Occidental Petroleum 2002 Annual Report Download - page 42

account for 66 percent of the reserves associated with this group. The three
sites are: an active refinery in Louisiana where Occidental indemnifies the
current owner and operator for certain remedial actions, a water treatment
facility at a former coal mine in Pennsylvania, and a former chemical plant in
West Virginia.
ENVIRONMENTAL COSTS
Occidental's costs, some of which may include estimates, relating to
compliance with environmental laws and regulations, are shown below for each
segment:
In millions 2002 2001 2000
============================= ======== ======== ========
OPERATING EXPENSES
Oil and Gas $ 32 $ 22 $ 17
Chemical 46 47 51
-------- -------- --------
$ 78 $ 69 $ 68
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CAPITAL EXPENDITURES
Oil and Gas $ 70 $ 60 $ 27
Chemical 16 19 20
-------- -------- --------
$ 86 $ 79 $ 47
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REMEDIATION EXPENSES
Corporate $ 23 $ 109 $ --
======== ======== ========
ENVIRONMENTAL RESERVES
Corporate $ 393 $ 454 $ 402
============================= ======== ======== ========
Operating expenses are incurred on a continual basis. Capital expenditures
relate to longer-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.
Eight counties in the Houston-Galveston area are subject to a federal
Environmental Protection Agency (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). In December 2002, the Texas
Commission on Environmental Quality revised the regulations associated with the
Plan. The revised Plan contains provisions requiring the reduction of 80 percent
of current nitrogen oxide (NOx) emissions and 60 percent of the volatile organic
compound (VOC) emissions in the Houston-Galveston area by November 2007.
Occidental operates six facilities that will be subject to the Plan's NOx and
VOC-reduction requirements. Occidental estimates that over the next several
years its capital expenditures will increase by a total of $70 - $120 million
for environmental control and monitoring equipment necessary to comply with the
Plan, depending on the amount of emissions reduction that is ultimately
required. 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 capital expenditures for environmental
compliance (including the Plan discussed above) will be approximately $72
million for 2003 and $95 million for 2004.
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, 2002, the carrying