As Houston’s Harvey Fortunes Go, So May Those of Oil and Gas

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There’s an eerie similarity between the lack of an energy policy in the United States and the lack of development policy in the city of Houston. And one could argue that it’s the haphazard approach to development in the energy capitol of the world that allowed Hurricane Harvey – expected to be the most expensive natural disaster in the nation’s history – to wreck such havoc that it led to the death of dozens of people and the paralysis of oil and gas infrastructure.

Indeed, Houston – a place of such diversity, wealth and warmth that it is one of the world’s truly great cities – possesses a larger-than-life, maverick approach to doing things its own way. In some measure, the fourth largest metropolis in the US epitomizes that ‘shining city upon a hill’ the late President Ronald Reagan rhapsodized. But it’s also one of the few places in modern North America where you could stop by the grocery store for a few dinner items and, without leaving the parking lot, amble over on over to a sex shop for things to satisfy different urges. There is a sense of freedom, of a rebellion even.

Houston, which is about 80 feet above sea level, has a system in place to protect it from catastrophic flooding that’s based on the existence of the Addicks and Barker reservoirs. Those facilities were authorized under the Rivers and Harbors Act of June 20, 1938, later modified by the Flood Control Acts of August 11, 1938; September 3, 1954; and October 27, 1965, according to the Texas Water Development Board. What that means is the last time the city’s best defense against a flood of biblical proportions, a little more than one million people lived in Houston. Today, that figure is closer to 2.4 million in the city, and more than 4 million across Harris county.

Perhaps in pursuing its ideal of limited outside – or more specifically, federal – influence, the city has made itself vulnerable. On to the city’s most prosperous industry, the oil and gas industry.

Energy is itself a world composed of individuals, the most legendary of which are characters who proudly wear the persona of a self-reliant wildcatter. It’s an approach that has served oil and gas players – and Houston – quite well in many ways. Striking oil is a lucky break recognized around the world. And on a more practical level, roughnecking in an oilfield owned by one of the hundreds of Houston-based companies is one job in which a high school education, augmented by on-the-job training, is sufficient to earn a lucrative paycheck.

In addition to Houston’s simpatico worldview with its favorite industry, the city offers its ally a serendipitous location. Situated close to the Texas coast, Houston is a stone’s throw from refineries and petrochemical storage, pipelines, processing and shipping operations. The US oil and gas industry is so concentrated in South Texas that in theory, it could be its own metropolis – one in no small measure that is as prosperous and yet, vulnerable, as its hometown.

When Hurricane Harvey took aim at the Texas coast, that mighty storm had the industry in its sights. While clustering refineries and petrochemical plants along the Texas coast is convenient for legacy business as well as supporting the nation’s burgeoning crude exports, the habit makes much of the industry’s oil and gas infrastructure remarkably exposed. Harvey took down what amounts to roughly 9 million US barrels of oil that won’t make it to market this month. Two of the nation’s largest refineries were offline for more than a week. A third remains shutdown. Gasoline prices have surged, and Texans have taken to hoarding the fuel – in water bottles, trash cans and a variety of other – highly flammable – containers. The lack of a thoughtful policy that accounts for worst-case scenarios is as troublesome for the oil and gas industry as it is for city of Houston.

To share your thoughts on this issue, please feel free to contact GEM board member Deon Daugherty at deondaugherty@gmail.com