PERSPECTIVES ON CLIMATE-RELATED SCENARIOS

Transcription

1 PERSPECTIVES ON CLIMATE-RELATED SCENARIOS RISKS AND OPPORTUNITIES OCTOBER 2017

2 TABLE OF CONTENTS 3 Letter from the Chairman and CEO 4 About MPC 6 Introduction 7 MPC Governance and Risk Management 9 Energy Demand Under the Climate-Related Scenarios The Climate-Related Scenarios Summary of Climate-Related Risks and Opportunities Results of Climate-Related Scenario Analyses Refining and Marketing Speedway Midstream 20 Performance Metrics and Energy Efficiency Energy Efficiency GHG Emission Reductions 26 Physical Risks to Our Facilities Hardening and Modernizing: Steps We Have Taken Resiliency Measures: Emergency Preparedness & Response 30 Conclusions Glossary of Terms Barrel: 42 U.S. gallons a common volume measure for crude oil and petroleum products bpcd: barrels per calendar day the average of how much crude oil or other feedstock a refinery processes over a period of time, divided by the number of days in that period, typically 365 days (a common rate measure for petroleum refineries) bpd: barrels per day a common rate measure for crude oil and petroleum products CAFE Standard: Corporate Average Fuel Economy standard for vehicle fleets mandated by the U.S. federal government DOE: The U.S. Department of Energy EII : Energy Intensity Index, a measure proprietary to energy consulting firm HSB Solomon Associates LLC ENERGY STAR: A program of the U.S. Environmental Protection Agency recognizing energy efficiency. To achieve this status, applicants must perform in the top quartile for energy efficiency and have no unresolved environmental compliance actions from state or federal regulators. EPA: The U.S. Environmental Protection Agency ERM: Enterprise Risk Management G20: An international forum for the governments and central bank governors from 20 of the world's largest economies GHGs: Greenhouse gases, such as carbon dioxide and methane IEA: International Energy Agency LNG: Liquefied natural gas Metric ton: 2,205 pounds MPC: Marathon Petroleum Corporation NGL: Natural gas liquid a light hydrocarbon liquid often produced with natural gas OECD: Organisation for Economic Co-operation and Development a group of the world s most industrialized nations ON THE COVER: MPC's refinery in Garyville, Louisiana TCFD: Task Force on Climate-related Financial Disclosures, formed by the Financial Stability Board (an international body that monitors and makes recommendations about the global financial system) 2

3 FROM THE CHAIRMAN AND CHIEF EXECUTIVE OFFICER Fellow shareholders, As investors who care about environmental stewardship and the welfare of future generations, we can be proud to own Marathon Petroleum Corporation stock. MPC manufactures, transports and markets fuels and other products that make millions of people s lives better every day, and we project continued robust demand for our products well into the future. Your board of directors and executive leadership team have positioned MPC well by investing billions of dollars in energy efficiency, emissions reductions, diversifying our business and hardening our facilities against extreme weather events. In short, for many years we have taken seriously the physical and transitional risks now associated with climate change. Our refineries are among the most energy efficient in the nation. Our facilities have earned more of the U.S. EPA s ENERGY STAR awards recognizing refineries than all other refining companies combined. We also apply this focus on energy efficiency to our transport trucks and our inland marine fleet, as well as through our research collaboration with the U.S. Department of Energy s Argonne National Laboratory. We are diversified through our general partner stake in MPLX LP, a midstream master limited partnership that is one of the largest natural gas gathering and processing companies in the U.S. This has positioned us to meet the ongoing and projected demand for natural gas long into the future. Our diversification also extends to the transportation fuels we offer our customers. We have equity interests in three corn ethanol plants in the Midwest and we own a biodiesel production facility in Cincinnati, Ohio. Through our Speedway retail business, we offer ethanol flex fuel at hundreds of our stores, amounting to more than 11 percent of the total number of stations offering this fuel nationwide. I invite you to read this detailed look at the board oversight, scenario analyses, asset optimization, portfolio management and other tools we use to mitigate risks inherent in a future characterized by potential climate impacts and policies designed to address climate change. While we focus on providing you the returns you expect on your investment, we also look to safeguard the long-term success of your company, understanding that the products we produce will continue to be a critical component of modern life for the foreseeable future. Sincerely, Gary R. Heminger Chairman and Chief Executive Officer 3

4 As of September

5 ABOUT MPC Marketing Area MPC Refineries Light Product Terminals MPC Owned and Part-owned Third Party Asphalt/Heavy Oil Terminals MPC Owned Third Party Water Supplied Terminals Coastal Inland Pipelines MPC Owned & Operated MPC Interest: Operated by MPC MPC Interest: Operated by Others Pipelines Used by MPC Renewable Fuels Ethanol Facility Biodiesel Facility MPC is the nation s third-largest refiner, with a total crude oil refining capacity of 1.8 million barrels per calendar day (bpcd) as of year-end Approximately, 60 percent of this capacity is located in the Gulf Coast region, with the remainder located in the Midwest. Marathon brand gasoline is sold through approximately 5,600 independently owned retail outlets across 19 states. In addition, Speedway LLC, an MPC subsidiary, owns and operates the nation s second-largest convenience store chain, with approximately 2,730 convenience stores in 21 states. MPC owns, leases or has ownership interests in approximately 10,800 miles of crude oil and light-product pipelines. MPC owns the general partner of MPLX LP, a midstream master limited partnership. Through MPLX, MPC has ownership interests in gathering and processing facilities with approximately 5.6 billion cubic feet per day of gathering capacity, 8 billion cubic feet per day of natural gas processing capacity and 570,000 barrels per day (bpd) of fractionation capacity. MPC s fully integrated system provides operational flexibility to move crude oil, natural gas liquids (NGLs), feedstocks and petroleum-related products efficiently through the company s distribution network and midstream service businesses in the Midwest, Northeast, East Coast, Southeast and Gulf Coast regions. MPLX Terminals: Owned and Part-owned Tank Farms Barge Dock MPLX Pipelines: Owned & Operated MPLX Interest Pipelines: Operated by Others Cavern MarkWest Complex 5

6 INTRODUCTION In June 2017, the Financial Stability Board s Task Force on Climate-related Financial Disclosures (TCFD) issued its final recommendations on reporting climate-related financial information. These recommendations have been endorsed by a majority of the G20 countries and over 100 large businesses. MPC has incorporated these recommendations as a means to further enhance our reporting on climate-related risks and opportunities. We believe the disclosures made in our Annual Report on Form 10-K, our annual Citizenship Report and this report are aligned with the main principles outlined in the recommendations of the TCFD and demonstrate MPC s resilience to potential climate-related risks. With this report, we have enhanced our disclosures respecting our governance, risk management, strategy and metrics related to the subject of climate change. We are also including the results of a stress-test of our business against the International Energy Agency s (IEA's) hypothetical 450 Scenario and New Policies Scenario. These scenarios conclude oil and natural gas will continue to play a significant, long-term role in meeting the world s energy needs. Oil and natural gas will also continue to provide the building blocks for the commercial products that are common in everyday life. As you will see in the Results of Climate-Related Scenario Analyses section of this report, MPC is well-positioned to remain a successful company into the future, even under the carbon-constrained future modeled in the IEA s hypothetical 450 Scenario. We believe MPC s current governance and risk-management processes sufficiently address both potential physical risks and transitional risks associated with a carbon-constrained future. At MPC, we implement cost-effective technologies to improve the energy efficiency of our operations and capital projects. As you will see in this report, our results are significant and quantifiable. We are committed to implementing solutions that achieve environmental objectives, while at the same time providing the reliable, affordable energy that makes modern life possible. 6

