The petroleum industry takes stock of its progress in recovering from the impact of hurricanes Katrina and Rita.

The oil and natural gas industry recognizes the catastrophic impact of hurricanes Katrina and Rita on millions of Americans. The Gulf Coast is the very heartland of our industry. And New Orleans has been a hub of our industry's operations for many decades. We are not just responding to this disaster; we are living it. Thousands of our workers are also suffering the hardships of living in New Orleans and throughout this devastated region they call home - many now without their homes. In concert with fire and police, friends and neighbors, suppliers and government officials, our employees are restoring the production, bringing the refineries back online, and restarting the pipelines. Our companies have made much progress in recovering from the hurricanes, but much remains to be done. Let us remember, this was a once-in-a-century natural disaster of monumental impact. It has been 90 years since two hurricanes of this magnitude struck the Gulf Coast in the same year, and Katrina and Rita came within a month of one another. Their side-by-side impacts directly touched 99 percent of our gulf region production facilities.

Second-Biggest Impact
In recent testimony before the House Budget Committee, the Congressional Budget Office (CBO) estimated that the energy industry as a whole incurred between $18 billion and $31 billion in capital losses from the two hurricanes. Only the housing industry suffered comparable financial damage, according to CBO.

Moreover, CBO estimated the total capital losses across all industries and consumer durable goods to be between $70 billion and $130 billion.

While many refineries, pipelines and other facilities are back in operation, some facilities are still out of service, either because of a lack of electricity or damage. Fuels are flowing to consumers nationwide, but below normal levels, in some areas.

Critically Important
At this time, energy conservation is critically important. We support recent calls to conserve energy by President Bush, the Alliance to Save Energy and others.

The American Petroleum Institute (API) has run full-page ads in major metropolitan newspapers across the nation urging consumers to use available supplies efficiently. We have urged such common-sense steps as planning trips carefully, properly maintaining your car, driving efficiently and using energy wisely at home.

Access to crude oil from the Strategic Petroleum Reserve and various government waivers to expedite the flow of fuels, particularly to emergency responders, have been vital in speeding recovery.

The Gulf Coast region includes some 4,000 offshore platforms in federal waters, two-dozen refineries and hundreds of production, transportation and marketing facilities.

These federal waters account for nearly 30 percent of the nation's crude oil production and approximately 20 percent of the natural gas production.

There is a reason for this geographic concentration. Government policies have largely limited offshore exploration and production to the central and western gulf - and our onshore facilities, including refineries, have been welcomed in communities in the region.

Unfortunately, offshore oil and natural gas development has been barred elsewhere; specifically, the eastern portion of the gulf and the entire Atlantic and Pacific coasts.

A Fluid Situation
The situation can change markedly from day to day. In summary, here is where we stood [in mid-October]:

· Offshore, shut-in oil production was 996,000 barrels per day, or 66.4 percent of daily Gulf of Mexico production. This is down from 100 percent a couple of weeks earlier.
· Shut-in natural gas production was 5.5 billion cubic feet per day, which is 55 percent of daily gulf production - down from 80.4 percent a couple of weeks earlier.
· Of the nation's refining capacity, 20 percent remained off-line or was restarting in the aftermath of Katrina and Rita (15 percent Rita; 5 percent Katrina). Refineries in the Beaumont/Port Arthur area were still down, as was one in the Houston area. Three Katrina refineries remained down; a fourth was restarting. All refineries affected by the hurricanes had partial or full power.
· As of Oct. 14, all on-shore interstate oil pipelines had resumed 100 percent normal operating capacity. However, some systems continued to experience reduced availability of products to transport.

We know that the hurricanes have had a nationwide impact through skyrocketing prices for gasoline and other fuels. We understand the concerns consumers have expressed, and our companies are doing everything in their power and are working 24/7 to restore operations and get supply back up to normal levels.

This work by industry, wise energy use by consumers and a “do-no-harm” approach by government officials provide the quickest path to consumer relief from tight supplies. In conclusion, the industry remains very focused on the serious work needed to ensure Americans continue to get the fuel they need.

Additionally, in the gulf region, API member companies are helping to provide community assistance, grief counseling and other on-the-ground humanitarian efforts. The industry has donated tens of millions of dollars to humanitarian relief efforts to assist evacuees, and to help rebuild lives and communities. The industry is supporting national, state and local initiatives in recovery and relief efforts through its contributions.  E+P

John Felmy is chief economist of the American Petroleum Institute. These comments were taken from his Oct. 18 testimony before the House Transportation and Infrastructure Subcommittees on Water Resources and Environment and Economic Development, Public Buildings and Emergency Management, as well as from statements released by API. For more information, visit www.api.org.