The 2025 hurricane season is projected to be more active than prior years’ seasons. Hence, it is important that companies operating facilities that could be impacted ensure that they have proper disaster preparedness plans in place. While proper disaster preparedness plans will help reduce potential harm caused during a storm, proper contract provisions can help reduce liability to a company both before and after a storm. Most companies’ commercial contracts contain force majeure clauses that are intended to provide protection to facilities impacted by natural disasters, such as hurricanes. However, such clauses are generally not construed broadly. Contracts should include clear and direct provisions that excuse lack of performance due to pre-storm shutdown procedures for companies pursuant to internal disaster preparedness plans. Further, contracts should address post-storm concerns arising from slow facility startup and reduced production rates during the restart process to ensure companies are not at risk of breaching production obligations under a contract.

Pre-Storm Performance

Disaster preparedness plans are often expansive and account for a wide range of potential scenarios, including tropical storms and hurricanes. The plans may require a wide range of tasks depending on the severity of the storm. Tasks may range from securing debris at a site to avoid airborne objects that may cause damage during a hurricane to a complete facility shutdown to avoid uncontrolled operating equipment failures that could cause substantial damage. Neither complete nor partial facility shutdowns happen instantaneously. Shutdowns could take several hours, or for larger and multifaceted facilities, a few days to achieve a safe shutdown. And since the shutdown process must be completed before the storm arrives, companies might begin the process days beforehand.

While force majeure clauses often contemplate hurricanes, such clauses may not provide protection that is as broad as needed. Companies should make sure their contracts include clauses that expressly excuse lack of performance during a pre-storm shutdown, especially when done pursuant to an internal disaster preparedness plan.

Post-Storm Performance

Similar to facility shutdowns, a facility startup to return to normal production rates does not happen instantaneously. Startup time can also vary depending on the type and size of the unit or facility. Until a facility reaches normal production rates, the company could face circumstances where it is unable to meet contractual obligations to its customers. Commercial contracts should therefore have clear language that protects companies while they restart production post-storm.

Accordingly, companies that operate facilities should ensure their contracts include specific provisions that address how their production volumes are to be allocated between customers when a facility is not capable of operating at normal production rates due to a natural disaster.