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 impactsdisproportionately affectedalready marginalized communities. My other colleague Erika Spanger-Siegfried wrote an excellent account of whethercommunities are preparedfor 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.
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 tanksspilled 25,000 barrels of oil, covering over a square mile of neighborhood and contaminating 1,700 homes. Murphy Oilpaid $330 millionto 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. Thecompany 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. A2013 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 anew buzzwordin the business community. And companies around the world began thinking and preparing forweather and climate risks.
美国证券交易委员会(SEC)federal agency responsible for overseeing public companies, issued landmark guidance in 2010 asking companies to disclose climate-related risks to their investors. TheSEC 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 researchhasfound connectionsbetween 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
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 Ritahave also failed to disclosesuch storm risks to the public and their investors.
公司考虑和公关吗eparing for these risks and just not telling us about it? For the sake of the communities around these facilities, we can only hope. Withoutfurther information disclosedfrom 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 andgreater considerationof 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 thanthe meteorologistswill see it coming.