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Senator Al Franken

May 20, 2015


I am a retired petroleum engineer, industrial engineer and corporate planner.
Over the past 3 months, beginning February 15, I have written you 12 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 plausible, indeed, 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
May 20, 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 Al Franken
Committee on Senate Energy and Natural Resource
309 Hart Senate Oce Building

Washington, D.C. 20510

Re: Oil Refining - Considering future eventualities versus the myopia of the present
Dear Senator Franken,
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 Al Franken
Senate Committee on Energy and Natural Resources
309 Hart Senate Oce Building

Washington, D.C. 20510

Re: Oil Refining - Considering future eventualities versus the myopia of the present
Dear Senator Franken,
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 Al Franken
Senate Committee on Energy and Natural Resources
309 Hart Senate Oce Building

Washington, D.C. 20510

Re: Oil Refining - Considering future eventualities versus the myopia of the present
Dear Senator Franken,
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 Al Franken
Senate Committee on Energy and Natural Resources
309 Hart Senate Oce Building

Washington, D.C. 20510

Re: Oil Refining - Considering future eventualities versus the myopia of the present
Dear Senator Franken,
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 Al Franken
Senate Committee on Energy and Natural Resources
309 Hart Senate Oce Building

Washington, D.C. 20510

Re: Oil Refining - Considering future eventualities versus the myopia of the present
Dear Senator Franken,
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

Douglas A. Grandt

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

Senator Al Franken
309 Hart Senate Oce Building

Washington, D.C. 20510


Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #6)
Dear ENR Committee Member Franken,
Is the U.S. ENERGY INDEPENDENT if the oil industry becomes a collapsing houses-of-cards?
Is energy security paying dividends and buying back shares of stock with borrowed money?
Is energy security production companies going out of business due to the low price of oil?
Is energy security relying on short-lived tight oil requiring ever more drilling and fracking?
Is energy security curtailing investments in wells needed to keep production just stable?
Is energy security ExxonMobil doubling the capacity of its Beaumont Refinery by adding a
third crude distillation unit? (See http://bit.ly/Beaumont31Mar15) Ask CEO Rex Tillerson if
the that third crude distillation unit might have the sole purpose of exploiting a new loophole
the Obama Administration createdfirst reported on New Years Eve by 247wallst.com:

The Commerce Departments Bureau of Industry and Security (BIS) said that it has
approved requests by some companies to export lightly refined condensates.
The news is that the agency has spelled out for the first time (in an FAQ of all places)
what the rules are. The agency defines crude oil as liquid hydrocarbons that have not
passed through a distillation tower. The definition includes reconstituted crude
petroleum, and lease condensate and liquid hydrocarbons produced from tar sands,
gilsonate, and oil shale. These may not be exported.
What may be exported are lease condensates that have been processed through a
crude oil distillation tower. That passage transforms the unexportable crude into an
exportable refined petroleum product. As the BIS notes, Petroleum products are
subject to few export restrictions.
Why now after months of dithering around? Could it be that the Obama administration
has figured out that exporting near-crude is more likely to keep crude oil costs low
than it is to raise them. If U.S. crude from shale plays in North Dakota can get into the
international market, and the Bakken producers can keep their costs under control, the
United States may be able to take a bit of market share away from the Saudis.
As a member of the Senate Committee on Energy and Natural Resources, please convene and
ask CEOs if they will supply us fuels when profits fall. How long will they keep rolling the dice?
Sincerely yours,
Doug Grandt
answerthecall@mac.com

