Baker Hughes 2010 Annual Report Download - page 142

60 B a k e r H u g h e s I n c o r p o r a t e d
We have also been identified as a potentially responsible
party (“PRP”) in remedial activities related to various Super-
fund sites. We participate in the process set out in the Joint
Participation and Defense Agreement to negotiate with gov-
ernment agencies, identify other PRPs, determine each PRP’s
allocation and estimate remediation costs. We have accrued
what we believe to be our pro-rata share of the total esti-
mated cost of remediation and associated management of
these Superfund sites. This share is based upon the ratio that
the estimated volume of waste we contributed to the site
bears to the total estimated volume of waste disposed at the
site. Applicable United States federal law imposes joint and
several liability on each PRP for the cleanup of these sites leav-
ing us with the uncertainty that we may be responsible for the
remediation cost attributable to other PRPs who are unable to
pay their share. No accrual has been made under the joint and
several liability concept for those Superfund sites where our
participation is de minimis since we believe that the probability
that we will have to pay material costs above our volumetric
share is remote. We believe there are other PRPs who have
greater involvement on a volumetric calculation basis, who
have substantial assets and who may be reasonably expected
to pay their share of the cost of remediation. For those Super-
fund sites where we are a significant PRP, remediation costs
are estimated to include recalcitrant parties. In some cases,
we have insurance coverage or contractual indemnities from
third parties to cover a portion of the ultimate liability.
Our total accrual for environmental remediation is $32 mil-
lion and $18 million, which includes accruals of $7 million and
$6 million for the various Superfund sites, at December 31,
2010 and 2009, respectively. Approximately $11 million of our
total environmental accrual at December 31, 2010 relates to
properties or liabilities acquired in connection with the BJ Ser-
vices acquisition. The determination of the required accruals
for remediation costs is subject to uncertainty, including the
evolving nature of environmental regulations and the difficulty
in estimating the extent and type of remediation activity that is
necessary. We believe that the likelihood of material losses in
excess of the amounts accrued is remote.
OTHER
In connection with the settlement of litigation with
ReedHycalog, in June 2008, the Company paid ReedHycalog
$70 million in royalties for prior use of certain patented tech-
nologies, and ReedHycalog paid the Company $8 million in
royalties for the license of certain Company patented technol-
ogies. The net pre-tax charge of $62 million for the settlement
of this litigation is reflected in the 2008 consolidated state-
ment of operations.
In the normal course of business with customers, vendors
and others, we have entered into off-balance sheet arrange-
ments, such as letters of credit and other bank issued guaran-
tees, which totaled approximately $1.16 billion at December 31,
2010. We also had commitments outstanding for purchase
obligations related to capital expenditures and inventory under
purchase orders and contracts of approximately $264 million
at December 31, 2010. It is not practicable to estimate the fair
value of these financial instruments. None of the off-balance
sheet arrangements either has, or is likely to have, a material
effect on our consolidated financial statements.