Adams Resources (AE) Risk Analysis

Litigation relating to the Merger may be filed against us and our Board of Directors. Among other remedies, these claimants could seek damages and/or seek to enjoin the Merger and the other transactions contemplated by the Merger Agreement. The outcome of any litigation is uncertain and any such lawsuits could prevent or delay the completion of the Merger and result in significant costs. Any such actions may create uncertainty relating to the Merger and may be costly and distracting to management.

More stringent laws and regulations relating to climate change and GHGs may be adopted which could cause us to incur material expenses to comply with such laws and regulations. In 2014, the U.S. Supreme Court upheld the EPA's authority to regulate GHG emissions. Pursuant to EPA regulations, a permit governing GHG emission may be required, in conjunction with authorization of emissions of other pollutants. The EPA also requires, pursuant to its GHG Reporting Rule, specified large GHG emission sources to report their GHG emissions. Regulated sources include, without limitation, onshore and offshore crude oil and natural gas production facilities and onshore crude oil and natural gas processing, transmission, storage and distribution facilities. Reporting of GHG emissions from such large facilities is required on an annual basis. We do not presently operate any such large GHG emissions sources, but if we were to do so, we would incur costs associated with evaluating and meeting this reporting obligation. Our industry is subject to regular enactment of new or amended federal, state, and local environmental health and safety statutes, regulation, and ballot initiatives, as well as judicial decisions interpreting these requirements, which have become more stringent over time. We expect these trends to continue, which could lead to material increases in our costs for future environmental, health, and safety compliance. These requirements may also impose substantial capital and operating costs and operational limitations on us and may adversely affect our business. Regulation of methane and volatile organic compound ("VOC") emissions has varied significantly between recent administrations, but regulation of these emissions is becoming increasingly stringent. Increased regulatory oversight by the EPA may result in increased compliance costs for our business. More directly, these costs may extend to our customers and the industry as a whole, which could lead to a diminution in our customers' business and their exploration and production activities, and ultimately detrimentally affect our business. Regulation of menthane and VOC emissions from oil and gas operation in particular is becoming more pervasive and comprehensive. In December 2023, EPA issued a final rule to further regulate methane emissions and VOCs from oil and gas industry sources-implementing regulations known as OOOOb and OOOOc. The rule includes a comprehensive suite of pollution reduction standards including, among others, the creation of a new New Source Performance Standard (NSPS) for oil and gas industry sources; a requirement that all well sites and compressor stations be routinely monitored for leaks; and the creation of what is known as a Super Emitter Program that authorizes third parties to remotely monitor regulated facilities and notify EPA when certain significant methane releases occur. Under OOOOb, a new NSPS includes generally more stringent standards for "new" emission sources not regulated previously under the previous rules-this being any facility constructed, reconstructed, or modified after December 6, 2022. Under OOOOc, the rule includes the first oil and gas emission guidelines for existing sources, which requires states to enforce standards largely consistent with those of Subpart OOOOb on existing oil and gas emissions sources. The state implementation plans are required to be submitted within two years of the rule's finalization and regulated entities will be required to comply within three years of the submittal deadline. These rules may require us and the industry to expend material sums on compliance, including equipment repair, replacement, and monitoring, which may reduce overall industry activity and demands which could have an adverse impact on our business. Further, states may adopt laws or regulations more stringent than the federal rules, which would remain in place regardless of the outcome of any federal rules stay or litigation, thus potentially causing additional impact on our business and the industry as a whole, which could adversely affect our business. The Bureau of Land Management ("BLM") has similarly promulgated proposed and final methane emission rulemakings, which also seek to reduce methane emissions from venting, flaring, and leaks during crude oil and natural gas operations on public lands. The increased regulation of the oil and gas industry's operations could adversely affect our business, our customers' business, and others. The heightened standards may increase the cost to our customers in delivering hydrocarbons and, as a result, may result in a diminution of product transported and our business generally. In addition, the U.S. Congress has considered legislation to reduce emissions of GHGs, and many states and regions have already taken legal measures to reduce or measure GHG emission levels, often involving the planned development of GHG emission inventories and/or regional cap and trade programs. Most of these cap and trade programs require major sources of emissions or major producers of fuels to acquire and surrender emission allowances. Generally, the number of allowances available for purchase is reduced each year in an effort to reduce overall GHG emissions, and the cost of these allowances could escalate significantly over time. In the markets in which we currently operate, our operations are not materially affected by such GHG cap and trade programs. On an international level, almost 200 nations agreed in December 2015 to an international climate change agreement in Paris, France that calls for countries to set their own GHG emissions targets and to be transparent about the measures each country will use to achieve its GHG emissions targets. Although the U.S. withdrew from the Paris accord in November 2020, it rejoined under the new administration in February 2021. Further, several states and local governments remain committed to the principles of the international climate agreement in their effectuation of policy and regulations. It is not possible at this time to predict how or when the U.S. might impose restrictions on GHGs as a result of the international climate change agreement. The adoption and implementation of any legislation or regulatory programs imposing GHG reporting obligations on, or limiting emissions of GHGs from, our equipment and operations could require us to incur costs to reduce emissions of GHGs associated with our operations including costs to operate and maintain our facilities, install new emission controls on our facilities, acquire allowances to authorize our GHG emissions, pay any taxes related to GHG emissions and administer and manage a GHG emissions program. Such programs also could adversely affect demand for the crude oil that we market and transport. Generally, the promulgation of climate change laws or regulations restricting or regulating GHG emissions from our operations could increase our costs to operate by increasing control technology requirements or changing regulatory obligations. In the United States, the EPA's current and proposed regulation of GHG emissions may result in an increased cost of our operations as well as that of our customers, which in either case could adversely affect our business. In addition to the regulation of operations, the SEC has adopted disclosure rules in March 2024 that will generally require public companies, after a transition period, to disclose climate-related risks and impacts, mitigation or adaptation activities, board oversight of climate-related risks, capitalized costs, expenses and losses incurred as a result of severe weather events and other natural conditions, and other climate-related information, and will require many public companies to monitor and report direct GHG emissions and indirect GHG emissions from the purchase of energy. Even though we will be exempt from the more onerous emissions-related disclosure requirements for so long as we continue to qualify as a "smaller reporting company," the rules may impose substantial compliance costs on our business, the impact of which we are currently unable to quantify.