NEW ORLEANS - A weakened Hurricane Gustav slammed into the heart of Louisiana's fishing and oil industry Monday, avoiding a direct hit on flood-prone New Orleans and boosting hope that the city would avoid catastrophic flooding.

Wind-driven water was sloshing over the top of the Industrial Canal's floodwall, but city officials and the Army Corps of Engineers said they expected the levees, still only partially rebuilt after Hurricane Katrina, would hold. The canal broke during hurricanes Betsy and Katrina, flooding St. Bernard Parish and the Lower 9th Ward.

"We are seeing some overtopping waves," said Col. Jeff Bedey, commander of the Army Corps of Engineers' hurricane protection office. "We are cautiously optimistic and confident that we won't see catastrophic wall failure."

Of more immediate concern to authorities was a barge that broke loose from its moorings and crashed into two anchors scrapped ships. The was no damage to the canal.

The National Hurricane Center in Miami said Gustav hit around 10:30 a.m. EDT Monday near the Cocodrie, a low-lying community in Louisiana's Cajun country about 72 miles southwest of New Orleans. Forecasters once feared a storm that chased nearly 2 million from the coast would arrive as a devastating Category 4 with much more powerful winds.

While New Orleans avoided a direct hit, the storm could be devastating where it did strike. For most of the past half century, the bayou communities that thrived in the Barataria basin have watched their land literally disappear. A combination of factors - oil drilling, hurricanes, river levees, damming of rivers - have destroyed marshes and swamps that once flourished in this river delta.

Entire towns in the basin of the Mississippi delta have disappeared because of land loss. The rates of loss are among the highest in the world; erosion has left it with virtually no natural buffer.

The nation was nervously watching to see how New Orleans would weather Gustav three years after Katrina flooded 80 percent of the city. Roughly 1,600 people were killed across the unprepared Gulf Coast. Federal, state and local officials took a never-again stance after the storm, and set to work planning and upgrading infrastructure in the below sea-level city.

"There's no indication of any walls in distress," said Robert Turner, the regional levee director for the Southeast Louisiana Flood Protection Authority-East. "No trenches are being cut that will destabilize the walls. No indication of walls deflecting or anything being washed out. No evidence of major seepage."

For all their seeming similarities, Hurricanes Gustav and Katrina were different in one critical respect: Katrina smashed the Gulf Coast with an epic storm surge that topped 27 feet, a far higher wall of water than Gustav hauled ashore.

"We don't expect the loss of life, certainly, that we saw in Katrina," Federal Emergency Management Agency Deputy Director Harvey E. Johnson told The Associated Press. "But we are expecting a lot of homes to be damaged, a lot of infrastructure to be flooded, and damaged severely."

Katrina was a bigger storm when it made landfall in August 2005, and it made a direct hit on the Mississippi coast. Gustav skirted along Louisiana's shoreline at "a more gentle angle," said National Weather Service storm surge specialist Will Shaffer.

Initial reports indicated storm surge of about 8 feet above normal tides, but forecasts indicated up to 14 feet in surge was possible.

"Right now, we feel we're not going to have a true inundation," said Karen Durham-Aguilera, director of the $15 billion project to rebuild the U.S. Army Corps of Engineer's levee and floodwalls in the New Orleans-area.

Still, Mayor Ray Nagin urged everyone to "resist the temptation to say we're out of the woods." He said Gustav's heavy rainfall could still flood the saucer-shaped city over the next 24 hours as tropical storm-force winds blast through the city. Winds were about 36 mph near City Hall Monday morning, with higher gusts.

Nagin's emergency preparedness director, Lt. Col. Jerry Sneed, said it's possible residents could return 24 hours after tropical-force winds die down. The city would first need to assess damage and determine if any neighborhoods were unsafe. A city-wide curfew would run through at least through the end of Monday.

The only storm-related death in Louisiana reported by state police involved a woman who drove off eastbound Interstate 10 and hit a tree between Baton Rouge and New Orleans. That brings Gustav's death toll to 95, and police urged those in the storm's path to stay sheltered and off the road.

Gusts snapped large branches from the majestic oak trees that form a canopy over St. Charles Avenue. Half the city was without power at midday, but officials said backup generators were keeping city drainage pumps in service.

On the high ground in the French Quarter, nasty winds whipped signs and the purple, green and gold Mardi Gras flags hanging from cast-iron balconies. Like the rest of the city, the Quarter's normally boisterous streets were deserted save for a police officer standing watch every few blocks and a few early morning drinkers in the city's famous bars.

"We wanted to be part of a historic event," said Benton Love, 30, stood outside Johnny White's Sports Bar with a whiskey and Diet Coke. "We knew Johnny White's would be the place to be. We'll probably switch to water about 10 o'clock, sober up, and see if we can help out."

New Orleans police superintendent Warren Riley said there had been no reports of looting or calls for rescue. The Superdome was locked up and city officials stuck to their pledge not to open a shelter of last resort. Public officials sternly warned in the days leading up to the storm that anyone leaving their homes after a dawn-to-dusk curfew was imposed would be swiftly thrown behind bars.

Evacuees watched television coverage from shelters and hotel rooms hundreds of miles away, praying the powerful Category 2 storm and its 115-mph winds would pass without the exacting Katrina's toll.

Harmonica player J.D. Hill said he was standing in line Monday morning to get into a public shelter in Bossier City in northwest Louisiana after waiting on a state-provided evacuation bus that carried him to safety.

He described a frustrating scene outside the shelter, where elderly evacuees and young children had to wait to be searched and processed before going inside.

"There's the funky bus bathrooms, people can't sleep, we're not being told anything. We're at their mercy," he said.

Hill was the first resident of the Musicians' Village, a cluster of homes Harry Connick Jr. and fellow New Orleans musician Branford Marsalis built through Habitat for Humanity after Hurricane Katrina. The village provides affordable housing for musicians and others who lost their homes in Katrina's flooding.

In coastal Mississippi, officials said a 15-foot storm surge flooded homes and inundated the only highways to coastal towns devastated by Katrina three years ago. There were no immediate reports of injuries, but officials said at least three people near the Jordan River in Hancock County had to be rescued from flood waters. Elsewhere in the state, an abandoned building in Gulfport collapsed and there were a few flooded homes in Biloxi.

Officials promised they were ready to respond to the storm, unlike Katrina. Johnson said FEMA had stockpiled enough food, water, ice and other supplies to take care of 1 million victims for three days. Also in place for rescues after the storm passes were high-water vehicles, helicopters and fixed-wing planes, plus Coast Guard cutters and a Navy vessel that is essentially a floating emergency room.

Gustav was the seventh named storm in the Atlantic hurricane season. The eighth, Tropical Storm Hanna, was strengthening about 40 miles north of the Bahamas. Though a storm's track and intensity are difficult to predict days in advance, long-term projections showed the storm could come ashore along the border of Georgia and South Carolina late in the week. The National Hurricane Center also was watching another tropical depression that formed Monday in the open Atlantic.

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Associated Press writers Becky Bohrer, Janet McConnaughey, Robert Tanner, Cain Burdeau, Alan Sayre, and Allen G. Breed contributed to this report from New Orleans. Vicki Smith in Houma and Doug Simpson in Baton Rouge also contributed. Michael Kunzelman reported from Lafayette, La.