The industry says it is applying lessons it learned the hard way last year in the gulf coast following hurricanes Katrina and Rita.

With the 2006 hurricane season under way, the oil and natural gas industry says it is applying lessons from last year's devastating storms that should make it better able to withstand new weather threats. Looking back from the perspective of nearly a year later, however, government and industry representatives say the sector weathered hurricanes Katrina and Rita remarkably well.

“Our industry is proud of its hurricane record,” Bob Greco, an official of the American Petroleum Institute (API), told the U.S. House Panel on Hurricane Preparedness on June 7. “The offshore industry in the Gulf, which includes 4,000 platforms and 33,000 miles of pipeline, survived the hurricanes well, with no loss of life and no significant offshore exploration and production releases.”

Speaking at a press conference on May 30, Kevin Kolevar, director of the Energy Department's Office of Electricity Delivery and Energy Reliability, called the industry's recovery in the storms' aftermaths “frankly, spectacular. The fact that the sector was able to come back up so quickly with minor disruptions is a testament not only to the resilience of the energy sector, but probably chiefly to the people, the men and women that work in the energy sector.”

But areas for improvement have been identified. One is what Red Cavaney, API president and CEO, at the same press conference referred to as “the haze of war. Any time you go in and experience, like the first 24 or 48 hours after something like this, there's a lot of confusion.”

Greco noted that government and private-sector agencies have been discussing ways to improve communication and coordination. “We need to work together to eliminate overlap or duplication of effort by multiple government agencies, which can result in duplicative requests for information from companies, misdirection of requests within companies and other inefficiencies.”

Two problem areas immediately apparent following the 2005 storms were difficulties related to crews' access to power generation equipment and employee access to refineries and other facilities. Greco said it was “critical” that government “helps to ensure that a high priority is given to facilitating a company's transportation and use of emergency backup generation and restoration of commercial power to pipelines and refineries.”

Greco said the industry itself has taken steps ensure the safety of “its most important asset”: its employees. These include “coordination of personnel evacuation plans to ensure that companies know where employees are and can communicate with them; establishment of distribution centers to provide food, potable water and other essential products to employees in need; and identification of alternative housing arrangements for employees who have lost their homes.”

API has issued two new recommended practices (RPs) to address concerns about mobile offshore drilling units (MODUs), several of which broke loose during the storms of 2005 when waves exceeded 100 feet in height. Elmer P. Danenberger III, chief of Offshore Regulatory Programs for the Minerals Management Service, said the loose rigs caused “no major damage, but [were] still a significant threat, not just to other facilities but to pipelines as they drag anchors.” RP 95F and 95J can be downloaded at www.api.org/pubs.

Back on dry land, the National Petrochemical and Refiners Association (NPRA) recently published a white paper on hurricane preparations. NPRA President Bob Slaughter said it is a “compilation of the lessons learned from last year's hurricanes.”

Available at www.npra.org, the document advises refineries on establishing emergency management teams, assessing security, enhancing logistics, establishing multi-modal communications and maintaining links with community and government organizations. Post-hurricane damage assessment and recovery are also discussed.

“Last year, NPRA's members dealt with … a devastating double-punch to a major area of the Gulf Coast where many refined products and chemicals are produced, [and they] came back and really demonstrated what they can do,” Slaughter said. “This publication is one part of our industry's efforts to be even better prepared.”

MINING MERGER
Dodge acquires Inco and Falconbridge- But What'll it Mean for Canada?
By Shannon McCarthy

Phoenix-based copper giant Phelps Dodge Corp. announced in June it will acquire two of the world's leading nickel producers. The $40 billion deal will complete the merger of Canadian nickel miners Inco and Falconbridge Ltd., both based in Toronto, to create Phelps Dodge Inco Corp., the world's largest nickel producer and publicly traded copper producer.

Inco had been in talks to acquire Falconbridge since last October. According to Canada's CBC News, the three-way merger foiled efforts by mining rivals who had made hostile offers to take over Falconbridge, including Xstrata PLC, a British/Swiss coal and copper producer. The Falconbridge/Inco deal was slated to close in July. Inco's merger with Phelps Dodge allowed it to increase its offer for Falconbridge, but the Phelps Dodge/Inco deal is not contingent on the transaction.

J. Steven Whisler, chairman and CEO of Phelps Dodge, said the merger presents a unique opportunity to create a global leader based in North America. “The combined company has one of the industry's most exciting portfolios of development projects, and the scale and management expertise to pursue their development successfully,” Whisler said.

Phelps Dodge Inco will be listed on the New York Stock Exchange and will apply for a listing on the Toronto Stock Exchange. Noting that the company's nickel division will be headquartered in Toronto, Whisler said the merger will make Canada “the center for the world nickel universe.”

But some disagree. Members of United Steelworkers (USW), which represents more than 7,500 workers at Inco and Falconbridge, said the merger will mean a loss of Canadian control of the country's natural resources as well as a blow to the country's economy. “From coast to coast in Canada, all our members at Falconbridge and Inco … and the local leadership and the elected leadership are concerned that Phelps Dodge will have no sense of what's important for Canada in this sector,” said Leo Gerard, international president of USW.

Gerard also asserted that Phelps Dodge's labor relations throughout the world are “tenuous at best,” and said the union felt the need to strike a deal with both Inco and Falconbridge that prohibits layoffs for three years. Just as it called for an investigation of Xstrata's offer, the union is calling for a Canadian government review of the proposed merger, Gerard said. “We'd prefer a made-in-Canada arrangement,” he said, noting that USW supports Inco's bid to acquire Falconbridge.

Gerard said the union plans to call an international meeting with all affected locals. “We're also calling on the [International Council on Mining and Metals] and the [International Metalworkers' Federation] to collaborate and have a global meeting,” he said.

But Whisler urged Canadians to “get to know [Phelps Dodge],” saying the deal will benefit America's northern neighbor. “That's particularly important from the Phelps Dodge perspective - allowing Canadians to get to know us. Once we do that, I'm extremely confident that most of these issues will go away.”