7 MPC GOVERNANCE AND RISK MANAGEMENT MPC's certified wildlife habitat at its Speedway LLC subsidiary headquarters in Enon, Ohio MPC s Board of Directors and executive leadership team meet frequently to discuss enterprise risk management (ERM), including the management of physical risks and those associated with a carbon-constrained economy. Our business strategy, including the assessment of the company s business in light of climate-related risks and opportunities, and the allocation of capital for major projects, are key focus areas for our Board. The issuance of this report at our Board s direction demonstrates its commitment to integrate climate-related scenario analysis into its long-term planning. MPC s Board members have significant expertise and experience in the energy sector, finance, economics, operations and public policy that sharpen the Board s insight into the potential implications of climate-related issues on policymakers, markets, and society at-large, as well as on our business and operations. The Board recognizes the potential impacts on our business from physical risks and the transitional risks and opportunities our industry faces in a lower-carbon economy. While our Board and its committees oversee risk management, our senior management team is charged with managing risk. We have a strong ERM process for identifying, assessing and managing risk, as well as for monitoring the performance of risk mitigation strategies. The governance of this process is effected through the executive sponsorship of our chief executive officer and chief financial officer, and is led by an enterprise risk manager. Officers and senior managers responsible for working across the business to manage enterprise-level risks and identify emerging risks meet routinely and regularly engage with our Board and its committees throughout the year. The following mature company practices, developed through our ERM process, promote effective decisionmaking. For instance, emissions of GHGs, physical risks and transitional risks associated with climate-related policies are all considerations in our strategy-setting, business planning and risk management: We use a long-term price forecast as the basis for capital allocation. Climate-related risks and policy changes are some of the many considerations incorporated into our projected commodity prices and demands. In addition, we use a risk-based capital allocation process with higher return on investment thresholds for business segments with the greatest financial and regulatory uncertainty. 7

8 MPC GOVERNANCE AND RISK MANAGEMENT MPC Chairman and CEO Gary R. Heminger addresses shareholders at the company's Annual Meeting. We use a risk-based approach to address possible physical impacts to our critical infrastructure, such as refineries, terminals, pipelines and the other assets necessary to manufacture and supply fuel and other petroleum products to the marketplace. More detailed information on this process is provided in the "Physical Risks to Our Facilities" section of this report starting on Page 26. We continually monitor environmental and climaterelated legislation, policies and regulations to ensure effective planning. We continually review our business portfolio and adjust investment patterns. We perform analyses of market-based scenarios that test the resilience of our business under varying market and regulatory conditions, including consideration of the IEA s hypothetical 450 Scenario and New Policies Scenario. These scenarios embed varying carbon prices into their projections, which are then assessed against our business. As one of our key performance metrics, we continually optimize our assets to make them more efficient, both in terms of cost and impact to the environment. We have undertaken a number of steps that reduce GHG emissions, including investments in flare reduction, improved energy efficiency and renewable fuels. More detailed information on these initiatives is provided in the "Performance Metrics and Energy Efficiency" section of this report starting on Page 20. With the continuing global demand for oil and gas, even under the IEA s hypothetical 450 Scenario, MPC is wellpositioned to remain a successful company. We believe our current governance and risk-management processes sufficiently address both the physical risks and transitional risks associated with a carbon-constrained future. These processes will enable the company to monitor and adjust accordingly to climate-related policy as it develops over time. Marathon brand station in Batesville, Mississippi 8

9 ENERGY DEMAND UNDER THE CLIMATE-RELATED SCENARIOS Petroleum-based fuels make modern life possible and drive sustained economic growth. For the last 150 years, fossil fuels have driven sustained economic growth and human progress. Fossil fuels are reliable, plentiful and affordable. They are unmatched in their energy density and portability. The robust global energy system that produces, refines, stores and transports fossil fuels is forecast to continue to grow as our world s population grows. Access to energy is vital to lifting hundreds of millions of the most vulnerable among us out of poverty. MPC recognizes the continued use of fossil fuels will help meet the world s growing energy needs. As a result, policies must ensure our nation s and the world s long-term needs for environmental stewardship, energy security and economic development are met. Costs for actions we take must be allocated equitably and predictably and consider adaptations to a changing climate as well as mitigating GHG emissions. Likewise, the costs of any actions we take as well as their uncertainties, risks and trade-offs should be transparently communicated to affected energy consumers worldwide. Access to energy is absolutely fundamental in the struggle against poverty. It is energy that lights the lamp that lets you do your homework, that keeps the heat on in a hospital, that lights the small businesses where most people work. Without energy, there is no economic growth, there is no dynamism, and there is no opportunity. Former World Bank President Rachel Kyte, World Bank, May 28,

10 ENERGY DEMAND UNDER THE CLIMATE-RELATED SCENARIOS The Climate-Related Scenarios ENERGY DEMAND UNDER THE CLIMATE SCENARIOS Most forecasts project global energy demand will rise by approximately one-third or more by 2040 as populations grow and people all over the world strive for higher living standards. 1 In developing this report, we applied three hypothetical scenarios developed by the IEA to analyze the effects on our business of various climate-related policies over the long term. The scenarios the IEA s Current Policies Scenario, New Policies Scenario and 450 Scenario are widely used around the world and are recommended by the TCFD 2 : Current Policies Scenario considers only those climate policies that have been formally adopted by governments. This scenario provides a comparison point against which new policies can be assessed. Scenarios are not intended to represent a full description of the future, but rather to highlight central elements of a possible future and to draw attention to the key factors that will drive future developments. It is important to remember that scenarios are hypothetical constructs; they are not forecasts or predictions, nor are they sensitivity analyses. New Policies Scenario incorporates existing energy policies, as well as an assessment of the results likely to occur from implementation of announced intentions, notably those in climate pledges submitted for the Paris Climate Agreement (COP21). TCFD, The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities (June 2017) 450 Scenario (or 2 degree scenario) hypothetical construct of policy-driven improvements in energy efficiency and other commitments to limit carbon dioxide concentrations in the atmosphere to 450 parts per million (ppm). This is frequently referred to as a 2 degree scenario, because it was developed to limit the average global temperature rise to 2 C by the end of the century relative to temperature levels in the mid-1800s. For this report, we focus most of our discussion on the New Policies Scenario and 450 Scenario with the Current Policies Scenario limited to a comparison where appropriate. The New Policies Scenario projects oil and natural gas will meet approximately half of global energy demand in 2040, while the 450 Scenario predicts oil and natural gas will meet 44 percent of global demand. By comparison, wind and solar energy in 2040 are expected to provide around 6 percent of energy demand in the New Policies Scenario and 12 percent in the 450 Scenario, up from less than 1 percent today. We performed the scenario analyses by business segment. Our Refining and Marketing analysis includes a perspective on the competitive advantages of the U.S. refining sector, IEA s projections for worldwide refining capacity and demand, and an assessment of our refining business in light of IEA s projections. IEA demand projections related to the type and volume of fuel that might be sold by Speedway locations are included in the analysis for our Speedway brand retail stores. Finally, we have included IEA projections related to natural gas, NGLs and other feedstock production and investments in the natural gas sector as these projections could be relevant to our Midstream segment. In performing the scenario analyses, we identified relevant climate-related risks and opportunities. 1 See e.g., U.S. Energy Information Administration, International Energy Outlook 2016 (projecting 48 percent increase); International Energy Agency, World Energy Outlook 2016 (projecting 30 percent increase in its New Policies Scenario); Institute of Energy Economics Japan, Asia/World Energy Outlook 2016, Tokyo, Japan, October 2016 (projecting 20 percent to 38 percent increase). 2 TCFD, The Use of Scenario Analysis in Disclosure of Climate-Related Risks and Opportunities (June 2017); International Energy Agency, World Energy Outlook