Douglas A. Grandt

PO Box 6603
Lincoln, NE 68506
(510) 432-1452
April 7, 2015

Senator Al Franken
309 Hart Senate Oce Building

Washington, D.C. 20510


Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #7)
Dear Senator Franken,
U.S. ENERGY INDEPENDENT does not come from the likes of ExxonMobil holding us hostage
to rectify their having shot themselves in the foot. The glut from the shale oil and gas boom
was their own miscalculation. Now, they are holding a gun to our collective head, demanding
that their cash flow and earnings be protected by allowing the glut of excess production to
flood the international markets to fetch higher prices. That, in turn will raise domestic prices.
Where is the industry taking us? Are We the People beholden to the industry for the fossil fuels
they provide are we expected to acquiesce to their experiment with our economy? Who will
bale them out when their accumulated miscalculations and hubris result in financial collapse?
We need to manage the industrys decisions for the sake of public interest and national interest.
Please call them to task, develop a strategy to get control, assure true energy independence.
This is no April Fools joke. One analyst had the courage to publish the following assessment,
which when taken in context with countless other assessments that also hint at a precarious
future for the fossil fuel industry points to serious risk for our economy. Read this critically:

Exxon Mobil - The Company That Buys High And Sells Low
April 2, 2015 | Aristofanis Papadatos | http://bit.ly/ALPHA2April15

Summary
XOM is reportedly escalating its plans to expand the capacity of its Beaumont refinery
from 344 Kbbl/day to 850 Kbbl/day in a multi-billion dollar project.
While the U.S. refining margins are high at the moment, the outcome of this investment is
unpredictable and will largely depend on whether the ban on oil exports is repealed.
The article discusses a series of critical decisions that XOM has made in recent years,
which have been marked by buying high and selling low.
.

Exxon Mobil (NYSE:XOM) is reportedly escalating its plans to expand the capacity of its
Beaumont refinery from 344 Kbbl/day to 850 Kbbl/day in a multi-billion dollar project. The
management previously intended to double the capacity of its refinery, but it now seems
determined to expand its capacity even further. While the U.S. refining margins are
particularly high at the moment, the outcome of this investment is unpredictable and will
largely depend on whether the U.S. government will continue to ban oil exports in the future.
In addition, although it is really hard to evaluate this decision of the management at the
moment, it is safe to claim that it has a similar character to some past decisions; investing in
answerthecall@mac.com

Senator Al Franken
April 7, 2015
Page 2
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a sector while it is thriving. Unfortunately, due to the multi-year lag between the investment
decision and the beginning of cash inflows, the results of past decisions have often turned
out to be very poor. The article discusses a series of critical decisions that the company has
made in recent years, which have been marked by buying high and selling low, and have
thus, pronouncedly hurt its shareholders.
Natural gas
Exxon Mobil acquired a major producer of natural gas, XTO Energy, in a $41 B ($31 B plus
$10 B debt) deal in 2009. As the success of any deal depends on its price, the deal has
proved very unfortunate for Exxon Mobil, as it was concluded in a context of elevated prices
of natural gas (around $6). To be sure, natural gas has traded much lower in recent years roughly 50%, on average, below the then-prevailing price.
It is evident that the return on investment of this deal has been very poor, and it will take
several years to Exxon Mobil to earn back the amount it spent on that acquisition. The
verdict is so obvious that even the CEO of the company admitted two years ago that the
timing of the deal was too unfortunate for the company. Therefore, the company essentially
wasted almost all its earnings from its best year ever (in terms of earnings), 2008.
Oil
During the last 4 years, in which oil was hovering around $100, Exxon Mobil excessively
increased its capital expenses for upstream projects. To be sure, as the table shows, the
company allocated almost all its earnings to capital expenses in the last few years.

The unfortunate factor is the significant, multi-year lag between the time of investment and
the time of incoming production from these projects. Therefore, the management of each oil
company should have a correct long-term view and great timing in its critical decisions.
Unfortunately for shareholders, the projects with the above expenses were planned with
forecasts for oil to remain above $100 for the foreseeable future, and hence, these projects
are condemned to provide poor returns if oil remains suppressed for a prolonged period.
Of course, no one can blame management for its efforts to replenish its oil reserves.
However, the cost of most projects largely depends on the prevailing environment during
the initial phase, and hence, management is supposed either to have timing skills or at least
to even out the great variations of expenses in the long term. Unfortunately, the
management of Exxon Mobil has recently proved insufficient even for the latter.
Of course, some investors may claim that management has the excuse that very few people
predicted the collapse of oil price due to the booming production of shale oil. Nevertheless,
the managements of oil majors, particularly that of this premium company, are expected to
execute far above the average and differentiate from the crowd at critical times.

