BusinessReport.com

Posted on the front door of Theriot’s Heating & Air last week was a sign: Customers in need of repairs would have to call Robbie Theriot on his cell phone.

The simple message spoke volumes about the way business must be done in south Louisiana in these post-Gustav days.

The Category 2 hurricane dropped in on Labor Day morning as a tame breeze and light rain. As the hours passed, the storm grew steadily to a windy rage not seen in the Capital Region since Hurricane Betsy in 1965.

Theriot was one of the lucky ones. Trees crushed houses and cars all across the town of Walker, gusts ripped away a church roof and water flooded many a yard, but Theriot’s green metal building on Florida Boulevard was spared. The storm did, however, leave the company without telephone or power—and no indication of when the latter might be restored.

Every day without electricity is another day Theriot spends $2,000 just to keep his 9-year-old business running without making any money [he brings in $1.8 million a year]. All he can do is post his sign and wait for life to return to normal.

That could take some time. Hundreds of thousands of people, businesses and major plants were without power last week, and Entergy—the largest provider of electricity in south Louisiana—said it could be two weeks before the majority of customers are restored. That’s with 11,000 linemen and tree-trimmers in the field. Gustav took out 191 transmission lines and 210 substations—a destructive force rivaled by Hurricane Katrina’s assault on southeast Louisiana in August 2005.

At the same time, only 30% of Cox customers in East and West Baton Rouge and Livingston parishes had their Internet service restored.

An early—and extremely rough—estimate by Louisiana Economic Development is that Gustav caused between $5 billion and $10 billion in property damage in Louisiana, excluding the Gulf of Mexico. The storm also is blamed for another $2 billion to $3 billion in lost economic activity before and after landfall, although that meter is still running.

At its peak, business interruption was costing the state $500 million a day in gross state product. That’s now down to between $200 million and $300 million, a number that will shrink as more firms are able to open their doors for business.

While there are no specific estimates for the Capital Region, LED Secretary Stephen Moret says the damage this time around is likely greater than it was from Katrina.

“The primary remaining threat from Gustav is the business interruptions due to a lack of electricity, fuel and employees,” Moret says. “The widespread power outages and the length of time it appears it is going to take to repair them is a significant economic threat today.”

Edward Flynn, director of safety and security for the Louisiana Chemical Association, said late last week that major industrial plants in East Baton Rouge and Ascension parishes are experiencing a number of obstacles preventing them from powering up again—the biggest one being a lack of electricity.

“Obviously, Entergy is working if not around the clock, then close to that,” Flynn says. “But they’re still telling us it’s going to be a number of weeks before power is restored to industrial facilities. Lots of the facilities do have gasoline generators that are being used to power control rooms, but even with the fuel supplies they had at the beginning of the storm, some are starting to run short on fuel. That’s going to be an issue.”

But gasoline isn’t the only problem. Nitrogen, a key utility for several plants, also is in short supply. And the Henry Hub, a 131-mile pipeline that transports natural gas—another necessary fuel—between Erath and Port Arthur, Texas, is experiencing compression problems. The hub interconnects nine interstate and four intrastate pipelines and serves as the pricing point for natural gas futures contracts traded on the New York Mercantile Exchange.

In addition to fuel challenges, a number of plant workers must tend to damage to their homes. Others can’t get to work because roads are closed or are being turned back by National Guardsmen and other law enforcement authorities manning checkpoints, despite new operating procedures implemented after Katrina.

“Unfortunately, we’re still hearing about people being turned back and not allowed through even though they have company identification, letterhead authorization and appropriate signage,” Flynn says. “In theory, that should allow the individual to be waved through checkpoints, but people are still having difficulty with that. I say this not as a criticism of the state, but once we get through the immediate aftermath of Gustav, we’re going to need to work out credentialing. Obviously, we don’t want people out joyriding, but we’re talking about folks who are essential to get us back up and running.”

Carolyn Valentine Blakley

SUPPLY STORE: Residents line up in front of the Whole Foods Market at the Towne Center at Cedar Lodge for ice and bottled water in the aftermath of Hurricane Gustav.

Even once those issues are resolved, it still takes some plants as long as 24 to 36 hours to start up again. Depending on the future courses of hurricanes Ike and Josephine, that process might be delayed, although it’s far too early to tell.