11 ENERGY DEMAND UNDER THE CLIMATE-RELATED SCENARIOS Summary of Climate-Related Risks and Opportunities POTENTIAL RISKS Starting as early as 2020, the demand for traditional transportation fuels could decrease in many Organisation for Economic Co-operation and Development (OECD) countries, including the U.S., due to higher corporate average fuel economy (CAFE) standards, increased market share of electric vehicles 3 and increased biofuels consumption in the transportation fleet. GHG regulations could be implemented, such as methods to further reduce methane emissions from our midstream assets, a carbon tax or similar effort that increases the costs of our products, thereby reducing demand. We could face increased litigation with respect to our operations or products in connection with climate-related policy. Physical risks, such as intense weather patterns or sea level rise, have the potential to impact our facilities. POTENTIAL OPPORTUNITIES Worldwide and domestic demand for natural gas and NGLs is expected to increase through 2040, even in the carbon-constrained 450 Scenario. This higher demand is driven by increased use in the power, industrial and transportation sectors. Worldwide and domestic demand for petrochemical feedstocks is expected to increase through The IEA notes there are few substitutes for oil-based feedstocks for the petrochemical industry. Energy-efficiency requirements for facilities are projected to increase. We consider energy efficiency to be a core business function and opportunity, because it reduces costs while reducing GHG emissions, putting our assets in a better competitive position. Through 2040, gasoline and diesel demand is expected to increase in many countries that are not members of the OECD. Our assets are favorably located for export to these countries. Worldwide and domestic demand for biofuels in the transportation fleet is expected to increase through 2040, especially in the carbon-constrained 450 Scenario. 3 There are considerable challenges to reaching the levels of electric vehicles and other renewable technologies predicted by the IEA New Policies Scenario and 450 Scenario. Particularly, the technologies assumed to populate the clean energy shift wind, solar, hydrogen, and electricity systems are in fact significantly MORE material intensive in their composition than current traditional fossil-fuel-based energy supply systems. World Bank, The Growing Role of Minerals and Metals for a Low-Carbon Future (June 2017); see also Dawkins et. al., Stockholm Environmental Institute, Metals in a Low-Carbon Economy: Resource Scarcity, Climate Change and Business in a Finite World (2012). 11

12 ENERGY DEMAND UNDER THE CLIMATE-RELATED SCENARIOS Results of Climate-Related Scenario Analyses The results of the analyses of these climate-related risks and opportunities to MPC s three main business segments are as follows: REFINING AND MARKETING IEA Refining Projections The IEA makes several projections in the New Policies Scenario 4 about the refining sector: Worldwide Refining Refining capacity is expected to increase by 16 million bpd, or 17 percent, from 2015 to A majority of this production increase is expected to occur in Asia, the Middle East and Africa. MPC's Garyville, Louisiana, refinery and its lightproducts export docks on the Mississippi River Demand for refined products is expected to be approximately 90 million bpd, or 81 percent of the projected refining capacity in Considering required downtime, the IEA projects refining capacity could exceed demand by 14.7 million bpd in Demand for distillates and petrochemical feedstocks is expected to increase because alternatives are scarce for the aviation, freight, marine and petrochemical sectors. North American Refining Refining capacity in North America is expected to remain relatively flat from 2015 to Demand for refined products is expected to be 16 million bpd, or 76 percent of the projected refining capacity in Considering required downtime, the IEA projects North American refining capacity could exceed North American demand by 3.7 million bpd in Refining and Marketing - Potential Risks and Opportunities The primary risk to our Refining and Marketing segment is decreased consumer demand for traditional transportation fuels in many OECD countries, including the U.S., due to higher CAFE standards, increased market share of electric vehicles, replacement with biofuels or increased costs as a result of regulation. The IEA s New Policies Scenario and 450 Scenario incorporate these risks into the related projections for these scenarios. As we demonstrate in the following discussion, our Refining and Marketing segment is expected to remain successful even with the lower demand projected by these scenarios. The primary opportunity is increased demand for gasoline and diesel in many non-oecd countries. Our assets are favorably located for export to these countries. 4 The IEA did not supply a specific analysis of the refining sector in its 450 Scenario, but the IEA s transportation fuel demand projections indicate more refining capacity would be at risk in both North America and worldwide than in the New Policies Scenario. 12

13 ENERGY DEMAND UNDER THE CLIMATE-RELATED SCENARIOS Resiliency of U.S. Refining Operating costs are a critical component in the financial viability of a petroleum refinery. Refining operating costs depend on a number of factors, including energy costs, refinery size and complexity, utilization rates and labor rates. Energy costs in particular represent a significant portion of the overall operating costs of a petroleum refinery. The U.S. refining sector benefits from lower natural gas cost compared to its global competitors. Lower energy costs translate into lower overall production costs of transportation fuels as reflected in the graph to the right. These favorable energy cost differentials are greater than the regional transportation costs, which enables the U.S. refining sector to export transportation fuels to other countries and regions, including Asia, Mexico, Central America, South America, Africa and Europe. Costs to produce transportation fuels ($U.S./bbl) North America Refining Cost Advantage Middle East Europe North America Cumulative crude oil distillation capacity (million bpd) HSB Solomon Associates 2016 Fuels Study Latin America As shown to the right, this trade flow advantage is confirmed by recent data of U.S. transportation fuel exports. Export volumes have steadily increased in recent years, with the majority of these exports originating at refineries located in the Gulf Coast region of the U.S. due to their proximity to the Gulf of Mexico and world-class export docks. 2,500 2,000 U.S. Exports of Transportation Fuels Diesel/Kerosene Gasoline Consistent with many other forecasts, the IEA projects the U.S. will continue to maintain lower natural gas prices through 2040 compared to other global regions, even in the carbon-constrained 450 Scenario. As a result, the U.S. refining sector should continue to maintain the flexibility and cost advantages to export transportation fuels to various global markets, including those non-oecd countries forecast by the IEA to have transportation fuel demand growth even in the carbonconstrained 450 Scenario. Thousand bpd 1,500 1, U.S. Energy Information Administration 13

