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EPA฀for฀evaluation.฀The฀initial฀estimate฀for฀cleanup฀at฀the฀
Malone฀site฀is฀$82฀million;฀however,฀this฀is฀subject฀to฀
change฀since฀the฀final฀remedial฀plan฀has฀not฀been฀selected.฀
Our฀total฀contribution฀is฀estimated฀at฀approximately฀1.7%.
(h)฀ In฀January฀2003,฀Western฀Atlas฀International,฀Inc.,฀its฀pre-
decessor฀companies฀and฀Baker฀Hughes฀Oilfield฀Operations,฀
Inc.฀were฀identified฀as฀PRPs฀in฀the฀Gulf฀Nuclear฀Superfund฀
site฀in฀Odessa,฀Texas.฀The฀EPA฀conducted฀an฀emergency฀
removal฀at฀the฀site฀in฀2000.฀Total฀investigation฀and฀
cleanup฀costs฀are฀estimated฀by฀the฀EPA฀to฀be฀approxi-
mately฀$24฀million.฀A฀preliminary฀settlement฀proposal฀
has฀been฀issued฀for฀review,฀and฀our฀settlement฀cost฀is฀
not฀expected฀to฀be฀material.
(i)฀ In฀September฀2003,฀we฀were฀identified฀as฀a฀de฀minimis฀
PRP฀by฀the฀EPA฀for฀the฀Operating฀Industries,฀Inc.฀Super-
fund฀site฀in฀Monterrey฀Park,฀California.฀A฀settlement฀offer฀
to฀all฀de฀minimis฀parties฀was฀delayed,฀but฀is฀expected฀in฀
2005.฀The฀EPA฀and฀Steering฀Committee฀estimate฀cleanup฀
costs฀in฀excess฀of฀$650฀million.฀As฀of฀January฀2005,฀there฀
was฀insufficient฀information฀to฀estimate฀our฀potential฀con-
tribution฀to฀these฀cleanup฀costs.
(j)฀ In฀October฀2003,฀Baker฀Petrolite฀was฀notified฀by฀the฀EPA฀
of฀their฀potential฀involvement฀at฀the฀Cooper฀Drum฀Super-
fund฀site฀located฀in฀South฀Gate,฀California.฀At฀this฀time฀
there฀is฀no฀estimate฀available฀for฀cleanup฀costs฀and,฀
accordingly,฀there฀is฀insufficient฀information฀to฀estimate฀
our฀potential฀contribution.
(k)฀ In฀April฀2004,฀we฀were฀notified฀that฀Baker฀Petrolite฀was฀
included฀in฀the฀Container฀Recycling฀Superfund฀site฀in฀฀
Kansas฀City,฀Kansas.฀We฀are฀a฀major฀PRP฀at฀the฀site,฀which฀
was฀a฀former฀drum฀recycler฀used฀by฀a฀predecessor฀com-
pany฀to฀Baker฀Petrolite.฀The฀EPA฀estimates฀outstanding฀
remedial฀costs฀of฀$1.7฀million,฀with฀our฀contribution฀esti-
mated฀to฀be฀4%฀to฀7%฀of฀these฀costs.
In฀addition฀to฀the฀sites฀mentioned฀above,฀there฀are฀four฀
Superfund฀sites฀where฀we฀have฀ongoing฀obligations.฀The฀
remedial฀work฀at฀most฀of฀these฀sites฀has฀been฀completed฀
and฀remaining฀operations฀are฀limited฀to฀groundwater฀recovery฀
and/or฀monitoring.฀The฀monitoring฀phase฀can฀continue฀for฀up฀
to฀30฀years.฀Our฀aggregate฀cost฀for฀these฀sites฀is฀estimated฀to฀
be฀less฀than฀$0.1฀million฀over฀this฀period฀of฀time.
While฀PRPs฀in฀Superfund฀actions฀have฀joint฀and฀several฀lia-
bility฀for฀all฀costs฀of฀remediation,฀it฀is฀not฀possible฀at฀this฀time฀
to฀quantify฀our฀ultimate฀exposure฀because฀some฀of฀the฀proj-
ects฀are฀either฀in฀the฀investigative฀or฀early฀remediation฀stage.฀
Based฀upon฀current฀information,฀we฀do฀not฀believe฀that฀prob-
able฀or฀reasonably฀possible฀expenditures฀in฀connection฀with฀
the฀sites฀described฀above฀are฀likely฀to฀have฀a฀material฀adverse฀
effect฀on฀our฀consolidated฀financial฀statements฀because฀we฀
have฀established฀adequate฀reserves฀to฀cover฀the฀estimate฀we฀
presently฀believe฀will฀be฀our฀ultimate฀liability฀with฀respect฀to฀
the฀matter.฀Further,฀other฀PRPs฀involved฀in฀the฀sites฀have฀sub-
stantial฀assets฀and฀may฀reasonably฀be฀expected฀to฀pay฀their฀
share฀of฀the฀cost฀of฀remediation,฀and,฀in฀some฀circumstances,฀
we฀have฀insurance฀coverage฀or฀contractual฀indemnities฀from฀
third฀parties฀to฀cover฀the฀ultimate฀liability.