Senator Al Franken
April 7, 2015
Page 3
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Share repurchases
The company has consistently repurchased its shares to enhance shareholder returns.
Unfortunately for shareholders, the company funded the acquisition of XTO Energy with the
issuance of new shares in 2010, when the stock stood at a decade low. Moreover, now that
the oil producers are facing the headwind of cheap oil, the company has drastically reduced
the annual rate of share repurchases, from 5% in 2011-2013 to 3% in 2014 and only 1% in
2015.
Nevertheless, to be fair to management, the poor timing in share repurchases is the norm
for the vast majority of companies. More specifically, as share repurchases are the last
priority - after the capital expenses and dividends are paid - most companies tend to
repurchase their shares only when they have ample cash. This invariably occurs during
booming periods, in which the stock prices are inflated, and hence these share repurchases
hardly add any shareholder value. While most companies tend to make the same mistake,
the few companies that keep performing buybacks even during rough times make a
difference to their shareholders.
Downstream
While refiners in most parts of the world have suffered from depressed margins in the last 6
years, their U.S. counterparts have thrived, thanks to the deep discount of WTI vs. Brent,
which has resulted from the shale oil boom. It is remarkable that this advantage of U.S.
refineries had remained largely unnoticed in the oil majors till recently, as oil majors
normally derived about 90% of their earnings from the upstream sector. However, now that
the oil price has collapsed, the downstream sector has provided significant support on the
earnings of oil majors. Therefore, it makes sense that Exxon Mobil wants to spend billions
to expand the capacity of its Beaumont refinery.
Nevertheless, as it will take some years to complete the expansion, the profitability of this
project will depend on the long-term trajectory of U.S. refining margins. If the ban on U.S. oil
exports is repealed, the refining margins will pronouncedly contract, and hence, this project
will offer disappointing returns. Therefore, management should carefully evaluate the longterm path of U.S. refining margins, and not just decide based on the recent enthusiasm over
U.S. refining margins. Hopefully, they will do their homework this time.
Conclusion
Buying high and selling low is a catastrophic strategy for long-term returns. Unfortunately,
this is much easier said than done, as it is much easier to follow the herd than go against
the flow. To be sure, the herd followers will be easily forgiven if their decision is proven
wrong, whereas the ones who decide against public opinion will incur excessive criticism,
should they fail. The management of Exxon Mobil has made some poor critical investments
in the past, which have punished the company's shareholders. Hopefully, their decision to
spend billions on the refinery expansion is based on a solid long-term view.
Again, I suggest that the ENR Committee convene a hearing and ask Rex Tillerson and other
CEOs if they will supply fuels when profits fall below breakeven. Ask how they will clean up the
toxic infrastructure in the end. Will Risk Management avert worst case scenarios the
unfathomable, shocking to ponder, economic collapse caused by their decisions and hubris?
Sincerely yours,
Doug Grandt

Douglas A. Grandt

PO Box 6603
Lincoln, NE 68506
(510) 432-1452
April 8, 2015

Senator Al Franken
309 Hart Senate Oce Building

Washington, D.C. 20510


Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #8)
Dear Senator Franken,
Oil Companies first quarter results will soon be made publica golden opportunity for ENR.
The Senate Committee on Energy and Natural Resources needs to understand the strategies
and prospects for survival Chevron, ConocoPhillips, Enterprise, ExxonMobil, Hess, Marathon,
Murphy, Sunoco, Tesoro, Valero, and World Fuels foresee given the poor oil economic climate.
With likely failures that would curtail fuel supply, we must develop an action plan for intervention
to assure the public interest and national interest energy security are the highest priority.
Sundays Wall Street Journal headline foretells an energy crisis for the U.S and the world:

Big Oil Companies Brace for Weak Quarter After Fall in Prices
The worlds big oil companies and their investors are bracing for some of the worst quarterly financial results in recent
memory as the first three months of the year closed with oil trading at about half of its 2014 peak.
The final quarter of 2014 was bad enough. British giant BP PLC announced its biggest quarterly loss since the
Deepwater Horizon spill in the Gulf of Mexico in 2010. Exxon Mobil Corps. cash flow fell to its lowest level since the
midst of the financial crisis in 2009.
The year-end carnage was for a three-month period in which a barrel of oil traded at $77. In the latest quarter, the
Brent international oil benchmark averaged $55.13 a barrel.
Its going to be ugly, said Jason Gammel, an analyst at Jefferies. Its going to be a really bad quarter.
Most of the worlds biggest oil companies have already slashed spending, with many of them cutting jobs.

In February, Exxon said to cut costs it would reduce first-quarter spending on share buybacks by two-thirds from the
preceding quarter to $1 billion. Chevron Corp. has suspended its buyback program altogether.
Congressional hearings are called for soon to ask the CEOs if they will continue to supply fuels
when earnings and dividends fall below internal thresholds and operations begin to lose money.
Will Risk Management avert worst case scenarios and unfathomable, too shocking to ponder,
economic collapse caused by their demise? How do they plan to finance their toxic clean-up?
Sincerely yours,
Doug Grandt
answerthecall@mac.com

Douglas A. Grandt

PO Box 6603
Lincoln, NE 68506
(510) 432-1452
April 26, 2015

Senator Al Franken
309 Hart Senate Oce Building

Washington, D.C. 20510


Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #9)
Dear Senator Franken,
Since February 15, Ive written 8 letters expressing concern about depressed petroleum prices.
April 21 Newsweek underscores a serious conundrum that faces you and the other members
of the Senate Committee on Energy and Natural Resources which you should be considering:
With the United States becoming more dependent upon a petroleum industry that is more and
more subject to external demands from equity markets increasing earnings and dividends,
and share value how will We the People wrest control of our destiny from Corporate Interest
and establish a truly secure manifestation of an energy policy solely in the Public Interest?

HSBC Warns Clients of Fossil Fuel Investment Risks


Global banking giant HSBC has warned investors of the growing risk of their fossil fuel
assets becoming useless
In the report, titled Stranded assets: what next?, analysts warn of the growing likelihood
that fossil fuel companies may become economically non-viable
The speed of the collapse in energy prices over the past three quarters has taken the fossil
fuel industry by surprise, in our view, reads the report. As rigs are dismantled, capex is
cut and operating assets quickly become unprofitable, stranding risks have become much
more urgent for investors to address, including shorter term investors.
The paper proposes three options for investors - divesting completely from fossil fuels;
shedding the highest risk investments such as coal and oil; or staying the course and
engaging with fossil fuel companies as an investor. The report argues that investors who
stay in fossil fuels may one day be seen to be late movers, on the wrong side of history.
Congressional hearings are warranted to ask the oil & gas industry CEOs if they will continue to
supply fuels when earnings and dividends fall below breakeven, and unprofitability is imminent.
Sincerely yours,
Doug Grandt
answerthecall@mac.com