Louisiana is the starting point for a significant amount of the nation’s plastics production. Too many delays and the public could start feeling the effects, as they did after Katrina, when the plastic used to manufacture milk jugs ran in short supply.

George Valentine, an Ascension Parish councilman and operations team leader at DuPont’s sulfuric acid regeneration plant in Burnside, said late last week the facility experienced some minor structural damage that was being repaired by a team from Turner Industries.

More critical was that the plant—which services four refineries—had no electricity or natural gas.

“I’m in industry, and I know you can’t snap your fingers and get things done immediately,” Valentine says. “But hopefully Entergy will fix this soon. In 58 years, I’ve been through a lot of storms, but this one has certainly put a dent in the situation in Ascension Parish. It’s the worst I’ve seen with electricity out and trees through houses.”

Ascension Economic Development Corporation President and CEO Tommy Kurtz says there apparently are “a lot of poles down on River Road,” which is home to a number of plants.

Entergy spokesman Mike Burns says the delays are brought on by the fact that the transmission system sustained so much damage, particularly in the Baton Rouge area. Entergy will first work to restore power to essential public services such as hospitals, police, fire, communications and transportation. The company then will repair lines that bring power to critical commercial and industrial customers as well as large residential areas.

In some instances, however, that could take several weeks, depending on the extent of the damage to the transmission and distribution systems.

“In order to return communities to the normal course of life, we need businesses open, stores open and refineries and other types of plans up and running to meet their needs,” Burns says. As of press time, electricity had been restored to downtown Baton Rouge, state government buildings, Metro Airport, Port of Greater Baton Rouge and all major hospitals that were able to accept power.

It’s still difficult to ascertain the full extent of the damage to Capital Region businesses. Baton Rouge Area Chamber President/CEO Adam Knapp says the organization attempted a phone survey of 110 major employers in the days after the hurricane but could reach only 35 of them.

Says Knapp: “Everybody is hampered by a lack of power.”

He says there are isolated reports of companies having major roof or structural damage from the hurricane, but owners won’t have a clear idea of how much the storm hurt them until they can get the lights back on and equipment running.

John Ware, executive director of the Livingston Economic Development Council, has been in contact with two of the parish’s largest employers, Shaw Sunland Fabricators and Ferrara Fire Apparatus. Shaw Group corporate officials did not return a call for comment, but two days after the storm, Ferrara was running its manufacturing and administrative facilities off a standby generator system installed four years ago. Workers were communicating by cell phones and e-mail, however.

“One of the things we’re concerned about is people’s paychecks,” Ware says. “When you’re out of work a week or two, the bills are still mounting up, and maybe you’re having to spend a little more than normal. Gasoline is a little higher, food is a little more expensive, and you’re having to shop at convenience stores and smaller businesses that are able to operate on generators. It’s just stressful.”

Moret says Gov. Bobby Jindal’s focus now is on “helping businesses get back in business. The governor is putting pressure on energy companies to get people reconnected. We’re also reaching out to top economic driver firms to determine their obstacles to getting back into business.”

Early last week, Jindal publicly criticized Entergy’s initial timeline for restoring power, insisting “there is no excuse for the delay. We need to quicken the pace.” The state is spending $20 million on generators that will be distributed to pharmacies, gas stations and other critical businesses still lacking power. That’s to bypass cumbersome federal programs.

Despite the immediate challenges, no one expects Gustav to have long-lasting effects on the region’s economy.

“It’s a short-term nuisance and inconvenience,” LSU economics professor Jim Richardson says. “The business interruption will probably last a couple of weeks and then eventually evaporate as a problem.”

Baton Rouge economic consultant Loren Scott believes the economy could actually benefit for a short period of time, particularly the general construction sector, which was starting to slow because of the national housing crisis.

“If you’re a general contractor, you’ve got business,” he says. “Plumbers, carpenters and electricians will have all the business you can say grace over for the next several weeks.”

He also predicts a spike in sales tax collections that might last three or four months before returning to normal as residents replace damaged belongings.

Moret says even though it may take some time to return to business as usual, so to speak, Gustav did help Louisiana improve its national image by showing how well it can manage in a storm. And that could have a big economic payoff down the road in terms of attracting businesses and people.

“Louisiana is a very resilient place,” he says. “We’re going to come back even stronger than we were before.”