We฀are฀subject฀to฀various฀other฀governmental฀proceedings฀
and฀regulations,฀including฀foreign฀regulations,฀relating฀to฀envi-
ronmental฀matters,฀but฀we฀do฀not฀believe฀that฀any฀of฀these฀
matters฀is฀likely฀to฀have฀a฀material฀adverse฀effect฀on฀our฀
consolidated฀financial฀statements.฀See฀Note฀16฀of฀the฀Notes฀to฀
Consolidated฀Financial฀Statements฀in฀Item฀8฀herein฀for฀further฀
discussion฀of฀environmental฀matters.
“Environmental฀Matters”฀contains฀forward-looking฀state-
ments฀within฀the฀meaning฀of฀Section฀27A฀of฀the฀Securities฀Act฀
of฀1933,฀as฀amended,฀and฀Section฀21E฀of฀the฀Exchange฀Act฀
(each฀a฀“forward-looking฀statement”).฀The฀words฀“will,”฀
“believe,”฀“to฀be,”฀“expect,”฀“estimate”฀and฀similar฀expres-
sions฀are฀intended฀to฀identify฀forward-looking฀statements.฀
Our฀expectations฀regarding฀our฀compliance฀with฀Environmen-
tal฀Regulations฀and฀our฀expenditures฀to฀comply฀with฀Environ-
mental฀Regulations,฀including฀(without฀limitation)฀our฀capital฀
expenditures฀for฀environmental฀control฀equipment,฀are฀only฀our฀
forecasts฀regarding฀these฀matters.฀These฀forecasts฀may฀be฀sub-
stantially฀different฀from฀actual฀results,฀which฀may฀be฀affected฀by฀
the฀following฀factors:฀changes฀in฀Environmental฀Regulations;฀a฀
material฀change฀in฀our฀allocation฀or฀other฀unexpected,฀adverse฀
outcomes฀with฀respect฀to฀sites฀where฀we฀have฀been฀named฀as฀a฀
PRP,฀including฀(without฀limitation)฀the฀Superfund฀sites฀described฀
above;฀the฀discovery฀of฀new฀sites฀of฀which฀we฀are฀not฀aware฀
and฀where฀additional฀expenditures฀may฀be฀required฀to฀comply฀
with฀Environmental฀Regulations;฀an฀unexpected฀discharge฀of฀
hazardous฀materials฀in฀the฀course฀of฀our฀business฀or฀operations;฀
a฀catastrophic฀event฀causing฀discharges฀into฀the฀environment;฀
or฀an฀acquisition฀of฀one฀or฀more฀new฀businesses.
ITEM฀2.฀PROPERTIES
We฀are฀headquartered฀in฀Houston,฀Texas฀and฀operate฀
40฀principal฀manufacturing฀plants,฀all฀within฀the฀Oilfield฀฀
segment,฀ranging฀in฀size฀from฀approximately฀4,600฀to฀฀
333,000฀square฀feet฀of฀manufacturing฀space.฀The฀total฀area฀
of฀the฀plants฀is฀more฀than฀3.1฀million฀square฀feet,฀of฀which฀
approximately฀2.1฀million฀square฀feet฀(68%)฀are฀located฀in฀
the฀United฀States,฀0.3฀million฀square฀feet฀(9%)฀are฀located฀฀
in฀South฀America,฀0.7฀million฀square฀feet฀(23%)฀are฀located฀
in฀Europe,฀and฀a฀minimal฀amount฀of฀space฀is฀located฀in฀the฀฀
Far฀East.฀Our฀principal฀manufacturing฀plants฀are฀located฀as฀฀
follows:฀United฀States฀–฀Houston,฀Texas;฀Broken฀Arrow฀and฀฀
Claremore,฀Oklahoma;฀Lafayette,฀Louisiana;฀South฀America฀–฀
various฀cities฀in฀Venezuela;฀and฀Europe฀–฀Aberdeen฀and฀East฀
Kilbride,฀Scotland;฀Liverpool,฀England;฀Celle,฀Germany;฀Belfast,฀
Northern฀Ireland.
We฀own฀or฀lease฀numerous฀service฀centers,฀shops฀and฀
sales฀and฀administrative฀offices฀throughout฀the฀geographic฀
areas฀in฀which฀we฀operate.฀We฀also฀have฀a฀significant฀invest-
ment฀in฀service฀vehicles,฀rental฀tools฀and฀manufacturing฀and฀
other฀equipment.฀We฀believe฀that฀our฀manufacturing฀facilities฀
are฀well฀maintained฀and฀suitable฀for฀their฀intended฀purposes.฀
12฀฀฀฀฀Baker฀Hughes฀Incorporated