Senator Ron Wyden

March 24, 2015

I am a retired petroleum engineer, industrial engineer and corporate planner.
Over the past month, beginning on February 15, I have written you five letters.
They are about a simple concept that nobody to my knowledge is aware of
and I believe there needs to be a discussion about the plausibility of a sever
disruption in the supply of fossil fuels for individual and commercial use.
I have come to a conclusion that the current state of global petroleum prices
could result in a plausible and likely catastrophic consequences if people of
conscience and vision do not recognize the possibilities and act accordingly.
Imagine a progressive nation-wide disruption in the supply of essential fuels
Petroleum and gas production and refining companies sudden demise
Refineries throughput of crude falling to the minimum operating capacity
CEOs and Boards of Directors decisions solely to preserve profitability
Business plans and strategic decisions not in the public/national interest
Major petroleum refining operations being abandoned when earnings fall
Sudden and unexpected shutting down refining operations curtail supply
Unexpected premature shortages of gasoline, diesel, kerosene, etc.
Disruption of air travel, truck and rail distribution, personal travel by car
Imagine the impact of sustained low price levels for petroleum products
Drilling new wells in the Bakken and elsewhere is being curtailed
Falling into negative cashflow and profitability, businesses are failing
Economic lifespan of the current gas and oil boom are being shortened
Blue Chip corporations manipulating share price and dividends per share
Debt is incurred to pay dividends due to declining earnings and free cash
Borrowing to buy back stock is putting large corporations at financial risk
At what point will declining production make operations unprofitable?
What are business plans and end-game for unprofitable businesses?
Do corporations and our government have a plan for a soft landing?

Douglas Grandt
March 23 - 27, 2015
Petroleum Engineer
Humble Oil & Refining Co. (Exxon Mobil)
Industrial Engineer, Corporate Planning, Logistics & Operations Management
American President Lines (APL)
Nippon Yusen Kabushiki Kaisha (NYK Line)
Air Pollution Engineer California Environmental Protection Agency
California Air Resources Board
Diesel Risk Reduction Plan (September 2000)
Commuter Buses and Transit Vehicles
Commercial Harbor Craft
Governor Arnold Schwarzenegger Executive Order (June 2005)
EO-S-3-05 establishes greenhouse gas emission reduction targets,
creates the Climate Action Team and directs the Secretary of Cal/
EPA to coordinate efforts with meeting the targets with the heads of
other state agencies. The EO requires the Secretary to report back
to the Governor and Legislature biannually on progress toward
meeting the GHG targets, GHG impacts to California, Mitigation and
Adaptation Plans.
California Global Warming Solutions Act of 2006 (September 2006)
Regulation for Energy Efficiency and Co-Benefits Assessment for
Large Industrial Sources (July 2010)
P. O. Box 6603
Lincoln, NE 68506
(510) 432-1452
answerthecall@mac.com

Douglas A. Grandt

PO Box 6603
Lincoln, NE 68506
(510) 432-1452
February 15, 2015

Senator Ron Wyden

Committee on Senate Energy and Natural Resource
221 Dirksen Senate Oce Building

Washington, D.C. 20510

Re: Oil Refining - Considering future eventualities versus the myopia of the present
Dear Senator Wyden,
Friday was would have been my fathers 98th birthday. He was an honorable man who taught
me a lot about politics and living an honorable life. He never talked politics. One thing I
learned from him was to do the best I can based on good information, to avoid rumors and
speculation, to think for myself, to do what is right, and to stand up for what I believe.
I have come to understand something so disturbing that I feel I must speak up, urgently.
For the past several years I have observed and pondered how the CEOs and Boards of
Directors of the petroleum drilling, production and refining companies have been going about
their business. I am not pleased with what I have observed, nor how I believe they will behave
in the future. I have come to the conclusion that their invoking proprietary and trade secret
and a total lack of transparency could destroy our economy and society.
I studied Industrial Engineering & Operations Research and Petroleum Engineering at UC
Berkeley. My career positions have always entailed looking into the future and preparing for
change. What I observe in the U.S. is a paradigm of myopia an avoidance of the future. I
fear that the petroleum industry will behave out of self interest not in the Public Interest.
Stock buy-back programs, declining earnings, paying dividends with borrowed money while
spending more and more in attempts to discover replacement reserves, shooting themselves in
the foot with a short-term production boom of tight formation oil and gas, relying on tarsands
bitumen to feed starving refineries that should by all rights be retired, pushing to export the glut
of domestic oil and gas stockpiled with no ready markets all of these point to near-term
collapse of the once-profitable house of cards. What will they do at break-even?
Ask CEO Rex Tillerson if ExxonMobil will remain in business approaching marginal profitability,
as earnings seriously erode, as dividends begin to fall below expectation. Call Mr. Tillerson and
CEOs of all petroleum refiners in the U.S. to a Committee hearing and ask the tough questions.
We cannot afford to let refineries go out of business or declare bankruptcy prematurely. How
can we compel each of the oil refiners to operating right down to their very last refinery. With a
serious effort to avert the worst case climate scenarios, this is now upon our doorstep.
Sincerely yours,

