ONLINE EXCLUSIVE: Katrina Rocks Gulf Coast, Affects Chemical Production

With winds of 145 mph, Hurricane Katrina slammed into the Gulf Coast on Aug. 29, halting chemical production across much of the region. While damage assessments are still being conducted, initial reports indicated that most major petrochemical facilities did not suffer major structural damage. The majority of facilities in the area dealt with extensive flooding and power outages, which severely disrupted production and limited raw material supplies and shipments in and out of the region. Crude oil and natural gas production in the Gulf Coast area was sharply cut back, further limiting raw material supplies for refineries and petrochemical makers. In addition, problems with transport, logistical, and feedstock suppliers will persist for weeks, analysts say.

The Dow Chemical Co., which has six manufacturing facilities in Louisiana, continues to assess the situation. Various Dow businesses will be impacted differently, depending on the concentration of their assets at various sites and the company's ability to supply customers from alternative Dow locations.

The St. Charles Operations of Union Carbide Corp. (Dow's wholly owned subsidiary) in Hahnville, LA, which underwent a controlled shutdown in anticipation of the hurricane, is once again producing ethanolamines.

"We are thankful that the ethanolamines production equipment was not impacted by the hurricane and that we were able to resume operations this week," says Ken Bromfield, marketing manager, Dow Ethanolamines. "Barring any unforeseen circumstances, we expect to return to normal operations over the next several days."

KRATON Polymers announced that Hurricane Katrina did not directly affect any of its operations. Because of its global manufacturing network, the company says it believes it will not have any significant supply disruptions. However, logistics could be an impediment to the shipping of products or delivery of raw materials because of limited navigation in the affected region and the scarcity of fuel and transportation equipment.

Shell Chemical LP said it is continuing to make progress in restoring operations. Its Geismar, LA, chemicals plant is operating at 60% of its capacity, limited by offsite logistics issues. Geismar produces first-line derivative products. Full capacity is expected as logistics become available. The Mobile facility is in its final startup phase. This facility produces base chemical feedstocks and fuels. More definitive information on startup dates will be announced as startup plans are developed jointly with the refinery, the company reported.

Dow says that both its affected sites continue to focus on the safety of employees and the surrounding communities. The company has enforced efforts to address the immediate needs of employees in the affected region; for example, hotline telephone numbers have been established for employees to check in and report on their status, and efforts are under way to support employees who need urgent assistance.

"Our primary concern is the safety of our employees and our community," said Joerg Duebel, PXC product manager, Dow EP&I. "We will focus on restoring normal operations as rapidly as is safely possible, but this is heavily dependent upon a number of issues, including availability of power, steam, utilities, raw materials and transportation. In the meantime, we will be working closely with our customers to lessen the impact of this situation on their business."

Rebuilding the Community

Several companies have announced plans to reach out to the community and help rebuild not only its facilities but the communities in which they work. Dow plans to work with communities to assist with their needs as they recover from the hurricane. To that end, the company plans to contribute $3 million to the hurricane relief efforts, including an immediate $1 million cash donation to the American Red Cross. (See sidebar for more corporate Katrina relief efforts.)

John Hofmeister, president of Shell Oil Co., said, "Our highest priority is to help provide for the immediate safety and long-term well being of our employees, their families, and the residents in these devastated communities. Shell has a long-standing record of working with the Red Cross nationally and locally for disaster relief and education on hurricane preparedness."

BASF has established a Katrina Relief Fund with the Baton Rouge Area Foundation to accept employee and retiree contributions during the month of September to aid those affected by Hurricane Katrina, primarily in Ascension Parish, where BASF's Geismar, LA, site is located.

"In keeping with BASF's tradition of helping the communities surrounding our sites, we will do everything we can to assist people whose lives have been devastated by Hurricane Katrina and its aftermath," said BASF Corp. Chairman and CEO Klaus Peter Löbbe. "We are still learning the full extent of the devastation. As we hold those who are going through so much pain and suffering in our thoughts, we are committed to supporting the relief and recovery efforts in the days and weeks ahead."

Force Majeures Declared

Due to the hurricane and its repercussions, several suppliers have declared force majeure for products. By declaring force majeure, an exporter does not have to bear financial responsibility for delays in shipments, which breach contract agreements with importers. These clauses typically cover natural disasters and other events that are unforeseen and could not be avoided by the exercise of due care.

