Marlyville / Fontainebleau / Broadmoor Preservation
post-Katrina and beyond...







how to



press clipping
March 8, 2006

Tough Hurdles for Companies in Move Back to New Orleans

NEW ORLEANS, March 7 — When Frank A. Glaviano Sr. told friends that he believed his company, Shell Oil, would return to New Orleans despite the devastation done by Hurricane Katrina, many had a good laugh. Forget it, they said; you are moving to Houston.

After all, more than 100 Shell employees lost their homes when water covered much of the city and the surrounding suburbs. Mail delivery was still unreliable, air service remained thin, and only a small fraction of the previous hospital capacity was back. With Shell's American base in Houston, it seemed to make sense to move its exploration and production unit there from New Orleans.

But Shell, a subsidiary of the Royal Dutch/Shell Group, returned last month to its marbled office building here at One Shell Square, after making an extraordinary investment to do so. It bought $32 million in residential properties in the area — 120 houses and condominiums in all — to lease to its employees. The company owned no residential property in the United States before Hurricane Katrina.

In considering whether to move back its 1,000 employees who worked in New Orleans before the storm, Shell had to monitor closely things like the federal government's commitment to rebuilding the levees and the city's progress in reviving its school system.

"In the end, we decided to do the right thing by the city, the company and our employees," said Mr. Glaviano, the company vice president in charge of Shell's operations here.

Shell's unusual move demonstrates the difficulties that businesses of all sizes have encountered in moving back to New Orleans, and the dedication that is required to restart commerce in a city where basic necessities, like roofs, can be difficult to come by. To reopen their doors, many businesses have had to develop expertise in flood protection, transportation and medical care.

Chevron, one of Shell's competitors, which this week moved back the last of its 700 or so employees who worked in New Orleans before the storm, has added a paramedic to its staff and leases an ambulance so it does not have to rely on the city's 911 system in an emergency.

Most companies, of course, do not have the resources of a company like Shell, which reported record profits of $25.3 billion in 2005. "A lot of smaller companies, and even a lot of medium-sized ones, cannot afford the costs of getting up and back in business," said Don Hutchinson, the director of economic development for the city.

As a result, six months after Hurricane Katrina, at least four of every five businesses in New Orleans are still shuttered, Mr. Hutchinson said. About 60 percent of the downtown businesses have reopened, he said, but that statistic is deceptively high because many companies are moving back only part of their workforce.

Another large energy company, Dominion Exploration and Production, a subsidiary of Dominion Resources, has announced that it will start moving employees back to New Orleans this month. But 140 of those positions — 40 percent of its pre-hurricane workforce — will remain permanently in Houston, according to David J. Auchter, a Dominion spokesman.

Entergy, the country's fifth-largest power company, has so far issued no public statement about the fate of its 1,500 employees who worked in New Orleans before the hurricane, except to say that whatever the company's decision, not all of them will be moving back.

"The question isn't whether New Orleans is going to take a huge hit in terms of job loss," said Jay Lapeyre, a local businessman who, as chairman of the Business Council of New Orleans, speaks on behalf of more than 50 of the area's largest corporations. "The real question is where we'll have to rebuild from once we know where we've bottomed out."

Many factors went into Shell's decision to move back to New Orleans, including a workforce that was eager to return. Informal polling, said Rob Ryan, a Shell vice president, showed that more than 80 percent of employees preferred moving back to New Orleans over staying in Houston, including those who had temporarily relocated to Houston. A sense of corporate responsibility was also a factor.

New Orleans is a city where oil and gas exploration takes a back seat only to tourism and perhaps the port in terms of economic impact, and before Hurricane Katrina, Shell was the industry's largest employer in the city. Its tower — a white marble monolith on a premier corner of the downtown business district — is the second tallest in town. The Place St. Charles office building is the tallest.

From Shell's perspective, the city had a variety of factors working in its favor, including its culture and especially its geography. The easy access to the rich oil reserves in the waters off the Louisiana coast first drew exploration firms to New Orleans decades ago, and the wells could not easily be abandoned — at least not by firms with the means and the will to stay.

"A lot of the smaller oil and gas companies haven't committed to return," said Mr. Hutchinson, the city economic official. "Basically, it's still wait and see with most of them."

That was Shell's attitude for weeks after the storm. Houston is the energy capital of the nation, and there were efficiencies in moving the company's operations to the home office. To many executives, there was no question that Houston represented the path of least resistance.

"This was one of those decisions," Mr. Glaviano said, "that had several executives feeling very strongly that we should relocate to Houston and several feeling very strongly in favor of moving back."

Shell was luckier than many of its rivals. The building Dominion called home before the storm, across the street from the Superdome, still sits abandoned, with roughly half of its windows covered by plywood. The basement and first floor of Chevron's office tower were flooded, which meant it was not ready for occupancy until the end of January.

The building Shell calls home, in contrast, sits atop a pedestal of white marble stairs. "The building was fine," Mr. Ryan said. "The key issue for us was whether we could bring 1,000 employees back."

To answer that question, Shell set up a virtual war room to monitor the city's progress and help its executives calculate the wisdom of returning. The company assigned about two dozen employees to judge the city's progress on a long list of factors, like repairing the pumping stations and providing parking in the central business district.

Other big companies did the same, including Chevron, which approached the task with military precision. It issued daily situation reports, devising a color-code system "just like the federal government does to track the terrorist threat level," said Matthew Carmichael, governmental affairs director for Chevron in New Orleans. Early on, the company deemed almost every core function code red.

It was in late October that Mr. Glaviano and his colleagues decided to move back to New Orleans, yet it was not until January that a thorough audit of the state of the city prompted the company to conclude that "the city was sufficiently back, from a safety and security perspective," Mr. Ryan said.

Nonetheless, Shell employees are returning to find that working downtown remains a challenge. Flight capacity is less than half of what it was before the storm — a crucial issue for a company with headquarters in another city. Mail service is still so unreliable that customers often pay the extra expense of overnight services to pay bills and send other important documents. The 120 or so Shell employees who lost homes no doubt appreciate that the company leases them housing at cost, but some of the units are a two-hour drive from downtown.

Still, despite these and other inconveniences, most of the employees seem happy to be back home, Mr. Glaviano said. Certainly he is. "Walking through the lobby," he said, "it feels like an ordinary day to me."