Gustav Is Downgraded as New Orleans Escapes Flooding

By Brian K. Sullivan and Brian Faler

Sept. 2 (Bloomberg) -- Hurricane Gustav was downgraded to a tropical storm as it swept inland, sparing New Orleans the devastation wrought by Katrina three years ago when 80 percent of the city was flooded.

The storm left half of New Orleans without power as it lashed Louisiana and Mississippi, toppling trees and tearing off roofs. The city's flood defenses remained intact and the death toll may have been kept to single figures, officials said.

``We had everything coordinated. We had a good plan,'' New Orleans Mayor Ray Nagin said on CNN late yesterday. Officials are ``getting the city ready to receive its citizens again.''

Some 1.9 million people left their homes in Louisiana's coastal areas as authorities, stung by criticism of their handling of Katrina, undertook the biggest evacuation in the state's history. Emergency workers stacked sandbags late yesterday and prevented a storm surge from overwhelming a levee south of New Orleans.

``We have stopped the bleeding,'' Billy Nungesser, president of Plaquemines Parish, about 55 miles (88 kilometers) from New Orleans, said in a statement. ``So far no homes have flooded,'' he said.

An unmanned predator drone and a helicopter with night- vision equipment will survey the area's flood barriers, Louisiana Governor Bobby Jindal told reporters yesterday in Baton Rouge, the state capital.

Death Toll

Seven deaths are being blamed on the storm so far, Jindal said, adding that the toll may rise.

``We're not hearing reports at this time of large numbers of fatalities or injuries,'' Jindal said. ``You are going to see severe property damage.''

Gustav's winds slowed to about 45 miles per hour at 1 a.m. local time today, the National Hurricane Center said. The storm was moving northwest at almost 10 mph and was about 30 miles west of Alexandria, Louisiana, according to the advisory.

It is forecast to cross into northeastern Texas later today when it may become a tropical depression, the center said.

Gustav tested the preparedness of authorities after Katrina, which made landfall as a Category 3 storm, killed 1,800 people in Louisiana and Mississippi and caused more than $80 billion in damage.

The Army Corps of Engineers has worked since 2005 to strengthen the levees, which form a ring surrounding New Orleans, a city of 300,000 people that lies below sea-level. Work isn't scheduled to be complete until 2011.

Flood Walls

Waves crashed high against some flood walls yesterday and washed over the Industrial Canal, exposing weaknesses in the system. Gustav, which came ashore as a Category 2 storm, was less powerful than Katrina and brought a maximum storm surge of about 14 feet, some 5 feet lower than in 2005.

After Katrina, thousands of people were forced to take shelter at the New Orleans Superdome and Convention Center. Only an estimated 10,000 people remained in the city this time to ride out the storm.

In Chauvin, close to the coast southeast of Houma, resident Miriam LeBoeuf stayed put as the eye of the storm passed over.

``My house is five feet off the ground, it was shaking like a freight train,'' she said by telephone yesterday. ``I have glass shelves and they shook right off the wall.''

Lafourche Parish, southwest of New Orleans, said it was beginning to assess the impact of the storm and that high winds had damaged a large number of homes and businesses.

Oil Production

The hurricane shut down all oil production in the Gulf of Mexico and 95 percent of gas production as Exxon Mobil Corp., Royal Dutch Shell Plc and other companies took safety measures, Jindal said. As much as 20 percent of oil and gas production may be restored by this weekend, he added.

Jindal asked the federal government to release fuel from the Strategic Petroleum Reserve as about 85 percent of South Louisiana service stations don't have gasoline in their tanks.

Gustav may trigger insurance claims of as much as $10 billion, making it potentially the fourth-costliest storm to hit the U.S., according to Newark, California-based Risk Management Solutions Inc.

Insured losses on land will be between $3 billion and $7 billion and oil-drilling damage between $1 billion and $3 billion, it said. That's ``significantly smaller'' than Katrina's record $41.1 billion, Robert Muir-Wood, head of research for RMS, said in an interview on Bloomberg Television.

To contact the reporter on this story: Brian K. Sullivan in Baton Rouge at bsullivan10@bloomberg.net; Brian Faler in Baton Rouge at bfaler@bloomberg.net