14 ENERGY DEMAND UNDER THE CLIMATE-RELATED SCENARIOS Resiliency of MPC Refining For an outside perspective, we retained HSB Solomon Associates to evaluate the resiliency of our refineries against the projections in the New Policies Scenario and 450 Scenario. HSB Solomon Associates is uniquely qualified to perform this analysis because it has cost and production data for nearly 85 percent of worldwide refineries through its biannual Fuels Studies. 5 The key assumptions and factors considered in their analysis were as follows: Refineries with high costs to produce transportation fuels and low net cash margins would cease operation in lieu of the entire refining sector operating at lower utilization rates. Regional trade flows of transportation fuels were considered. Refinery-specific production costs and other data were utilized from the HSB Solomon Associates' latest worldwide Fuels Study in The transportation fuel demands projected in the New Policies Scenario and 450 Scenario were used. HSB Solomon Associates concluded that all of MPC's refineries would be cost-competitive, even in the carbonconstrained 450 Scenario. This is due to the U.S. cost advantages discussed on the previous page, as well as our cost competitiveness relative to other U.S. refiners. Key examples of our commitment to implement strategies that align with IEA s product demand projections include: We are continuing to execute a strategic plan to more than double the export capacity from our U.S. Gulf Coast refineries to over 510,000 bpd of transportation fuels by the end of This provides us with added flexibility to market nearly 30 percent of our gasoline and distillate in other regions like Asia, Central and South America, Europe and Africa, including the non-oecd countries that have forecast increased transportation fuel demand through 2040, even in the IEA s carbon-constrained 450 Scenario. We are further optimizing finished distillate and jet fuel production at our U.S. Gulf Coast refineries over the next five years. This is expected to increase finished distillate production by more than 11 percent company-wide, without a material increase in crude oil throughput. Given the projected viability of our refining operations in a hypothetical lower-carbon economy, other facets of our operations stand to similarly benefit. For example, our logistics assets including the storage and transportation assets in our Midstream segment will continue to be integral to our refining business, even in the carbon-constrained 450 Scenario. Thousand bpd MPC Light-Product Export Capacity (projected)

15 ENERGY DEMAND UNDER THE CLIMATE-RELATED SCENARIOS MPC Renewable Fuels In making the following projections about biofuels production and consumption, the IEA noted that while advanced biofuels "promise to provide a sustainable pathway to raising total biofuels production, [they] have to overcome major challenges to become available on the scale required by the 450 Scenario." 6 The New Policies Scenario and 450 Scenario project biofuel demand will increase by 2.6 million and 7.4 million bpd on an energy equivalent basis to gasoline and diesel, respectively, from 2014 to This is an increase of 462 percent under the 450 Scenario. The majority of this production increase is expected to come from advanced biofuel (i.e., cellulosic) which is not projected to occur until after 2025 with anticipated advancements in technology that would allow for production of advanced biofuels at scale. % increase from 2014 Levels Projected Worldwide Biofuels Production Current Policy New Policies 450 ppmv Adapted from IEA, 2016 World Energy Outlook In the 450 Scenario, biofuels will displace 6.1 million bpd of oil equivalent in highway use and 2 million bpd in aviation use. 7 MPC has made significant investments in the production and blending of renewable fuels as part of our overall business strategy: We hold equity ownership in three corn ethanol plants with a total production capacity of 410 million gallons per year. We own and operate a facility in Cincinnati, Ohio, that produces biodiesel from soybean oil and methanol. We have nearly completed an expansion that will increase capacity of the plant to approximately 90 million gallons per year, making it one of the five largest biodiesel plants in the U.S. We sell a significant amount of biofuels throughout our Speedway retail network (see next page for details), as well as on the wholesale market and through Marathon brand locations. We support advanced biofuels research through our equity ownership in Enchi Corporation, which is developing proprietary technology related to bioprocessing of corn fiber to produce cellulosic ethanol. 6 International Energy Agency, 2016 World Energy Outlook. 7 The IEA cautions that although biofuels show some promise for aviation fuels, they have not been demonstrated at scale. As a result, if the targets are not achieved, conventional aviation fuel would displace the biofuels projections. 15

16 ENERGY DEMAND UNDER THE CLIMATE-RELATED SCENARIOS SPEEDWAY IEA Demand Projections Based on the IEA s demand projections under the New Policies Scenario and 450 Scenario, the type and volume of fuel sold at Speedway retail locations could be impacted: By 2040, the New Policies Scenario and 450 Scenario project a 22 percent and 43 percent reduction, respectively, in total liquid fuel consumption within the U.S. transportation sector, with the largest potential reductions occurring after The projected decrease in demand is driven by the CAFE standards and the number of electric vehicles predicted to enter the transportation fleet. The New Policies Scenario and 450 Scenario project more than a twofold increase in the amount of biofuels in the U.S. road transport fleet from 2014 to The increased volumes would increase the share of biofuels in the U.S. road transport sector. For instance, the New Policies Scenario projects an increase to 16 percent from 6 percent. Speedway - Potential Risks and Opportunities One of the primary risks to Speedway's profitability is reduced consumer demand for traditional transportation fuels, which could reduce revenue from light-product sales at our retail locations. Further, we may need to make additional investments at retail locations to accommodate increased demand for biofuels. The IEA's biofuel projections, however, provide an opportunity to broaden our Speedway brand customer base by increasing our offerings of biofuels. Speedway Resiliency We have adopted strategic measures that will support the continued success of our Speedway operations in a carbon-constrained environment. Systems and resources are in place to be quick-to-market and an industry leader in offering different fueling options to the customer, including those consistent with IEA s biofuel projections. Some recent examples that demonstrate these capabilities include: Ì Ethanol flex fuel: Fuels that contain high percentages of ethanol are currently sold at over 330 Speedway retail locations, or 12 percent of our portfolio. Data from the U.S. Department of Energy (DOE) indicates Speedway is currently operating over 11 percent of the U.S. retail locations that offer ethanol flex fuel. Ì Biodiesel: We offer diesel fuel with at least 11 percent biodiesel (referred to as B11) at more than 110 Speedway retail locations, and 20 percent biodiesel (referred to as B20) at select travel plaza centers through a joint venture. Ì Compressed natural gas: We offer compressed natural gas at select Speedway retail locations where there is consumer demand for the product. A Speedway store in Homer Glen, Illinois 16

17 ENERGY DEMAND UNDER THE CLIMATE-RELATED SCENARIOS The convenience stores are getting ahead thanks to a few distinct advantages over traditional fast-food chains. Because many of these stores double as gas stations and offer other groceries, they are one-stop shops rather than a singular destination like offered by [fast food chains]. Many of the stores offer a broader assortment than traditional fast-food chains as well, selling everything from pizza and hot dogs to subs and salads From the article: "An unlikely group of stores is becoming a major threat to [a fast-food franchise]," by Ashley Lutz, Business Insider, Jan. 15, 2017 Speedway is enhancing the variety of fresh and prepared foods offered at its stores, drawing customers independent of their fueling needs. We also have a multiyear strategic plan to increase in-store merchandise sales to boost overall gross margin. We are progressing toward this goal by offering an increasing variety of fresh and prepared food, and other grocery items at our Speedway retail locations, and through our ever-expanding Speedy Rewards loyalty program, which included 5.7 million active members as of year-end This strategic effort has established a loyal customer base that purchases food, beverages and other grocery and convenience items at Speedway retail locations even when not fueling their vehicles. 17

