Hurricane Dolly moved inland after tearing into the South Texas coast on Wednesday with 95 mph (150 kph) winds, pouring torrential rain on the U.S.-Mexico border area before being downgraded to a tropical storm.
Officials feared Dolly's rains still would cause flooding problems in the coming days, possibly overwhelming levees along the Rio Grande.
Dolly, the second hurricane of the 2008 Atlantic hurricane season, dropped up to 12 inches (30 cm) of rain in the first few hours after coming ashore at the barrier island of South Padre Island, where it ripped off roofs, bent palm trees in half and left thousands of residents without power.
"You've got your horizontal rain and things are flying everywhere," said Kevin Hoffman, 52, who rode out the storm in his boarded-up home in nearby Port Isabel.
"All you hear is things snapping and hitting."
South of Port Isabel in the border town of Brownsville, the storm knocked down power lines, uprooted trees and dumped rain on flat-lying marshland, raising concerns about potential flooding.
"The main hazard from this storm is probably going to be inland flooding," said John Nielsen-Gammon, official climatologist for the state and a professor at Texas A&M University.
The storm's leading edge hit South Padre Island as a Category 2 hurricane, the second level on the five-step Saffir-Simpson scale, with maximum sustained winds of 100 mph (160 kmh) but quickly fell back to Category 1, the National Hurricane Center said.
In its 11 p.m. New York time, the hurricane center said Dolly's center was located about 55 miles (90 km) northwest of Brownsville, Texas, and the storm had maximum sustained winds of 70 miles per hour (110 kph).
The storm missed most offshore drilling rigs and production platforms in the Gulf of Mexico.
U.S. crude oil prices rose earlier this week on worries about possible storm damage.
But oil prices hit six-week lows on Tuesday and fell further on Wednesday to below $125 a barrel after the storm barely dented offshore supplies.
The full effect of the flooding might not be seen for days as rain dumped by Dolly's inland march flows back down the Rio Grande to coastal areas, Nielsen-Gammon said.
Rain was falling as rapidly as 4 inches (10 cm) per hour and the worst flooding could occur on the Mexican side of the border, he said.
Mexico's navy said it recovered the body of a fisherman who had gone missing off the Yucatan Peninsula as the storm passed.
In South Padre Island, a 17-year-old boy was seriously injured when he fell seven stories from a balcony at the Lighthouse Condominiums, said Dan Quandt, a spokesman for the town's emergency operations.
Across the Rio Grande from Brownsville in Matamoros, Mexico, thousands of people squeezed into shelters as heavy rain overwhelmed drains and flooded streets in waist-deep water.
Soldiers patrolled the city to prevent looting.
Dolly knocked out power, blew down trees and damaged street lights in Matamoros but no serious injuries were reported, Tamaulipas state Gov. Eugenio Hernandez said.
The prospect of heavy rains and a storm surge of sea water pushing back upstream spurred concern that levees holding back the Rio Grande could be breached, causing widespread flooding.
The National Hurricane Center said Dolly could dump up to 20 inches (51 cm) of rain in South Texas and northeastern Mexico in coming days.
Texas Gov. Rick Perry put 1,200 National Guard troops on alert and issued a disaster declaration for 14 low-lying counties.
In Cameron County near the Mexico border, officials had expected up to 20 inches (51 cm) of rain.
"That's going to do a number on our county," said Johnny Cavazos, the county's emergency management coordinator.
He said levees holding back the Rio Grande held under similar conditions during Hurricane Beulah in 1967 but have "seriously deteriorated" since then.