* Water tops levee in Plaquemines Parish on city outskirts
* New Orleans mayor says levees in city are holding
* Storm moving slowly, torrential rains continue
* Energy companies start damage assessments
By Ellen Wulfhorst and Scott Malone
NEW ORLEANS, Aug 29 Drenching rains from Hurricane Isaac brought flooding to the U.S. Gulf Coast on Wednesday, but elaborate defenses built to protect New Orleans after it was devastated by Hurricane Katrina seven years ago seemed to pass their first major test.
The slow moving weather system, downgraded to a tropical storm on Wednesday, dumped massive amounts of rain to test new levees and flood containment systems and officials were careful not to declare a premature victory.
"This is a slow-moving storm and it is going to cause a tremendous amount of damage," said Louisiana Governor Bobby Jindal, warning of another day of wind and rain ahead.
Water flooded over the top of a levy on the outskirts of New Orleans and threatened to flood oil refineries and towns in the state and neighboring Mississippi. It looked, though, as if most energy facilities had escaped damage.
In districts outside of New Orleans, rising floodwaters forced the evacuation of several thousand people from their homes, but no deaths or serious injuries were reported.
While not nearly as strong as Katrina - a Category 3 hurricane on the five-step Saffir-Simpson scale when it slammed into New Orleans in 2005 - authorities have warned repeatedly against underestimating Isaac, which has brought prodigious amounts of rain.
Isaac slowed dramatically as it approached land and hugged the coast for hours before turning inland. This allowed it to take on more strength than many forecasters had expected, said Tim Doggett, the principal scientist at AIR Worldwide, a disaster modeling agency.
U.S. President Barack Obama's top advisor on disaster response, said the storm downgrade was not grounds for complacency.
"There is no such thing as 'just' a tropical storm," said Craig Fugate, director of the Federal Emergency Management Agency. "You have significant weather impacts still to occur."
Late on Wednesday, Obama signed declarations terming the impact of the storm on Louisiana and Mississippi major disasters and ordering federal aid to help with their recovery.
At 11 p.m. EDT (0300 GMT), Isaac was 70 miles (110 km) west-northwest of New Orleans, moving northwest at 6 miles per hour (9 kph), with sustained maximum wind speeds of 60 mph (97 kph), the National Hurricane Center said.
Isaac made landfall in southeast Louisiana on Tuesday afternoon as a Category 1 hurricane before crawling up the coast and toward New Orleans and Baton Rouge on Wednesday. It brought high winds, storm surges, and torrents of rain.
"The slow motion and large size of this system are making the impacts more severe and more wide ranging than some folks might have perceived would be the case," said Rick Knabb, National Hurricane Center director.
The center said isolated maximum rainfall could reach 25 inches (64 cm) over much of Louisiana and parts of Mississippi and Alabama through Friday. Unofficially, a few spots in New Orleans already approached those totals.
New Orleans Mayor Mitchell Landrieu said the city's flood defenses, strengthened since 2005 with a $14.5 billion system of walls, floodgates, levees and pumps, had done their job in the face of the torrential rain.
"The federal levee system ... is fine," he told local radio. "There are no risks. It is holding exactly as we expected it to and is performing exactly as it should."
The storm taxed the city's sewage system, though, prompting Landrieu to urge residents to "keep the flushing to a minimum."
Tree limbs and street signs littered the streets on Wednesday, drainage canals filled with storm water and power was out in much of the city.
Police and National Guard units, many armed with assault rifles, patrolled the virtually empty downtown area of New Orleans, a port city which normally bustles with tourists drawn to its jazz bars, Creole cuisine and French colonial architecture. They were deployed to prevent a repeat of a wave of crime that followed Hurricane Katrina.
Just four looting arrests were reported this time, but Landrieu nonetheless imposed a dusk-to-dawn curfew on New Orleans for Wednesday night. About 60 percent of the city was dark after the storm brought down power lines.
After a night of hunkering down, some residents braved the winds and rain on Wednesday.
Walking in the French Quarter at mid-afternoon, Cameron Bradford, 24, a University of New Orleans student, was barefoot, soaking wet, and carrying a can of beer.
"Why not? This is the cleanest I've ever seen the French Quarter. The water washed everything away," he said.
Benjamin Hubert, 25, who works driving a mule-drawn carriage for visitors in the French Quarter, took the curfew in stride.
"They just don't want people taking advantage of a bad situation, that's all," he said.
The heavy rain from Isaac is expected to spread inland over the next few days, although the storm is forecast to weaken to a tropical depression on Thursday.
An estimated 22.5 inches (57 cm) of rain fell in Arabi, Louisiana, not far from the Lower Ninth Ward of New Orleans, which was swamped by Hurricane Katrina and remains partially abandoned. Audubon Park, a few miles from downtown New Orleans, received 17 inches.
Rescue efforts were concentrated in low-lying Plaquemines Parish, southeast of New Orleans, and in St. John the Baptist Parish, upriver from the city.
The latter was hit by storm surges from Lake Pontchartrain and Lake Maurepas and officials worked well into the night to evacuate about 3,000 people forced from their homes, including residents of an assisted living facility.
In Plaquemines Parish, many residents in vulnerable areas had disregarded a mandatory evacuation order made early this week.
About 118 people were rescued in the parish, including 25 trapped on their roofs or attics as water rose 14 feet (4.3 meters), authorities said.
"This storm has delivered more of a punch than people thought," said Parish President Billy Nungesser. "We're not out of the woods yet."
Private citizens in their boats led the rescue effort, Nungesser said, referring to boatmen from the Mississippi Delta and bayous popularly known as the "Cajun Navy."
Before moving to the Gulf Coast, Isaac killed at least 23 people and caused significant flooding and damage in Haiti and the Dominican Republic before skirting the southern tip of Florida on Sunday.
More than 700,000 Louisiana customers of Entergy Corp and other local utilities were without power as of late afternoon. Entergy warned that it would be unable to begin restoring power until winds drop below 30 mph (48 kph).
Oil production in the U.S. Gulf of Mexico nearly ground to a halt as Isaac closed in on Louisiana on Tuesday and ports and coastal refineries curtailed operations.
But by Wednesday, big oil companies including Royal Dutch Shell and Exxon Mobil Corp began making plans to assess or restart operations.
Perceptions that the area's oil facilities would not sustain major damage left benchmark Brent crude were trading lower late on Wednesday, at $112.41 a barrel.