Doug Grandt

Douglas A. Grandt

PO Box 6603
Lincoln, NE 68506
(510) 432-1452
February 27, 2015

Senator Ron Wyden

Senate Committee on Energy and Natural Resources
221 Dirksen Senate Oce Building

Washington, D.C. 20510

Re: Oil Refining - Considering future eventualities versus the myopia of the present
Dear Senator Wyden,
Two weeks ago today would have been my fathers 98th birthday.
Four years ago today, we celebrated his 94th. It took him 12 days to die on his own terms.
One thing I learned from him was to do the best I can based on good information, to avoid
rumors and speculation, to think for myself, to do what is right, to stand up for what I believe.
Two weeks ago I wrote that I know something disturbing that I must share with you, urgently:
For the past several years I have observed and pondered how the CEOs and Boards of
Directors of the petroleum drilling, production and refining companies have been going about
their business. I am not pleased with what I have observed, nor how I believe they will
behave in the future. I have come to the conclusion that their invoking proprietary and
trade secret and a total lack of transparency could destroy our economy and society.
I studied Industrial Engineering & Operations Research and Petroleum Engineering at UC
Berkeley. My career positions have always entailed looking into the future and preparing for
change. What I observe in the U.S. is a paradigm of myopia an avoidance of the future. I
fear that the petroleum industry will behave out of self interest not in the Public Interest.
Stock buy-back programs, declining earnings, paying dividends with borrowed money while
spending more and more in attempts to discover replacement reserves, shooting themselves
in the foot with a short-term production boom of tight formation oil and gas, relying on
tarsands bitumen to feed starving refineries that should by all rights be retired, pushing to
export the glut of domestic oil and gas stockpiled with no ready markets all of these point to
near-term collapse of the once-profitable house of cards. What will they do at break-even?
I again suggest that you ask Rex Tillerson if ExxonMobil will remain in business as profitability
declines, as earnings erode, as dividends begin to fall below expectation. Call Mr. Tillerson and
CEOs of all petroleum refiners in the U.S. to Congressional hearings and ask tough questions.
We cannot afford to let refineries go out of business or declare bankruptcy unexpectedly. We
must require the oil refiners to operate until their very last refineries refine their very last drop.
With a serious effort to avert the worst case climate scenarios, this is now upon our doorstep.
Sincerely yours,

Doug Grandt

Douglas A. Grandt

PO Box 6603
Lincoln, NE 68506
(510) 432-1452
March 2, 2015

Senator Ron Wyden

Senate Committee on Energy and Natural Resources
221 Dirksen Senate Oce Building

Washington, D.C. 20510

Re: Oil Refining - Considering future eventualities versus the myopia of the present
Dear Senator Wyden,
The article Investors ask oil companies to disclose refineries' risks from climate change
appeared in The Guardian on February 26. I found it very alarming to read the following:
[T]he US Securities and Exchange Commission in 2010 issued guidance suggesting that
companies disclose climate change-related risks that might affect their bottom lines. But oil
companies have largely ignored this guidance, which isnt legally required.
Of the companies studied in the report, only Phillips 66 has disclosed any physical
climate risks in SEC filings, according to the report, which calls the Texas-based
companys disclosures poor.
In its 2014 filing, Phillips 66 stated: To the extent there are significant changes in the
Earths climate, such as more severe or frequent weather conditions in the markets we
serve or the areas where our assets reside, we could incur increased expenses, our
operations could be materially impacted and demand for our products could fall.
And in its most recent earnings statement, filed last week, the company said climate change
posed a serious potential risk to its business.
None of the companies provided information on how they will prepare for these risks.
Really in the end, the industry is damned if it does and damned if it doesnt when it comes
to climate change, says Andrew Logan, director of sustainability advocate nonprofit Ceres
carbon asset risk program. If oil companies continue along the business-as-usual
path, theyll either be hit by demand risk and the rise of clean energy, or by the
massive physical impact of climate change, or perhaps both.
[Lead analyst at the Center for Science and Democracy] Goldmans report recommends
that the SEC push companies to follow its guidelines for disclosing climate change risks.
An SEC spokesperson said the guidelines arent mandatory and arent actively enforced by
the SEC: companies can use the guidance to assess their own facts and circumstances on
this issue and provide disclosure to the extent material to investors.
Congress has an obligation to compel the industry to behave in the national and public interest.
Sincerely yours,