18 ENERGY DEMAND UNDER THE CLIMATE-RELATED SCENARIOS MIDSTREAM IEA Midstream Projections The IEA s projections for natural gas, NGLs and other feedstocks are as follows: Natural Gas: From 2014 through 2040, the New Policies Scenario and 450 Scenario both project an increase in worldwide natural gas production of 47 percent and 13 percent, respectively. Increased production is primarily driven by higher demand in the power, industrial and transportation sectors. The New Policies Scenario also projects U.S. natural gas production will increase by 31 percent from 2014 to A majority of this increase will result from increased shale gas and tight oil production. 8 % increase from 2014 levels Projected Worldwide Natural Gas Production Current Policy Scenario New Policies Scenario 450 Scenario Adapted from IEA, 2016 World Energy Outlook Refining Intermediates: Fractionated products from NGLs are expected to increase from 8.8 million to 10.6 million bpd from 2015 to 2040 under the New Policies Scenario. These NGLs are more cost-effective and energy-efficient to process at refineries than heavier crude grades. Petrochemical Feedstock: As shown to the right, worldwide demand for petrochemical feedstock is projected to increase by 47 percent from 2015 to 2040 under IEA s New Policies Scenario and 450 Scenario. IEA projected the same demand volumes under both scenarios because there are few viable non-hydrocarbon substitutes in the petrochemical industry. In the short to medium term, the U.S. petrochemical industry is projected to experience over 25 percent of the worldwide demand growth in petrochemical feedstocks due to the availability of low-cost natural gas and NGLs. Million bpd Projected Worldwide Petrochemical Feedstock Demand Adapted from IEA, 2016 World Energy Outlook The IEA noted additional demand for natural gas and renewable energy could occur by 2040 in the event carbon capture and sequestration (CCS) is not commercialized on a large-scale basis. The 450 Scenario currently assumes CCS will be installed on power plants that collectively produce 10 percent, or 430 gigawatts, of the world s electricity demand. 18

19 ENERGY DEMAND UNDER THE CLIMATE-RELATED SCENARIOS Midstream - Potential Risks and Opportunities The primary risks facing our Midstream segment, which includes MPLX, are as follows: Increased capital necessary to grow our natural gas business, increased methane emission regulation and reduced demand for traditional transportation fuels that are transported and stored by our logistics assets, including pipelines, terminals and marine fleet. Key opportunities in which we are positioned to take advantage of IEA's demand projections include: Our Midstream segment is particularly well-positioned to take advantage of increased natural gas and NGLs production that is projected by the IEA in all three of its scenarios. Currently, approximately 10 percent of the natural gas produced in the U.S. passes through our gas processing facilities. The increased petrochemical feedstock demand projected by the IEA will further strengthen increased demand for NGLs from our gas processing facilities. By having our transportation and storage assets integrated with our refining, gas processing and retail locations, we are able to act quickly and cost effectively to take advantage of market opportunities, such as being located in areas accessible to existing and planned liquefied natural gas (LNG) export facilities. Our Midstream Resiliency The New Policies Scenario projects the natural gas sector will experience worldwide investments of $9.4 trillion from 2016 to Around $2 trillion, or 21 percent, of these investments are expected to occur in the U.S. and Australia. Even in the carbon-constrained 450 Scenario, the natural gas sector is projected to experience worldwide investments of $7 trillion through One of our strategic goals is to grow our midstream infrastructure over the long term, including by 10 to 15 percent year-over-year in processed gas volumes and 15 to 20 percent year-over-year in fractionated liquid volumes in This growth will further strengthen MPLX's position as the largest processor and fractionator in the prolific Marcellus and Utica shale plays, two of the primary areas in which IEA has projected the growth in U.S. natural gas production. In addition, the increased U.S. natural gas production can be marketed globally due to the significant number of existing and planned LNG export facilities in the U.S. In fact, IEA projects that the U.S., a net importer of natural gas in 2014, will be a net exporter of natural gas in Given the projected viability of our refining operations discussed in the preceding section, our logistics assets including storage and transportation assets will continue to transport feedstocks and products to and from our refineries. Further, as NGL production from our gas plants continues, our logistics assets will be used to store and transport these products to market. MPLX's Sherwood natural gas processing complex in West Virginia 19

20 PERFORMANCE METRICS AND ENERGY EFFICIENCY Part of MPC's 450-acre certified wildlife habitat in Garyville, Louisiana In addition to analyzing risks and opportunities under different climaterelated scenarios, we evaluate risks and opportunities associated with GHG emissions reductions and energy efficiency. The following initiatives exemplify our commitment to reducing GHG emissions. Energy Efficiency As highlighted in our scenario analyses, MPC considers energy efficiency to be a climate-related opportunity with both environmental and financial benefits. We have established multiple programs to improve energy efficiency across our assets, including the measurement of energy efficiency using the HSB Solomon Associates Energy Intensity Index (EII ) and the real-time monitoring of our transport trucks' and marine fleet's traveling speeds to minimize fuel combustion and ensure the safety of our employees. These energy-efficiency programs and associated metrics have achieved best-in-class performance with numerous U.S. Environmental Protection Agency (EPA) certifications and endorsements through the ENERGY STAR and SmartWay Programs. Energy efficiency needs to be at the heart of any strategy to guarantee secure, sustainable and inclusive economic growth. It is one of the most cost-effective ways to enhance security of energy supply, to boost businesses competitiveness and to reduce the environmental burden of the energy system... it is possible to say with confidence that a sustained decoupling of CO2 emissions from economic growth will not happen without major gains in energy efficiency. International Energy Agency, 2016 World Energy Outlook PERSPECTIVES ON CLIMATE-RELATED CLIMATE-CHANGE SCENARIOS RISKS AND OPPORTUNITIES 20

21 PERFORMANCE METRICS AND ENERGY EFFICIENCY ENERGY EFFICIENCY AT OUR REFINERIES Our Refining business is the source of roughly 70 percent of our direct and indirect GHG emissions. Thus, even small gains in energy efficiency at our refineries have a significant impact on overall company emissions. In addition, after crude oil, energy is the single largest expense for our refineries, so there is ample economic incentive to be as energy-efficient as practicable. In 2010, we established a Focus on Energy initiative to bolster our commitment to improving efficiency of our existing installations. As part of this initiative, a team of dedicated energy specialists was formed to execute the following: In 2016, our Garyville, Louisiana refinery was the third most energy-efficient refinery in the U.S. based on EII as determined by HSB Solomon Associates. Track and communicate nearly 600 individual energy metrics system-wide that influence our EII scores. Ensure energy efficiency is designed into, and EII impacts are evaluated for, proposed capital and expense projects Identify and implement energy-efficiency improvements at each refinery, including multiyear programs to enhance insulation, steam system performance and heat integration. By tracking these metrics in real time, we ensure that we continually focus on energy. Through this focus, our refineries have achieved significant energy-efficiency improvements and performance. For example, based on HSB Solomon Associates' 2016 Fuels Study of the U.S. Refining Sector, three of our refineries have the best EII performance for their size and complexity, two more of our refineries achieved top quartile EII performance for their size and complexity, and the remaining two refineries achieved more than a 5 percent improvement in their EII score since The EII is also one of the key metrics reviewed by our Refining Leadership and Executive Leadership teams as an ongoing measure of our performance. The EPA also utilizes the EII metric as one of its eligibility criteria for refineries seeking recognition in its ENERGY STAR Program. Only those refineries that meet the following criteria qualify: An EII score within the top 25 percent of U.S. refineries of similar size, as certified by HSB Solomon Associates No significant, ongoing environmental enforcement actions or penalties EPA ENERGY STAR History Operating Year ---> Certification Year ---> Canton, Ohio MPC MPC MPC MPC MPC MPC MPC MPC MPC MPC MPC Detroit, Michigan MPC MPC MPC MPC MPC MPC Garyville, Louisiana MPC MPC MPC MPC MPC MPC MPC MPC MPC MPC MPC Robinson, Illinois MPC MPC MPC Texas City, Texas MPC MPC MPC MPC MPC All Other U.S. Refineries Total Awards (MPC) = Total Awards (Others) = 12 As shown on the above chart, MPC is the industry leader in recognition under the ENERGY STAR Program, having earned 36 of the 48 total recognitions awarded to U.S. refineries. This represents 75 percent of such recognitions an overwhelmingly large share, considering our refineries represent approximately 10 percent of the total U.S. refining capacity. In addition, our Canton, Ohio, and Garyville, Louisiana, refineries have earned ENERGY STAR recognition every year of the program's existence the only refineries in the nation with this distinction. 21

