes, etc.) at our Meraux…refinery.”

The business community at large has made great strides since 2005 in increased awareness of climate change and storm impacts. A 2013 report by IPICEA, an oil and gas industry association affiliated with the United Nations, highlighted the importance of the oil and gas industry incorporating climate-related risks, including physical risks, into risk management and adaptation plans. Resiliency became a new buzzword in the business community. And companies around the world began thinking and preparing for weather and climate risks.

The Securities and Exchange Commission (SEC), the federal agency responsible for overseeing public companies, issued landmark guidance in 2010 asking companies to disclose climate-related risks to their investors. The SEC wrote, “Significant physical effects of climate change …. Have the potential to have a material effect on … business and operations… They can include the impact of changes in weather patterns, such as increases in storm intensity [and] sea level rise.”

Since the SEC wrote those words, more scientific research has found connections between climate change and the proportion of more intense storms in the North Atlantic basin.

Are companies paying attention?

After Murphy Oil's Meraux refinery spilled 25,000 barrels of oil during Hurricane Katrina, more than a square mile of neighborhood was contaminated and Murphy Oil had to pay $330 million in settlements. Photo: UCS/Jean Sideris

After Murphy Oil’s Meraux refinery spilled 25,000 barrels of oil during Hurricane Katrina, more than a square mile of neighborhood was contaminated and Murphy Oil had to pay $330 million in settlements. Photo: UCS/Jean Sideris

It seems our memories are short.

Murphy Oil sold their Meraux facility in 2011 (perhaps the risks were just too big for them to swallow?). The facility’s new owner, Valero Energy Corporation, hasn’t disclosed climate-related risks at this facility despite its vulnerable position and wounded past. Other companies with facilities that were damaged by Katrina and Rita have also failed to disclose such storm risks to the public and their investors.

Are companies thinking about and preparing for these risks and just not telling us about it?  For the sake of the communities around these facilities, we can only hope. Without further information disclosed from companies and without stronger demands from the SEC and investors for this information to be shared, it is difficult for us to know whether companies have sufficiently prepared for another disastrous storm in the gulf. We need greater transparency from companies and greater consideration of climate-related risks.

Avoiding risky business

The alternative, of course, is another Katrina—another storm with costly consequences for fence line communities, for American taxpayers, and for companies and their investors. When the next Katrina comes, I hope more than the meteorologists will see it coming.

Posted in: Energy, Science and Democracy Tags: , , , , , ,

Support from UCS members make work like this possible. Will you join us? Help UCS advance independent science for a healthy environment and a safer world.

Show Comments


Comment Policy

UCS welcomes comments that foster civil conversation and debate. To help maintain a healthy, respectful discussion, please focus comments on the issues, topics, and facts at hand, and refrain from personal attacks. Posts that are commercial, self-promotional, obscene, rude, or disruptive will be removed.

Please note that comments are open for two weeks following each blog post. UCS respects your privacy and will not display, lend, or sell your email address for any reason.

  • ruthrgriffins

    WORK AT HOME SPECIAL REPORT………After earning an average of 19952 Dollars monthly,I’m finally getting 98 Dollars an hour,just working 4-5 hours daily online….It’s time to take some action and you can join it too.It is simple,dedicated and easy way to get rich.Three weeks from now you will wishyou have started today – I promise!….HERE I STARTED-TAKE A LOOK AT…ml…..

    ➤➤➤➤ http://googleonbuzz1spotmediaworkzone/starter/work/…. ⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛⚛s