Occidental Petroleum 2001 Annual Report Download - page 41

In millions 2001 2000 1999
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OPERATING EXPENSES
Oil and Gas $ 22 $ 17 $ 13
Chemical 47 51 51
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$ 69 $ 68 $ 64
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CAPITAL EXPENDITURES
Oil and Gas $ 60 $ 27 $ 19
Chemical 19 20 17
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$ 79 $ 47 $ 36
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REMEDIATION EXPENSES
Corporate $ 109 $ -- $ --
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ENVIRONMENTAL RESERVES
Corporate $ 454 $ 402 $ 454
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Operating expenses are incurred on a continual basis. Capital expenditures
relate to long-lived improvements in currently operating facilities. Remediation
expenses relate to existing conditions caused by past operations and do not
contribute to current or future revenue generation. Although total costs may
vary in any one year, over the long term, segment operating and capital
expenditures for environmental compliance generally are expected to increase.
Occidental manages its environmental remediation efforts through a wholly
owned subsidiary, Glenn Springs Holdings, Inc. (GSH). GSH has full management
authority over all remediation sites and reports directly to Occidental's
corporate management. The environmental reserves, as shown in the table above,
have been provided for environmental remediation liabilities at the Superfund
and comparable state sites discussed above, and for Resource Conservation and
Recovery Act and other sites where Occidental has environmental remediation
responsibility.
Eight counties in the Houston-Galveston area are subject to a federal EPA
mandate to adopt a plan for implementing certain requirements of the federal
Clean Air Act, known as a State Implementation Plan. In October 2001, the EPA
approved a State Implementation Plan for the Houston Galveston area (the Plan).
The Plan contains provisions requiring the reduction of 80 - 90 percent of
current nitrogen oxide (NOx) emissions in the Houston-Galveston area by November
2007. Occidental operates five facilities that will be subject to the Plan's
NOx-reduction requirements. Occidental estimates that its capital expenditures
will increase by between $80 - $120 million for environmental control and
monitoring equipment necessary to comply with the Plan's enacted or proposed
NOx-reduction requirements. Occidental began expending the capital necessary to
comply with the Plan in 2001 and expects expenditures to end in 2007, although
the timing of the expenditures will vary by facility.
Occidental presently estimates that divisional capital expenditures for
environmental compliance (including the SIP discussed above) will be in the
range of $38 million for 2002 and $46 million for 2003.
FOREIGN INVESTMENTS
Portions of Occidental's assets outside North America are exposed to
political and economic risks. Occidental conducts its financial affairs so as to
mitigate its exposure against those risks. At December 31, 2001, the carrying
value of Occidental's assets in countries outside North America aggregated
approximately $2.0 billion, or approximately 11 percent of Occidental's total
assets at that date. Of such assets, approximately $1.3 billion was located in
the Middle East, approximately $502 million was located in Latin America, and
substantially all of the remainder were located in Pakistan and Russia.
CRITICAL ACCOUNTING POLICIES
Generally accepted accounting principles require the use of management
judgments and estimates in addition to the rules and regulations established by
accounting pronouncements.
Occidental has adopted a number of accounting policies, the most important