DALLAS - Millions of residents along the upper Texas and Louisiana Gulf Coast are without power and many are stranded by high waters and debris on roads as the region took the full brunt of Hurricane Ike's storm surge and 110-mph winds.
The storm came ashore just west of Galveston early Saturday morning as a strong category 2 hurricane. Insured damages in the region are estimated at between $6 billion and $18 billion.
If damages top $17 billion, the storm would rank as the fourth most costly catastrophe in U.S. history. Hurricane Katrina, with insured losses of $41.1 billion and total damages of $80 billion in 2005, is first, followed by Hurricane Andrew in 1992 and the 2001 terrorist attacks on the World Trade Center and the Pentagon.
Economic activity in the area from Houston to Louisiana is at a standstill, with many businesses closed and most Gulf of Mexico oil and gas production shut down due to damage to offshore platforms and pipelines. The lost oil production amounts to about 20% of total U.S. daily petroleum output.
The federal Minerals Management Service said at least 10 of the almost 4,000 production platforms in the Gulf were destroyed by Ike, down from 2005's record of 44 destroyed by Hurricane Katrina and 64 destroyed by Hurricane Rita.
Refineries in the Houston and Port Arthur areas reported only minor damage from wind and flooding, but 14 facilities with a daily capacity of 3.6 million barrels a day were out of service on Monday due to a lack of power, according to the U.S. Department of Energy.
A large portion of the property damage is expected on Galveston Island. The western and eastern ends of the island were under several feet of ocean over the weekend, with only the portion protected by the island's 17-foot seawall escaping severe flooding. Officials have not been able to assess damage due to high water.
The seawall was built after a hurricane in 1900 almost destroyed the city and killed thousands of residents. Galveston City Manager Steve LeBlanc said there were three deaths on the island attributed to Ike as of Monday morning.
Risk Management Solutions, a catastrophe-risk firm based in Newark, Calif., put the insured losses from the storm between $6 billion and $16 billion.
The company said its preliminary estimate includes onshore and offshore losses resulting from strong winds and storm surge, but does not include damages caused by inland flooding or damages covered under policies issued through the National Flood Insurance Program.
Peter Dailey, director of atmospheric science at AIR Worldwide Corp., a Boston-based catastrophe risk-modeling firm, said the island had a total of $12 billion in insured properties, but only about half of the damages would be covered by flood insurance.
Dailey said flooding occurred across Galveston Island, including in the city's downtown. He said the storm surge in the area was reported at more than 11 feet.
Dailey estimated insured losses to onshore properties in the U.S. from Hurricane Ike at between $8 billion and $12 billion. Offshore losses should be between $600 million and $1.5 billion, he said.
Schools operated by the Galveston Independent School District will be closed at least through Friday, district officials said. One high school is being used as an emergency shelter for residents who refused to evacuate the island despite a warning from the National Weather Service of "certain death" for those who stayed.
Galveston County commissioners voted last month to ask voters to approve in November a $135 million general obligation bond package to improve roads and flood control in the low-lying county. Officials with the county could not be reached on Monday. The county's GO debt is rated Aa2 by Moody's Investors Service and AA by Fitch.
Doug Benton, vice president and senior credit officer in the Dallas office of Moody's Investors Service, said it was too early to know how or if the storm damage would affect the credit rating of issuers in the region.
"We're in the process of assessing where things are, but it would be premature to talk about the credit worthiness," he said. "It seems to be like the hurricane in Florida, where any curtailment of tax revenue streams is more than made up with sales taxes and other revenues associated with repairs and recovery."
Doug Scott, a senior director in the Austin office of Fitch Ratings, said he expects the region's economy to absorb any short-term problems.
"It appears that the impact will be more of the traditional hurricane situation, as opposed to what happened with Katrina," he said.
"It's our position that there probably won't be any short-term economic problems that would impact credits down there. Sometimes when the water recedes and the clean-up begins, folks get to rebuilding and it provides somewhat of a boost to the local economy, as sales-tax revenues increase," Scott said. "But, of course, it is still early."
Horatio Aldrete of Standard & Poor's Dallas office said the situation in southeast Texas is still unclear.
"We're waiting to see how the recovery effort proceeds and see what kind of impact there might be to tax revenues," he said. "Right now there is not enough information to make an opinion."
Edwin Harrison, director of financial services for Harris County, which includes Houston, said damage to county-owned facilities seemed to be slight.
"We're open," he said. "The courts are going to be closed Monday and Tuesday, but that's mostly to give people the opportunity to get things in order before they come down here for jury duty."
Harrison said the storm damage should not affect revenues on the county's toll roads, or delay plans to issue debt for highway work.
"The toll roads are open," he said. "People still have to get around, and the toll roads are being used to get people out of town and into town. We may see a slight decrease in revenues until power is restored and everything opens up again, but it would be just a blip on our radar screen."
Houston Mayor Bill White on Sunday ordered a week-long curfew from 9 p.m. to 6 a.m. because of the widespread damage and lack of power. Officials of the Houston ISD said schools would be closed for 10 days to two weeks as power was restored to its facilities.
Huntsville, located about 70 miles north of Houston, had planned to bring approximately $2.2 million of general obligation bonds to market this week, but the issue may have to be postponed. Coastal Securities Inc. is sole underwriter for the negotiated sale and First Southwest Co. is the financial adviser to the city.
First Southwest managing director Boyd London said the issue will probably be delayed due to the widespread power outages in Houston, where Coastal Securities is located.
"We don't know what kind of shape Coastal is in," London said. "We haven't been able to get in touch with them.
"We may very well have to postpone this issue," he said. "It depends on how fast Coastal can recover."
In Congress, Rep. Gene Green, D-Houston, and Rep. Kevin Brady, R-The Woodlands, said they would work together to add a regional aid package to a government funding bill that must pass by Sept. 30. Sen. Kay Bailey Hutchison, R-Texas, said she would lead the effort in the Senate.
Because of hurricane-related issues, the State Board of Education meeting scheduled for this week was cancelled, said Debbie Ratcliffe, a spokeswoman for the Texas Education Agency. She said the board will probably have a specially called meeting later this month or in October but no date has been set.