22 PERFORMANCE METRICS AND ENERGY EFFICIENCY ENERGY EFFICIENCY AT OUR BIODIESEL FACILITY Beyond our refineries, we are making strides in energy efficiency metrics at other locations. For example, in April 2017, the EPA recognized our Cincinnati, Ohio, biodiesel plant for achieving the ENERGY STAR Challenge for Industry, which recognizes plants that achieve at least a 10 percent reduction in energy intensity within five years. We achieved an energy intensity reduction of 30.7 percent within one year, reducing GHG emissions by nearly 2,000 metric tons while increasing throughput by 28 percent. This accomplishment is even more significant given we have owned the plant only since TRANSPORTATION FLEET EFFICIENCY Our Terminal, Transport and Rail (TT&R) business is a partner company in the EPA s SmartWay Transport Partnership, which recognizes the best-performing freight carriers for GHG efficiency. To achieve this milestone, TT&R began installing low rolling resistant tires along with other aerodynamic improvements, such as modified mud flaps. TT&R also installed DriveCam and GEOTAB driver-assist systems that monitor and moderate driver behavior (such as fast acceleration, hard braking, speed and excessive idling) to ensure our vehicle fleets are not only operated safely, but also more efficiently. Finally, TT&R has optimized delivery routes to minimize transport of empty loads. These improvements reduce overall fuel usage, lowering GHG emissions. MARINE FLEET EFFICIENCY Beginning in 2015, our Marine business implemented a fuel optimization program. Marine determined that the majority of its fuel consumption occurred while vessels were operating at higher speeds. By moderating speed as little as 1 to 2 mph, on average, Marine projected it could reduce fuel consumption between 10 and 20 percent. By implementing a default speed limit and a real-time dashboard for captains to track key performance metrics, fuel efficiency increased by approximately 20 percent during 2016, the first full year of the program. This saved roughly 1.2 million gallons of diesel fuel in 2016 alone, avoiding approximately 12,000 metric tons of GHG emissions. 22

23 PERFORMANCE METRICS AND ENERGY EFFICIENCY RESEARCH ON AUTOMOBILE ENGINE EFFICIENCY We are collaborating with Argonne National Laboratory (part of the DOE) to conduct research toward achieving greater automobile engine efficiency. As the number of gasoline and dieselpowered vehicles is projected to increase worldwide, engine efficiency is a key GHG emissions-reduction strategy. The collaboration between MPC and Argonne National Laboratory brings together experts on fuel design, and advanced engine combustion and emissions formation. Through this joint effort, which supports the Co-Optimization of Fuels and Engines initiative launched by the DOE Vehicle Technologies and Bioenergy Technologies Offices, researchers hope to make substantial gains in efficiencies that could not be achieved by studying engines or fuels separately. EXPLORING RENEWABLE ENERGY Director of the Argonne National Laboratory Energy Sciences Division Don Hillebrand, left, and Fred Walas, Fuels Technology manager at MPC, at the company s Refining Analytical Development Facility in Catlettsburg, Kentucky. We continue to actively explore the potential to use renewable energy at our facilities. In 2012, we installed a 6,000-panel solar array at the Municipal Water Pollution Control Center in Findlay, Ohio. In 2016, we installed a wind turbine at our pipeline station in Harpster, Ohio, to study whether wind power could provide the needed reliability that the current electric grid provides, as an option to be deployed at other facilities. MPC's wind turbine located at our pipeline station in Harpster, Ohio 23

24 PERFORMANCE METRICS AND ENERGY EFFICIENCY GHG Emission Reductions REDUCTIONS FROM ENERGY EFFICIENCY Our energy-efficiency efforts have enabled us to avoid emitting millions of tons of GHGs per year. Our refineries have reduced GHG intensity (the amount of emissions for a given quantity of product manufactured) by approximately 16 percent since 2002 while increasing overall throughput by more than 400,000 bpd. This means since 2002, we added the equivalent capacity of the eighth-largest refinery in the U.S. without significantly increasing GHG emissions over 2002 levels. This is an extraordinary accomplishment and demonstrates the effectiveness of energy optimization and efficiency improvements in reducing GHG emissions. We have effectively avoided emitting millions of metric tons of GHGs as our GHG intensity has decreased. REDUCING FLARING EMISSIONS We are an industry leader in reducing emissions from refinery flares. As part of the EPA s refinery flare enforcement initiative, we collaborated with the EPA to define a series of operating parameters that ensure flares continuously operate above 98 percent combustion efficiency. We were the first company to produce and publish the results of our own flare performance tests, setting the standard for the use of new measurement techniques and technologies to characterize and reduce emissions from industrial flares. Subsequently, we entered into an agreement with the EPA to reduce flaring emissions at our refineries. The agreement includes provisions for source reduction (preventing gases from entering the flare system) and installation of systems that recover waste gas that has entered the flare system so it can be put to beneficial use as fuel gas within the refinery. Recovering these gases reduces reliance on purchased natural gas, lowering overall GHG emissions. The agreement also includes waste gas caps that ensure levels of flaring will remain low into the future. GHG metric tons/bbl of throughput MPC Refinery Greenhouse Gas Intensity Baseline 2002 data includes estimated GHG emissions and throughput for the Galveston Bay Refinery prior to MPC ownership. Million metric tons GHG MPC Refinery Greenhouse Gas Emissions (Direct & Indirect) Baseline GHG Emissions Throughput 2002 data includes estimated GHG emissions and throughput for the Galveston Bay Refinery prior to MPC ownership. Today s agreement will result in cleaner air for communities across the South and Midwest. By working with EPA, Marathon helped advance new approaches that reduce air pollution and improve efficiency at its refineries and provide the U.S. with new knowledge to bring similar improvements in air quality to other communities across the nation. Cynthia Giles, former assistant administrator for EPA s Office of Enforcement and Compliance Assurance, April Throughput (millions of bbls) 24

