Bands of heavy rain and strong wind gusts from tropical storm Lee knocked out power to thousands in south Louisiana and Mississippi on Saturday and prompted evacuations in bayou towns, where water lapped at several front doors, as the system veered towards New Orleans.

The sluggish storm stalled just before making landfall, and threatened to dump 30 centimetres of rain across the northern Gulf Coast and into the Southeast in coming days. No injuries were reported and there were only scattered reports of water entering low-lying homes and businesses.

"I can tell you that all pumps and pump stations are 100 per cent operational at this time," New Orleans Mayor Mitch Landrieu said in a news conference late Saturday afternoon. "The generators are on and are working as well."

Intermittent downpours have caused some street flooding in low-lying areas of New Orleans. However, the surge did not penetrate levees along the coast. Bridges, including the 38.6-kilometre-long Lake Pontchartrain Causeway, remained open to traffic throughout Saturday.

Landrieu said the flooding was under control: "We expected this and what we expected came to pass…the break in the weather today has given our pumps the opportunity to catch up and they did so very, very quick."

Coastal Mississippi officials expected the worst from the storm around the time it made landfall later Saturday afternoon or evening.

"We've been getting some pretty good onshore rains," said Jackson County emergency director Donald Langham. "We should see the winds pick up later this evening. We've had no tropical force winds yet, but once the storm takes that hook to the right we will be getting into that wind and rain."

Most of the outages affecting more than 35,000 reported Saturday morning on the Entergy website were in the New Orleans area and along the coast. By midday, Entergy restored power to 6,000 households. There are scattered outages well inland into central Louisiana and Mississippi.

Lee's top sustained winds hit 97 km/h as it moved north at nine km/h.

The centre of the storm was about 88.5 kilometres south of Lafayette, Louisiana.

The storm could be a major test of levees that were rebuilt in New Orleans after hurricane Gustav struck three years ago.

In 2005, Hurricane Katrina brought catastrophic damage to New Orleans, as well as the Louisiana and Mississippi coastlines. The Category 5 hurricane was blamed for the deaths of more than 1,800 people and resulted in vast areas of the city being submerged by floodwaters.

Flood warnings from Texas to Florida

People along the Gulf Coast in Louisiana and Texas are bracing for the impact of Lee, the 12th named storm of the Atlantic hurricane season.

Tropical storm warnings have been issued along the coast from Mississippi to Texas and flash flood warnings extended along the Alabama coast into the Florida Panhandle.

Beaches along the Gulf, normally packed with Labour Day weekend tourists, were empty. Concerts and other festivities were cancelled.

"The weekend is literally a wash," said Jeff Collier, mayor of Barrier Island, Ala., located in the Gulf of Mexico. "It's really a shame that it happened on a holiday weekend, but on the other hand it's good because we really do need the rain."

Oil and gas operators have been shutting down operations. Federal authorities said 237 of the 617 staffed production platforms in the Gulf of Mexico have been evacuated, along with 23 of the 62 drilling rigs.

The Bureau of Ocean Energy Management, Regulation and Enforcement estimated about 60 percent of the current oil production in the Gulf and almost 55 percent of the natural gas production has been shut down.

Lee comes less than a week after Hurricane Irene killed more than 40 people along the East Coast and knocked out power to millions.

Forecasters are also watching Katia, a Category-1 hurricane spinning in the west-central Atlantic.

Katia is expected to pass well north of the Caribbean's northern Leeward Islands on Sunday and is so far no threat to any land.

There was also a slow-moving low pressure system about 725 kilometres south of Halifax that could turn into a tropical cyclone in the next two days.

With files from The Associated Press