Hess 2008 Annual Report Download - page 53

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environment and safety management systems that help protect the Corporation’s workforce, customers and local
communities. The Corporation’s management systems are designed to uphold or exceed international standards and
are intended to promote internal consistency, adherence to policy objectives and continual improvement in EHS &
SR performance. Improved performance may, in the short-term, increase the Corporation’s operating costs and
could also require increased capital expenditures to reduce potential risks to assets, reputation and license to
operate. In addition to enhanced EHS & SR performance, improved productivity and operational efficiencies may
be realized as collateral benefits from investments in EHS & SR. The Corporation has programs in place to evaluate
regulatory compliance, audit facilities, train employees, prevent and manage risks and emergencies and to generally
meet corporate EHS & SR goals.
The Corporation and HOVENSA produce and the Corporation distributes fuel oils in the United States.
Proposals by state regulatory agencies and legislatures have been made that would require a lower sulfur content of
fuel oils. If adopted, these proposals could require capital expenditures by the Registrant and HOVENSA to meet
the required sulfur content standards.
As described in Item 3 “Legal Proceedings,” in 2003 the Corporation and HOVENSA began discussions with
the U.S. EPA regarding the EPA’s Petroleum Refining Initiative (PRI). The PRI is an ongoing program that is
designed to reduce certain air emissions at all U.S. refineries. Since 2000, the EPA has entered into settlements
addressing these emissions with petroleum refining companies that control nearly 90% of the domestic refining
capacity. Negotiations with the EPA are continuing and substantial progress has been made toward resolving this
matter for both the Corporation and HOVENSA. While the effect on the Corporation of the Petroleum Refining
Initiative cannot be estimated until a final settlement is reached and entered by a court, additional future capital
expenditures and operating expenses will likely be incurred over a number of years. The amount of penalties, if any,
is not expected to be material to the Corporation.
The Corporation has undertaken a program to assess, monitor and reduce the emission of “greenhouse gases,”
including carbon dioxide and methane. The Corporation recognizes that climate change is a global environmental
concern with potentially significant consequences for society and the energy industry. The Corporation is
committed to the responsible management of greenhouse gas emissions from our existing assets and future
developments and is developing and implementing a strategy to control our carbon emissions.
The Corporation will have continuing expenditures for environmental assessment and remediation. Sites
where corrective action may be necessary include gasoline stations, terminals, onshore exploration and production
facilities, refineries (including solid waste management units under permits issued pursuant to the Resource
Conservation and Recovery Act) and, although not currently significant, “Superfund” sites where the Corporation
has been named a potentially responsible party.
The Corporation accrues for environmental assessment and remediation expenses when the future costs are
probable and reasonably estimable. At year-end 2008, the Corporation’s reserve for estimated environmental
liabilities was approximately $61 million. The Corporation expects that existing reserves for environmental
liabilities will adequately cover costs to assess and remediate known sites. The Corporation’s remediation spending
was $23 million in 2008, $23 million in 2007 and $15 million in 2006. Capital expenditures for facilities, primarily
to comply with federal, state and local environmental standards, other than for the low sulfur requirements, were
$15 million in 2008 and $22 million in 2007 and 2006.
Forward-Looking Information
Certain sections of Management’s Discussion and Analysis of Financial Condition and Results of Operations
and Quantitative and Qualitative Disclosures about Market Risk, including references to the Corporation’s future
results of operations and financial position, liquidity and capital resources, capital expenditures, oil and gas
production, tax rates, debt repayment, hedging, derivative, market risk and environmental disclosures, off-balance
sheet arrangements and contractual obligations and contingencies include forward-looking information. Forward-
looking disclosures are based on the Corporation’s current understanding and assessment of these activities and
reasonable assumptions about the future. Actual results may differ from these disclosures because of changes in
market conditions, government actions and other factors.
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