25 PERFORMANCE METRICS AND ENERGY EFFICIENCY By the end of 2016, our flare efficiency improvements resulted in an 87 percent reduction in emissions of volatile organic compounds, an 85 percent reduction in emissions of hazardous air pollutants, and a 51 percent reduction in GHG emissions from 2007 levels, which was the baseline year for the flare performance studies. Flare gas recovery systems are currently being installed at three additional refineries, and all are scheduled to be operational by the end of 2018, resulting in further GHG emission reductions. In total, we expect to invest more than $375 million on projects that reduce flaring. RECOVERING OFF-GASES FOR PETROCHEMICAL FEEDSTOCK Over the past several years, we implemented projects at our Garyville, Louisiana, refinery, and our Galveston Bay refinery in Texas City, Texas, to recover off-gas from multiple refinery process units. Process off-gases, which include large volumes of ethylene, ethane and heavier materials, were previously sent to fuel gas systems and used as fuel in heaters and boilers throughout the refineries. With these recent projects, the gases are now isolated and sold as petrochemical feedstock the building blocks for plastics and other valuable products at a premium over the equivalent cost of fuel gas. By removing these more GHG-intensive materials from the fuel gas system and replacing them with natural gas, we have reduced overall GHG emissions by over 100,000 metric tons. REDUCING FUGITIVE METHANE EMISSIONS Hydrocarbons (Tons) 8,000 6,000 4,000 2,000 MPC Refinery Flare Emission Reductions In accordance with the Paris Agreement, the U.S. included methane emission reductions from the oil and gas sector as part of its Nationally Determined Contributions. Despite the U.S. announcing its intent to withdraw from the Paris Agreement, these reductions were modeled as part of the IEA s New Policies Scenario and 450 Scenario. Over the past several years, we worked with the EPA to identify ways to reduce fugitive emissions from our operations. We have agreed to implement enhanced leak detection and repair practices at our largest gas processing and fractionation facilities, along with implementing design modifications to select high-pressure maintenance-related stations Baseline Hydrocarbon Greenhouse Gas Flaring emissions, including GHG, have decreased dramatically since Greenhouse Gas (metric tons x 100,000) MPLX's Hopedale natural gas processing complex in Ohio 25

26 MPC's refinery in Robinson, Illinois PHYSICAL RISKS TO OUR FACILITIES With a 130-year history of successful operations in the energy business, we have mature systems in place to manage both the potential acute physical risks, such as floods and hurricane-force winds, and chronic physical risks, such as higher ocean levels. Part of our approach is to assume these risks and the technologies and processes available to mitigate them constantly evolve, requiring us to be flexible and vigilant. In 2010, the DOE issued a report in response to the 2005 and 2008 hurricane seasons, in which it identified best practices to prevent or minimize damage from hurricanes or floods. We have been assessing our assets against the best practices covered by this and other reports issued by the DOE. 9 Specifically, where appropriate, we are hardening and modernizing assets against flood and wind damage and ensuring we have resiliency measures in place, such as storm-specific readiness plans. Hardening and Modernizing: Steps We Have Taken With refineries, pipelines, dock facilities and other assets in areas periodically subjected to extreme weather, we have ample operational, safety, environmental and financial reasons to harden against damage and ensure resiliency. Some measures we have implemented are described in this section. CONTROL ROOMS AND OTHER CRITICAL BUILDINGS In 2007, we began a modernization program to address the siting, projected growth needs and enhanced protection needs of control rooms, which provide centralized monitoring and control functions at refineries, and other critical buildings at our refineries, especially those on the U.S. Gulf Coast due to their 9 U.S. Department of Energy, Hardening and Resiliency: U.S. Energy Industry Response to Recent Hurricane Seasons (August 2010) available at The DOE has published several additional reports to supplement the 2010 report. These are available for download at 26

27 PHYSICAL RISKS TO OUR FACILITIES The control room at MPC s Galveston Bay refinery in Texas City, Texas, is designed to withstand a Category 5 hurricane and flooding. exposure to hurricanes. We have upgraded control rooms and other critical buildings at our refineries in Garyville and Texas City, including building two new, state-of-theart control rooms that are elevated above grade to avoid flood damage and built to withstand wind and storm surges characteristic of the most extreme weather in their locations. For instance, the Galveston Bay refinery operations control center is built to withstand winds from a Category 5 hurricane. ELECTRICAL INFRASTRUCTURE AND POWER SUPPLY We are proactively implementing a multiyear program to replace and upgrade electrical infrastructure at our refineries. Improvements include, but are not limited to, cable replacement, high-resistance ground installations, combining substations, installing new safety features and elevating infrastructure to avoid flooding. Our refineries on the U.S. Gulf Coast each have redundant power supplies, and historically have experienced few problems maintaining power during severe weather events, including hurricanes. Our other facilities historically exposed to hurricanes or other severe weather such as fuel terminals and pipeline stations elevate power infrastructure above historic flood levels and maintain a combination of on-site generators and contracts for rapid procurement of generators in the event of power loss. Notably, all of our operations in the greater Houston area maintained power throughout Hurricane Harvey and its aftermath. FLOOD CONTROL Our refineries on the U.S. Gulf Coast are also protected from storm surges, and high waves and flooding by infrastructure currently in place, with more being planned. Our refinery in Texas City is already well-protected by a levee, ranging in height from 19 to 23 feet, which protects 36 square miles of land in the Texas City area. This levee has provided adequate protection through several storms, including Hurricane Ike in 2008, which was accompanied by an unprecedented Category 4 storm surge, and Hurricane Harvey in 2017, which was accompanied by record rainfall and region-wide flooding. Neither of these major storm events caused any significant flood or wind damage to our Texas City, Texas, operations. For instance, during Hurricane Harvey in 2017, our Galveston Bay refinery continued to operate throughout the storm, albeit at reduced rates due to interruptions at the ports and pipelines that supply crude to the refinery and transport finished products from the refinery. Because the storm did not directly cause the refinery to shut down, we were able to quickly increase throughput as ports and pipelines re-opened. Our Garyville refinery is favorably located on a local high point, which provides a natural barrier to flooding. The refinery is also protected by a levee along the Mississippi River and is near several spillways both upstream and downstream of the refinery. An additional 18-mile levee system called the West Shore Lake Pontchartrain Hurricane and Storm Damage Risk Reduction System is planned to be built by the Pontchartrain Levee District with federal and local funding to protect areas around the refinery from a storm surge in Lake Pontchartrain. Beyond government initiatives, we have implemented safeguards at our U.S. Gulf Coast facilities, including locating most pumps and compressors on foundations above grade and adopting hurricane preparedness measures that are implemented well before a storm has a chance to impact operations. 27

28 PHYSICAL RISKS TO OUR FACILITIES Resiliency Measures: Emergency Preparedness & Response Our Emergency Preparedness Group plans and maintains our ongoing ability to respond rapidly and appropriately to emergency incidents anywhere the company has operations. Our Corporate Emergency Response Team (CERT) is comprised of about 160 professionals throughout the company with response expertise and training in the Incident Command System, a globally recognized organizational structure providing for the development of plans and the integration of all resources across multiple agencies and organizations to respond to any emergency event. Tier III CERT Tier II Area/Region/Refinery Management Team Tier I Local Site Tier III Response Assures total corporate manpower, resources, support and response-management available Tier II Response Teams developed where Tier III support may not be readily available Bridges gap in response timing for incidents too large for the Tier I team Tier I Response Local response team Consists of corporate, contractor and consultant resources CERT members participate in an annual training exercise, simulating an incident that significantly impacts our operations, the environment and the community. As in a real incident, CERT drills involve federal organizations, such as the EPA or the U.S. Coast Guard; state environmental protection or wildlife agencies; and local emergency responders, such as fire departments and law enforcement. In addition to the CERT, our operational locations maintain site-specific emergency preparedness and response plans. Refineries and other facilities also identify crews to secure the facility when a weather event is imminent, and a team to resume normal facility operation after a storm passes. These location-specific response plans are also subject to regular drills to ensure they can be executed in the event of a real incident. We have gone to great lengths to maintain our operations throughout severe weather and to quickly recover. We have agreements in place for alternate workspace, necessary office equipment and multiple means to maintain internet and telephone connectivity, even during prolonged power outages. We have agreements for needed supplies like generators, repair materials, water and more. We maintain an emergency mass-notification system to provide information to, and receive information from, personnel before, during and after an emergency. This information is vital to providing humanitarian aid to our personnel and contractors. We also have a Business Recovery Team (BRT) that responds during emergency situations to maintain transportation fuel supplies to affected areas. The BRT coordinates supplies and transportation methods throughout our operational areas to meet the company s contractual obligations. The team s efforts also help ensure fuel supplies to affected areas, which facilitate recovery efforts and enable daily life and normal operations to resume as quickly as possible. MPC's Corporate Emergency Response Team at a strategy meeting during its response to Hurricane Harvey's landfall in Texas 28