Douglas A. Grandt

PO Box 6603
Lincoln, NE 68506
(510) 432-1452
May 11, 2015

Senator Al Franken
309 Hart Senate Oce Building

Washington, D.C. 20510


Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #10)
Dear Senator Franken,
This is my tenth letter to you expressing my deep concern about an imminent conflict between
1) Corporate Officers and Boards of Directors fiduciary duty in the face of insolvency, indeed
their termination of unprofitable refining operations, and 2) national interest or public interest.
In view of expected continuing depressed petroleum prices, I fear that oil refining corporations
will soon face severely declining earnings, dividends, and share value, all of which will bring
their Officers and Boards of Directors to decisions to curtail production and refining operations.
My fear, which has been growing over several month, is that decisions by those with the best
intentions to fulfill their legal obligations could lead us into territory that nobody is anticipating.
Read the ABAs August 6, 2010, document Insolvency and Fiduciary Duties: Advising Directors
and Officers When the Company Cannot Pay Its Bills. (http://bit.ly/ABA6Aug10)
Officers and Boards of Directors fiduciary duty to companies like Chevron, ConocoPhillips,
ExxonMobil, Marathon, Occidental, etc. and their investors, will likely have dire consequences
for other businesses and the public unless we prepare to take preventative, controlling actions.
This is what one industry expert has to say, and we can all surmise the disastrous implications:

Prolonged low oil prices will prove that tight oil plays need at least $75 per barrel to break
even. When oil prices recover to that level, only the best parts of the tight oil core areas will
be competitive in the global market. As production declines from expensive tight oil, oil sand
and ultra-deep-water plays, inexpensive Saudi oil will gain market share.

Saudi Arabia is not trying to crush tight oil plays, just the stupid money that funded the
over-production of tight oil. Too much supply combined with weak demand created the
present oil-price collapse. Saudi Arabia hopes to prolong low prices to benefit their
long-term needs for market share and higher demand. (http://bit.ly/OilPrice20Apr15)

Demand the petroleum industry CEOs tell the American public how they will respond when they
become insolvent. Will they continue to supply fuels when earnings and dividends fall to critical
levels where share price plummets and they are no longer financially viable in the marketplace?
They have the best and brightest working on the problem. Make them reveal the results of their
economic models. Lets critique their assumptions, especially the worst case scenarios.
Sincerely yours,
Doug Grandt
answerthecall@mac.com

Douglas A. Grandt

PO Box 6603
Lincoln, NE 68506
(510) 432-1452
May 18, 2015

Senator Al Franken
309 Hart Senate Oce Building

Washington, D.C. 20510


Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #11)
Dear Senator Franken,
This is my eleventh letter to you expressing deep concern about an imminent conflict between
1) Corporate Officers and Boards of Directors fiduciary duty in the face of insolvency, indeed
their termination of unprofitable refining operations, and 2) national interest or public interest.

We the People must demand petroleum industry CEOs tell us the American public how

they will continue to supply fuels when earnings and dividends fall to critical levels, share price
plummets, they are no longer financially viable in the marketplace, and they become insolvent.
They have the best and brightest addressing the problem. Compel them to share the results of
their economic models. The economic conventional wisdom is that industry must grow or die.
We have a challenge to change the paradigm from growing upward to growing in breadth with
diversification, from the traditional and conventional to the innovative and sustainable.
ENR must guide the petroleum industry to providing We the People a choice of fuels, which will
also enhance their longevity as viable and healthy corporations that are intended to live forever.
Petroleum prices where they are and corporate profitability in the balance, we face economic
and security uncertainty as a nation because another competing interest is exercising control
over our self-induced vulnerability. The not-unexpected crisis provides America an opportunity
to exercise honorable choice. It is choice that makes us an innovative and democratic nation.
Our choice now is whether to battle foreign manipulation of crude supply and price, or to shift
our national policies and human energies away from such conflicts. Stepping into the future is
what we must compel the oil industryour national resourceto do. Our future is electric.
Sincerely yours,
Doug Grandt

