THE GULF COAST RECOVERY
Better Than Ever?
Any look forward, however, merits the caution, "Check your mirrors." Amid all the corporate goodwill, possible enterprise zone incentives and other enticements to return, some very big bills will be coming due. So some very big corporations are examining more closely than ever their absolute needs in the Gulf states.
The risks are not so much related to direct plant operations as they are to the secondary but crucial processes that support production, namely power and raw materials. Aggregate company Texas Industries saw little damage to its plants in Texas and Louisiana, which were up and running again at near capacity not long after Katrina and Rita. But the logistics hurdles were apparent.
"Many of our Louisiana employees had property damage and loss," says Kirk Wm. Starks, Dallas-based real estate manager for Texas Industries. "The biggest problems we faced were getting power re-established and getting our employees back to work. In South Louisiana the trucks that haul our products to our customers were called on to work on the demolition work in the greater New Orleans area."
In any case, a redefined cushion of distance from the coast now may be a more prominent site selection criterion. Take Cardinal Glass, which recently announced a $22-million, 135-employee plant in Ocala, Fla., for the manufacture of hurricane impact-resistant laminated glass. Standard building codes in the state's coastal areas now require laminated glass. The influence of customer Custom Window Systems' plant, next door to Cardinal's forthcoming facility, was a strong factor, following a pattern evident in some of Cardinal's other 28 U.S. plant locations. But Ocala is a long way from the coast.
"While we want access to the coastal areas, we also want the plant to be safe during hurricane season," said Cardinal Glass Plant Manager Kyle Petersen. "When we looked at the different areas across Florida, Ocala made sense because of its proximity to major roadways. Most of our product is shipped by truck, so the access to I-75 gets us to any part of the state within a day's drive."
Such a choice bodes well for all interior portions of the Gulf states. While they now cope with the temporary influx of evacuees and evacuated businesses, some of those may grow into permanent moves, and those metros will remain just outside the coming higher risk premium of the Gulf Coast. Of the 300,000 households displaced by Katrina and Rita, the highest number of inland evacuees went to Baton Rouge and Lafayette, La., Dallas and Atlanta. Many, however, chose to move to other Gulf Coast communities: Houston, Mobile and Biloxi-Gulfport-Pascagoula among their leading destinations.
So, risk or no risk, residents have found new homes in familiar and equally vulnerable territory. Likewise, corporations that sustained major damage have backed vows of a comeback with real girders and concrete, as they balance the strategic advantages and disadvantages of Gulf sites that are as accessible to trade, resources and contracts as they are to bad weather. Certainly building materials is one of the sectors that is immediately boosting investment, not least because some 50,000 homes need to be rebuilt in Mississippi alone. The same number are headed for demolition in New Orleans, while East Texas saw some 17,000 homes destroyed.
In Martin Marietta's third-quarter earnings call, company President Stephen P. Zelnak, Jr., specified "a number of carefully selected plant capacity expansion and efficiency improvement projects" the company would be starting up during the second quarter of 2006, not least because of the huge amount of materials that will be needed during regional reconstruction. The company was also the recipient of a $14-million contract from the Federal Emergency Management Agency for a highway reconstruction project in Louisiana.
After Katrina, Georgia-Pacific restarted an idled sawmill in Roxie, Miss., and a plywood manufacturing facility in Gloster, Miss., specifically to supply the rebuilding effort. Around 500 jobs will return to the two towns, and part of the furnish for the Roxie mill will come from damaged timber salvaged in the region.
By early 2006, Motiva Enterprises LLC, the U.S. joint venture owned by Shell Oil Co. and Saudi Refining, Inc., expects to have decided on refinery expansions at one or more of its Gulf Coast complexes. Motiva's refineries are located in Port Arthur, Texas; Convent, La.; and Norco, La. William B. Welte, Motiva President and CEO, said that all three are viable candidates for expansion. Design work for the expansion is being conducted by Halliburton subsidiary KBR.
Meanwhile, Shell itself has pledged a return of its Exploration and Production personnel to New Orleans by mid-2006, provided the operations infrastructure is there. And company officials have expressed their desire to help get it there.
"The success of the area's rebuilding effort is critically important to the long-term viability of the Gulf Coast, and will allow us to continue to be an important part of the business and social fabric of this community," said Marvin Odum, Executive Vice President — EP Americas for Shell, in November. "We have offered to assist the Governor and Mayor by making available some of the best minds in the world to assist with a successful, transparent and integrated rebuilding program that will help New Orleans."
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