UPDATE 3-New Orleans marks Katrina, braces for Gustav

(Recasts, adds evacuation order possible Sunday)

By Kathy Finn

NEW ORLEANS, Aug 29 (Reuters) - New Orleans residents paused on Friday to mark the third anniversary of Hurricane Katrina's devastating blow even as they faced a possible evacuation order ahead of another potentially powerful storm.

City residents, many still recovering from the destruction of Katrina, could be ordered to evacuate early on Sunday to escape next week's expected landfall of Hurricane Gustav, Mayor Ray Nagin said.

Gustav strengthened to a hurricane on Friday after it killed up to 77 people in the Caribbean in mudslides and floods.

As it churns into the Gulf of Mexico's warm waters it could grow to a Category 3 hurricane on the five-step Saffir-Simpson scale of hurricane intensity with wind speeds up to 130 miles per hour (209 kph). It would be the most powerful hurricane to hit the U.S. Gulf Coast since 2005.

The storm's current projected track takes it into the low-lying Terrebonne Parish southwest of New Orleans, one of the least-protected areas on the Louisiana coast.

City officials paused their Gustav preparations to hold an abbreviated ceremony to mark the third anniversary of Katrina with a symbolic burial service for more than 80 unidentified victims of the 2005 storm.

Katrina's waters flooded 80 percent of New Orleans, killed 1,500 people along the Gulf Coast and caused at least $80 billion in damages.

But there was no escaping the threat of Gustav, which could bring a storm surge up to 30 feet (9 metres) when it comes ashore on Tuesday morning, according to federal officials.

That could mean voluntary or mandatory evacuations starting on Saturday for the four states in Gustav's path -- Louisiana, Mississippi, Texas and Alabama -- the Federal Emergency Management Agency said.

"We fear for our lives," said Edgar Gomez, a Venezuelan engineer working for ConocoPhillips, who was at the New Orleans airport with his wife and three daughters. "We have no experience with this kind of a storm and after Katrina there is no way we are staying."

In all, 11.5 million people are in the path of the storm, according to the U.S. Census Bureau.

Louisiana will likely order evacuations from some low-lying coastal areas on Saturday, and probably shift traffic flow patterns to carry all vehicles away from coastal regions on Sunday, Gov. Bobby Jindal said.

"It does look like this will be a strong storm," Jindal said, leaving the door open for broader evacuations.

At least two low-lying parishes near New Orleans, St. Charles and Lafourche, plan mandatory evacuation as of Saturday afternoon.

In a bid to avoid the 2005 spectacle of desperate city residents crammed into the New Orleans Superdome, the government has lined up hundreds of buses and trains to evacuate 30,000 people who can't leave the city on their own.

About 1,500 Louisiana National Guard troops were now in New Orleans.

THE THREAT TO COME

On Friday, about 150 residents gathered in a cemetery and a lone trumpeter played a dirge as pallbearers guided a single silver casket from a horse-drawn carriage.

"We look forward to a better day, even as we prepare for a threat to come," Nagin said.

Bells rang through the city at 9:38 a.m., the time on Aug. 29, 2005, when the city's levees began to give way. Federal officials say the levees are stronger but gaps still exist that leave some of the neighborhoods hardest hit by the 2005 flooding vulnerable.

U.S. President George W. Bush, who was widely criticized for a slow federal response to Katrina, on Friday declared an emergency in Louisiana.

Governors of Louisiana, Texas and Mississippi declared emergencies to allow them to call up troops and mobilize emergency efforts. (Additional reporting by Randall Mikkelsen in Washington and Tim Gaynor in New Orleans) (Editing by Chris Baltimore and Peter Cooney)