answerthecall@mac.com

Douglas A. Grandt

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

Senator Al Franken
309 Hart Senate Oce Building

Washington, D.C. 20510


Re: Oil Refining - Considering future eventualities versus the myopia of the present (letter #12)
Dear Senator Franken,
This is my twelfth letter to you expressing deep concern about an imminent conflict between
1) Corporate Officers and Boards of Directors fiduciary duty in the face of insolvency, indeed
their termination of unprofitable refining operations, and 2) national interest or public interest.
Does Congress interpret in the national interest and in the public interest to mean
protecting and preserving all aspects of the commonwealth, the common-wealth, the common
weal, the common well-bring, public welfare? From my research, free-trade is the focus.
I have been unable to find an explicit definition of national interest or public interest. No code
or law defines either. The closest thing to a definition I have found is in Delaware Riverkeeper
Networks recently published paper TPP and Fast Track: What they mean for our Environment
and our Country. The following portrays most of what I have read by FERC, DOE, and GAO:
The Natural Gas Act (15 U.S.C. 717b) prohibits the import or export of natural gas, including
liquefied natural gas (LNG), to or from any foreign country without receiving prior approval from
the U.S. Department of Energy (DOE).
In order to receive approval of an application for export of natural gas to a foreign nation, Section
3 of the Natural Gas Act requires DOE to first make a determination that the proposed export of
natural gas will not be inconsistent with the public interest.14 A public interest determination
includes consideration of both environmental and economic impacts. Section 3(a) thus
establishes DOEs authority to deny an application requesting authorization to export natural gas
to foreign countries upon a showing of inconsistency with the public interest.15
___________________________
14

15 U.S.C. 717b(a).
(a) Mandatory authorization order
After six months from June 21, 1938, no person shall export any natural gas from the United
States to a foreign country or import any natural gas from a foreign country without first having
secured an order of the Commission authorizing it to do so. The Commission shall issue such
order upon application, unless, after opportunity for hearing, it finds that the proposed exportation
or importation will not be consistent with the public interest. The Commission may by its order
grant such application, in whole or in part, with such modification and upon such terms and
conditions as the Commission may find necessary or appropriate, and may from time to time,
after opportunity for hearing, and for good cause shown, make such supplemental order in the
premises as it may find necessary or appropriate.
15

Id.; see also Sabine Pass Liquefaction, LLC, FE10-111-LNG, DOE Order No. 2961 (May 20,
2011); Sabine Pass Liquefaction, LLC. FE10- 85-LNG, DOE Opinion and Order No. 2833 (Sept.
7, 2010).
BUT ....

Page 1
! of 4
!

Section 3(c) of the NGA requires the DOE to deem as consistent with the public interest any
applications to authorize the import or export of natural gas, including LNG, from and to
nations which have entered into a free trade agreement with the U.S. requiring national
treatment for trade in natural gas i.e. Free Trade Agreement countries, or FTA countries.
As such, applications for authorization to export natural gas to FTA countries is required, by the
NGA, to be granted without modification or delay.16
___________________________
16

15 U.S.C. 717b(c)
(c) Expedited application and approval process
For purposes of subsection (a) of this section, the importation of the natural gas referred to in
subsection (b) of this section, or the exportation of natural gas to a nation with which there is in
effect a free trade agreement requiring national treatment for trade in natural gas, shall be
deemed to be consistent with the public interest, and applications for such importation or
exportation shall be granted without modification or delay.

I am not a lawyer, but as a former Petroleum Engineer, Industrial Engineer and a Corporate
Planner, I learned early on to clearly document the basis for my work; the assumptions that
defined the system, facility, equipment, process or economic assessment that went to my boss
and the Board of Directors to justify millions of dollars in capital investment. What I have seen
in the documents I have read is that they lack a precise definition that transparently explains
decisions having major impact on the public, local communities, the national economy, or
nation security.
The irony of making decisions and recommendations without a definition of public interest is
clear in The Department of Energy Office of Fossil Energys FE Docket No. 11-128-LNG
(Dominion Cove Point LNG LP) Section II, Summary of Findings and Conclusions, which states:
Based on a review of the complete record and for the reasons set forth below, DOE/FE has
concluded that the opponents of the DCP Application have not demonstrated that the requested
authorization will be inconsistent with the public interest and finds that the exports proposed in
this Application are likely to yield net economic benefits to the United States.