Doug Grandt
answerthecall@mac.com

Douglas A. Grandt

PO Box 6603
Lincoln, NE 68506
(510) 432-1452
March 12, 2015

Senator Ron Wyden

Senate Committee on Energy and Natural Resources
221 Dirksen Senate Oce Building

Washington, D.C. 20510

Re: Oil Refining - Considering future eventualities versus the myopia of the present
Dear Senator Wyden,
If the current situation for refineries could be seriously precarious, would you be concerned?
During the past month, I have sent you three letters expressing my concern about an issue that
is not being discussed, but which could spell economic and social disaster for Americans.
Nobody can predict exactly how future events may play out, but we should not let ourselves be
blind-sided for a conscious lack of awareness and consideration of foreseeable events.
Further to my letters of February 15, February 27 and March 2, on March 10, 2015, Reuters
published, the article Exxon, Shell's spending patterns may help them through oil price drop.
Consider the implications of refining companies going out of business unexpectedly. Reuters
assessment is an indication that the industry is anything but stable for the foreseeable future:
Exxon Mobil and Royal Dutch Shell are likely to withstand the oil price collapse better than
their rivals because they are closer to finishing expensive investment projects.
Chevron and Total, on the other hand, are both in the midst of large project spending cycles
and will need to tap into more debt in order to stay afloat.
While all companies are expected to keep paying high dividends by increasing borrowing,
Exxon and Shell appear to be most able to cover both spending and dividend payouts if oil
prices stay at current prices.
According to analysts at Jefferies, Exxon and Shell have 2015 breakevens of $75-$80/bbl,
healthier than Chevron, BP and Eni's respective breakevens of $95, $100 and $120.
All of the big oil firms are expected to see negative cash flows this year, according to
Moody's, and will turn to borrowing in order to cover costs.
Who will survive and who will fail? What are the ramifications for the economy and society if
worst-case scenarios come to fruition? What can our government do to avert the worst?
Ask refining CEOs and Board Members how they will respond when financials go negative.
Sincerely yours,

Doug Grandt
answerthecall@mac.com

Douglas A. Grandt

PO Box 6603
Lincoln, NE 68506
(510) 432-1452
March 19, 2015

Senator Ron Wyden

Senate Committee on Energy and Natural Resources
221 Dirksen Senate Oce Building

Washington, D.C. 20510

Re: Oil Refining - Considering future eventualities versus the myopia of the present
Dear Senator Wyden,
What is ENERGY INDEPENDENCE, really? With Saudi Arabias decision to keep the flow of
oil high to retain market share, they have hijacked the world with a flood of oil at reduced price,
some say with the explicit intention of destroying the economics of unconventional deposits of
shale oil and tarsands. Do they intend to extract all of their resourcesbefore the end of oil?
The March 1, 2015 edition of Washinton Specter raises the issue squarely front and center:
Late 21st-century graduate students of business studying the growing problem of stranded
assets will almost certainly focus on the history of Canadas Athabasca Oil Sand (aka tar
sands). The case studies they read will either describe the gradual abandonment of the
worlds largest reserve of bituminous crude or they will read about the tar sands miraculous
last-minute escape from becoming the worlds largest stranded asset. For either outcome,
the turning point they will look back on is just about now.
In some respects Albertas gigantic deposits of bitumen, a dense mixture of sand and heavy
crude oil, third in size only to the reserves of Saudi Arabia and Venezuela, were stranded
from the start by location. Situated in the heart of a vast boreal forest at the center of a very
large continent, they are hundreds of miles from the nearest refinery and thousands more
from navigable tidewater.
Of course, some of Albertas crude has made its way to market, but so much slower than it
could have, or was projected to, that producers, refiners, shippers, banks and other
investors in tar-sands development are beginning to wonder whether they have backed a
good play by investing over $160 billion to turn tar into oil.
So the economic stranding process has already begun. Five global energy giants
Shell, Total, Suncor, Statoil and Occidentalhave cut bait on major bitumen deposits in
Alberta, in which they had already invested billions. Suncor has just slashed another billion
dollars from its capital spending program and $800 million more from operating expenses.
And as oil prices slide lower, commercial and investment banks are reconsidering future
underwritings. An industry that recently envisioned doubling production over the next
20 years is now looking at something closer to the opposite, a halving of production
or worse in far fewer than 20 years.
Please ask refining CEOs and their Boards how they will behave as Corporate profits fail.
Sincerely yours,

Doug Grandt
answerthecall@mac.com