• Dow declared force majeure Aug. 31 for ethyleneamines produced by its subsidiary Union Carbide Corp. at its St. Charles plant. Ethyleneamines are used as chemical intermediates in the manufacture of lube additives, as well as other applications.

  The next day, Peroxymeric Chemicals (PXC), a business unit of Dow's Epoxy Products and Intermediates, announced force majeure for all its products, including CYRACURE^TM cycloaliphatic epoxides; FLEXOL^TM epoxidized soybean and linseed oils; and TONE^TM polyols, polymers, and monomers. PXC products are produced using raw materials from a plant at the Union Carbide facilities at St. Charles Operations in Hahnville, LA.

  "Our ability to ship PXC products has been completely halted by the impact of Hurricane Katrina," Duebel said. "We are still assessing the situation and do not know when we will be able to restore normal operations or ship product from the site."

  Dow said it expects to maintain its force majeure status for these products until operations and transportation challenges are completely resolved.

• Hurricane Katrina caused extensive flooding at two DuPont facilities in Mississippi - the titanium dioxide plant in DeLisle and the First Chemical Corp. aniline plant in Pascagoula. As a result, DuPont declared force majeure for both businesses. Based on the company's preliminary assessment of damages, it is not yet clear when restart will occur. DuPont plants in Pontchartrain, LA, Burnside, LA, and Mobile, AL, were not as severely impacted by the storm.

Lasting Effects

The lasting effects of Hurricane Katrina are yet to be determined. As the area rebuilds, the repercussions on the chemical industry could be felt for years to come. Since companies that rely on chemical products comprise 25% of America's GDP, it is critical for our nation to repair quickly the damage to the Gulf Coast infrastructure, the American Chemistry Council said.

"Transportation and logistics continue to be constrained on the Gulf Coast and southeastern United States as a result of the hurricane's impact, and they are likely to continue to present supply disruptions over the coming months," says Dow's Bromfield. "Based on current assessments, this situation could last through at least October."

SIDEBAR: Corporate Katrina Relief Efforts Announced

Air Products Foundation Donates $100,000 to American Red Cross

BASF Corp. is to donate $1 million to agencies supporting Hurricane Katrina relief and recovery efforts in the company's site communities in Louisiana, Mississippi, Alabama, and Texas. In addition, the company has established the BASF Katrina Relief Fund with the Baton Rouge Area Foundation to accept employee and retiree contributions.

Bayer Corp. has committed $2 million in cash and product donations and will match employee donations to the Red Cross.

BP is donating $1 million to the Red Cross.

Cytec Industries Inc. will donate $50,000 to the American Red Cross and match employee donations to the American Red Cross up to $50,000.

Dow Chemical is donating $1 million to the Red Cross, up to $1 million in employee matching gifts and $1 million in products and technology for rebuilding.

DuPont is giving a $1 million contribution targeted to the Red Cross, Salvation Army and Ongoing Recovery Efforts, and has established a DuPont Hurricane Katrina Fund.

Exxon Mobil will donate $2 million to the American Red Cross Disaster Relief Fund. It is also donating fuel to government responders.

Flowserve will donate $50,000 and match up to $50,000 in employee donations to the Red Cross.

HONEYWELL will contribute $500,000 to support Hurricane Katrina relief efforts.

3M and 3M Foundation announced plans for an initial contribution of $1.5 million to help with relief efforts in areas impacted by Hurricane Katrina. The donation includes a $500,000 grant to match employee contributions to the American Red Cross and the Salvation Army. 3M will also donate $1 million in products needed by relief organizations.

Shell Oil Co. and Motiva Enterprises LLC will implement a disaster relief support program to aid recovery efforts in Gulf Coast areas devastated by Hurricane Katrina. A key part of the program involves Shell and Motiva dedicating $2 million to the American Red Cross Disaster Relief Fund and matching employee donations up to another $1 million.

Total S.A. announced today a commitment of $1 million to the American Red Cross Hurricane Relief Fund.

Tyco International Inc. announced a corporate cash donation of $500,000 to the American Red Cross. In addition, the company is providing a 100% match for qualified employee contributions through its U.S. Employee Matching Gift Program.

W.R. Grace & Co. will donate $100,000 to the American Red Cross for hurricane victims.