Likely to yield net economic benefitsthats it? Section III, Public Interest Standard goes on:
Section 3(a) of the NGA sets forth the standard for review of DCPs Application:
[N]o person shall export any natural gas from the United States to a foreign country or import
any natural gas from a foreign country without first having secured an order of the [Secretary
of Energy25] authorizing it to do so. The [Secretary] shall issue such order upon application,
unless after opportunity for hearing, [he] finds that the proposed exportation or importation
will not be consistent with the public interest. The [Secretary] may by [the Secretarys] order
grant such application, in whole or part, with such modification and upon such terms and
conditions as the [Secretary] may find necessary or appropriate.
15 U.S.C. 717b(a). This provision creates a rebuttable presumption that a proposed
export of natural gas is in the public interest. DOE/FE must grant such an application
unless opponents of the application overcome that presumption by making an affirmative
showing of inconsistency with the public interest.26
___________________________
25

The Secretarys authority was established by the Department of Energy Organization Act, 42
U.S.C. 7172, which transferred jurisdiction over imports and export authorizations from the
Federal Power Commission to the Secretary of Energy.
26

See, e.g., Sabine Pass, Order No. 2961, at 28; Phillips Alaska Natural Gas Corp. & Marathon
Oil Co., DOE/FE Order No. 1473, Order Extending Authorization to Export Liquefied Natural Gas
from Alaska, at 13 (April 2, 1999), citing Panhandle Producers & Royalty Owners Assn v. ERA,
822 F.2d 1105, 1111 (D.C. Cir. 1987).

Page 2 of 4

While section 3(a) establishes a broad public interest standard and a presumption
favoring export authorizations, the statute does not define public interest or identify
criteria that must be considered. In prior decisions, however, DOE/FE has identified a
range of factors that it evaluates when reviewing an application for export authorization.
These factors include economic impacts, international impacts, security of natural gas
supply, and environmental impacts, among others. To conduct this review, DOE/FE looks to
record evidence developed in the application proceeding.27
DOE/FEs prior decisions have also looked to certain principles established in its 1984
Policy Guidelines.28 The goals of the Policy Guidelines are to minimize federal control
and involvement in energy markets and to promote a balanced and mixed energy
resource system. The Guidelines provide that:
The market, not government, should determine the price and other contract terms of
imported [or exported] natural gas .... The federal governments primary responsibility
in authorizing imports [or exports] will be to evaluate the need for the gas and
whether the import [or export] arrangement will provide the gas on a competitively
priced basis for the duration of the contract while minimizing regulatory
impediments to a freely operating market.29
While nominally applicable to natural gas import cases, DOE/FE subsequently held in Order
No. 1473 that the same policies should be applied to natural gas export applications.30
In Order No. 1473, DOE/FE stated that it was guided by DOE Delegation Order No.
0204-111. That delegation order, which authorized the Administrator of the Economic
Regulatory Administration to exercise the agencys review authority under NGA section 3,
directed the Administrator to regulate exports based on a consideration of the domestic
need for the gas to be exported and such other matters as the Administrator finds in the
circumstances of a particular case to be appropriate.31 In February 1989, the Assistant
Secretary for Fossil Energy assumed the delegated responsibilities of the Administrator of ERA.32
Although DOE Delegation Order No. 0204-111 is no longer in effect, DOE/FEs review of
export applications has continued to focus on: (i) the domestic need for the natural gas
proposed to be exported, (ii) whether the proposed exports pose a threat to the
security of domestic natural gas supplies, (iii) whether the arrangement is consistent
with DOE/FEs policy of promoting market competition, and (iv) any other factors
bearing on the public interest described herein.
___________________________
27

See, e.g., Sabine Pass, DOE/FE Order No. 2961, at 28-42 (reviewing record evidence in
issuing conditional authorization); Freeport LNG, DOE/FE Order No. 3282, at 109-14 (discussing
same); and Lake Charles Exports, DOE/FE Order No. 3324, at 121-27.
28

New Policy Guidelines and Delegations Order Relating to Regulation of Imported Natural Gas,
49 Fed. Reg. 6684 (Feb. 22, 1984) [hereinafter 1984 Policy Guidelines].
29

Id. at 6685.

