Occidental Petroleum 2002 Annual Report Download - page 74

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$ 78 $ 69 $ 68
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CAPITAL EXPENDITURES
Oil and Gas $ 70 $ 60 $ 27
Chemical 16 19 20
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$ 86 $ 79 $ 47
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REMEDIATION EXPENSES
Corporate $ 23 $ 109 $ --
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ENVIRONMENTAL RESERVES
Corporate $ 393 $ 454 $ 402
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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 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.
NOTE 9 LAWSUITS, CLAIMS, COMMITMENTS, CONTINGENCIES AND RELATED MATTERS
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OPC and certain of its subsidiaries have been named in a substantial number
of lawsuits, claims and other legal proceedings. These actions seek, among other
things, compensation for alleged personal injury, breach of contract, property
damage, punitive damages, civil penalties or other losses; or injunctive or
declaratory relief. OPC and certain of its subsidiaries also have been named in
proceedings under CERCLA and similar federal, state and local environmental
laws. These environmental proceedings seek funding or performance of remediation
and, in some cases, compensation for alleged property damage, punitive damages
and civil penalties; however, Occidental is usually one of many companies in
these proceedings and has to date been successful in sharing response costs with
other financially-sound companies. With respect to all such lawsuits, claims and
proceedings, including environmental proceedings, Occidental accrues reserves
when it is probable a liability has been incurred and the amount of loss can be
reasonably estimated.
During the course of its operations, Occidental is subject to audit by tax
authorities for varying periods in various federal, state, local and foreign tax
jurisdictions. Taxable years prior to 1996 are closed for U.S. federal income
tax purposes. Taxable years 1996 through 2000 are in various stages of audit by