29 PHYSICAL RISKS TO OUR FACILITIES HURRICANE HARVEY RESPONSE In late August 2017, Hurricane Harvey hit the Texas Gulf Coast, bringing unprecedented rainfall and flooding that affected a wide area, including our Texas City, Texas, refining, pipeline and other logistics operations, and an affiliate gas processing plant in Corpus Christi, Texas. Before Hurricane Harvey made landfall, our CERT was activated and began staging tractor-trailers full of food, water, fuel and other supplies employees and others would need in the aftermath of the storm. We procured dozens of hotel rooms and more than 100 apartments to accommodate employees displaced by the storm and its flooding. After the storm, teams of MPC volunteers staffed a distribution center and helped to stabilize their fellow employees' flood-damaged homes. We also provided food and other essentials to a home for developmentally disabled adults, the Texas City Emergency Operating Center, and to charitable organizations that were helping flood victims. Our employees provided hot meals to law enforcement officers, and delivered meals to flood victims at their homes. MPC donated $1 million to local municipalities and charities to aid with storm recovery, and pledged to match up to another $100,000 of employee contributions. Throughout the storm and recovery efforts, our refineries did not experience any material flooding or damage from Hurricane Harvey but did operate at a reduced operating rate for a few days to enable pipelines and marine vessels to resume normal operation. HURRICANE IRMA RESPONSE In September 2017, Hurricane Irma struck Florida, leading to one of the largest mass evacuations in U.S. history. Before Hurricane Irma made landfall, our CERT and BRT were activated, working closely with authorities in Florida, Georgia and South Carolina to ensure fuel supplies were maintained during the mandatory evacuations as well as during recovery efforts immediately after the storm passed. We also began staging tractor-trailers full of food, water, fuel and other supplies and, after the storm, distributed the supplies from our Florida terminals to affected employees. Our logistics team contracted with additional third-party transport carriers to supply as much fuel as possible to Speedway and Marathon brand stations along the evacuation routes. We also delivered fuel using our marine fleet from our U.S. Gulf Coast refineries to maintain supply at our terminals. We worked with local authorities and store managers to keep our Speedway stores open as long as possible to ensure that every citizen had a chance to evacuate. We also staged fuel trucks for quick deployment once the storm passed to ensure fuel availability for recovery efforts as evacuees returned. In addition to ensuring adequate fuel supplies, our Speedway organization deployed 36 generators for stores along the evacuation and return routes in areas that had lost power. As power was restored, the generators were redeployed to other stores, prioritizing locations where power was most needed. Within three days of the storm s passing, 98 percent of the 241 Speedway stores in Florida were operating. All of our light-products terminals in Florida are also equipped with backup generators on site. When our Tampa terminal lost power, we were able to quickly restore power using the backup generators so that fuel was quickly available after the storm passed. Notably, none of our terminals sustained any material damage from the storm. In addition, only three Speedway stores sustained material damage. However, because some of our employees were affected, we staffed a distribution center at each of our terminals to provide food and supplies to employees in need. Speedway donated $250,000 to local charities that were providing storm recovery assistance, and we also donated supplies to several organizations helping people in the storm's aftermath. 29

30 CONCLUSIONS Conclusions With the continuing global demand for oil and gas, MPC is positioned to remain a successful company well into the future, even under the IEA s hypothetical 450 Scenario. Our Board of Directors and Executive Leadership Team will continue to enhance our climate-related strategies using the framework of the TCFD's recommendations, including the use of scenario planning. We believe our mature governance and risk-management processes enable the company to effectively monitor and adjust to the physical risks and transitional risks associated with a carbon-constrained future. The following strategies highlight areas in which we can continue to effectively mitigate potential climate-related risks and take advantage of the potential climate-related opportunities that may present themselves: Continue to improve energy efficiency of our refineries and other assets. Energy efficiency is one of our key metrics and strategies, and is a necessary element of both the New Policies Scenario and 450 Scenario. Improved energy efficiency also makes economic sense and can make companies more cost-competitive. Continue the steady growth of our midstream assets. Demand for natural gas and NGLs is expected to grow through 2040 under both IEA scenarios, and we are well-positioned to take advantage of that growth. Further increase gasoline and distillate export capacity at our U.S. Gulf Coast refineries. This strategy will enable us to market more than 30 percent of our gasoline and distillate production in other areas of the world, including non- OECD countries where demand for transportation fuel is expected to increase in both the short and long term, even in the 450 Scenario. Continue to optimize distillate production at our refineries. Even in the carbon-constrained 450 Scenario, the IEA notes alternatives to hydrocarbons are scarce in the freight and aviation sectors. Continue to execute a strategy to increase in-store gross margins at our Speedway retail locations through prepared food and merchandise sales. We budget for prospective costs of climate regulations in our business and strategic planning and our approval of capital project allocations. By ensuring our refineries, midstream assets, marketing systems and retail stores are competitive and efficient, we expect to be in a superior position to meet demand, even in a carbon-constrained future. A light-product storage tank at MPC's Galveston Bay refinery in Texas City, Texas 30

31 Forward-Looking Statements This publication includes forward-looking statements. You can identify our forwardlooking statements by words such as anticipate, believe, design, estimate, expect, forecast, goal, guidance, imply, intend, objective, opportunity, outlook, plan, position, pursue, prospective, predict, project, potential, seek, strategy, target, could, may, should, would, will or other similar expressions that convey the uncertainty of future events or outcomes. Such forward-looking statements are not guarantees of future performance and are subject to risks, uncertainties and other factors, some of which are beyond the company s control and are difficult to predict. Factors that could cause our actual results to differ materially from those implied in the forwardlooking statements include: adverse changes in laws including with respect to tax and regulatory matters; changes to the expected construction costs and timing of projects; continued/further volatility in and/or degradation of market and industry conditions; the availability and pricing of crude oil and other feedstocks; slower growth in domestic and Canadian crude supply; the effects of the lifting of the U.S. crude oil export ban; completion of pipeline capacity to areas outside the U.S. Midwest; consumer demand for refined products; transportation logistics; the reliability of processing units and other equipment; MPC's ability to successfully implement growth opportunities; modifications to MPLX earnings and distribution growth objectives, and other risks associated with MPLX; compliance with federal and state environmental, economic, health and safety, energy and other policies and regulations, including the cost of compliance with the Renewable Fuel Standard, and/ or enforcement actions initiated thereunder; adverse results in litigation; changes to MPC's capital budget; other risk factors inherent to MPC's industry; and the factors set forth under the heading Risk Factors in MPC's Annual Report on Form 10-K for the year ended Dec. 31, 2016, filed with Securities and Exchange Commission (SEC). Copies of MPC's Form 10-K are available on the SEC website, MPC's website at or by contacting MPC's Investor Relations office. 31

32