30

Phillips Alaska Natural Gas, DOE/FE Order No. 1473, at 14, citing Yukon Pacific Corp., DOE/
FE Order No. 350, Order Granting Authorization to Export Liquefied Natural Gas from Alaska, 1
FE 70,259, at 71,128 (1989).
31

DOE Delegation Order No. 0204-111, at 1; see also 49 Fed. Reg. at 6690.

32

See Applications for Authorization to Construct, Operate, or Modify Facilities Used for the
Export or Import of Natural Gas, 62 Fed. Reg. 30,435, 30,437 n.15 (June 4, 1997) (citing DOE
Delegation Order No. 0204-127, 54 Fed. Reg. 11,436 (Mar. 20, 1989)).

These justifications appear to be circular logic defining public interest with reference to itself.
My previous letters have suggested that we demand petroleum industry CEOs tell us how they
will continue to supply fuels when earnings and dividends fall to critical levels, share price
plummets, they are no longer financially viable in the marketplace, and they become insolvent.
Page 3 of 4

Up to now, I have believed that Congressspecifically the Senate Committee on Energy and
Natural Resourceshas the rightful authority to conduct such an inquiry, as both FERC and
DOE carry out the laws that Congress passes, laws which are spawned in your committee.
Now, having discovered a conundrum which would make the results of any such investigation
meaningless, given the lack of a precise definition and standard for national interest or public
interest, I suggest that you first come up with suitable, complete and relevant definitions,
and be prepared to hold the petroleum companies accountable to those definitions.
Only then can we compel them to share their visions and results of their economic models, and
to explain their business strategies in context with their definition of Corporate Citizen. That will
be an interesting juxtaposition with what you declare to be in the national and public interest.
From her usage in the enclosed June 4, 2014, letter to Cheryl LaFleur (then Acting Chairman of
FERC) it is not clear to me how ENR Chairman Murkowski differentiates between the two.
I still believe that we must find ways to avert petroleum production and refining companies
going out of business as a result of sustained low commodity prices manipulated by competitive
forces in other parts of the world. I also believe that it is incumbent upon us to change the
paradigm from growing upward to growing in breadth with diversification, from the traditional
and conventional to the innovative and sustainable. We must make our national resources
immune to the manipulations of a commodity to which we have made ourselves vulnerable.
MY ASK: Therefore, I call upon the Senate Committee on Energy and Natural Resources
to guide the petroleum industry to provide a choice of transportation fuels, which will also
enhance their longevity as viable corporations that are intended to live forever.
We must be precise as to what we are demanding of the industryclear expectationswhen
we demand that they make decisions in the national interest and public interest.
What do we mean by national interest or public interest while corporate profitability is in the
balance, and we face insolvency of the industry? Our predicament is self-induced vulnerability.
We have brought it upon ourselves by a laissez-faire attitude with industry behaving according
to free market conventions. We have allowed a lack of innovation through our investment tax
credits and other subsidies. Now we must level the playing field, force innovation and let true
competition see that the cream will rise to the top. Oil certainly is no longer black gold.
As I suggested yesterday, we must now choose whether to battle foreign manipulation of crude
supply and price, or to shift our national policies and human energies away from such conflicts.
I believe our only choice is to step into the future with the pizzazz of the burgeoning electric car
offerings and innovation of battery and other not-ready-for-prime-time high tech portable fuels.
Sincerely yours,
Doug Grandt
answerthecall@mac.com

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