Occidental Petroleum 2003 Annual Report Download - page 67

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Occidental's operations in the United States are subject to stringent
federal, state and local laws and regulations relating to improving or
maintaining environmental quality. Foreign operations also are subject to
environmental-protection laws. Costs associated with environmental compliance
have increased over time and are generally expected to rise in the future.
Environmental expenditures related to current operations are factored into the
overall business planning process. These expenditures are mainly considered an
integral part of production in manufacturing quality products responsive to
market demand.
The laws that require or address environmental remediation may apply
retroactively to past waste disposal practices and releases. In many cases, the
laws apply regardless of fault, legality of the original activities or current
ownership or control of sites. Occidental Petroleum Corporation (OPC) or certain
of its subsidiaries are currently participating in environmental assessments and
cleanups under these laws at federal Superfund sites, comparable state sites and
other remediation sites, including Occidental facilities and previously owned
sites. Also, OPC and certain of its subsidiaries have been involved in a
substantial number of governmental and private proceedings involving historical
practices at various sites including, in some instances, having been named in
proceedings under CERCLA and similar federal, state and local environmental
laws. These proceedings seek funding or performance of remediation and, in some
cases, compensation for alleged property damage, punitive damages and civil
penalties.
Occidental manages its environmental remediation efforts through a wholly
owned subsidiary, Glenn Springs Holdings, Inc. (GSH), which reports its results
directly to Occidental's corporate management. The following table presents
Occidental's environmental remediation reserves at December 31, 2003, 2002 and
2001 grouped by three categories of environmental remediation sites:
$ amounts in millions 2003 2002 2001
=============================== ========================== ========================== ===========================
RESERVE Reserve Reserve
NUMBER OF SITES BALANCE Number of Sites Balance Number of Sites Balance
--------------- ------- --------------- ------- --------------- -------
CERCLA & equivalent sites 131 $ 240 124 $ 284 126 $ 320
Active facilities 13 79 14 46 14 59
Closed or sold facilities 39 53 44 63 47 75
--------------- ------- --------------- ------- --------------- -------
TOTAL 183 $ 372 182 $ 393 187 $ 454
=============================== =============== ======= =============== ======= =============== =======
The increase in the number of CERCLA and equivalent sites between 2002 and
2003 was primarily in the "minimal/no exposure" category as discussed below.
The following table shows environmental reserve activity for the past three
reporting periods:
12 MONTHS 12 Months 12 Months
ENDED Ended Ended
In millions 12/31/03 12/31/02 12/31/01
=========================================================================== ========== ========== ==========
Balance -- Beginning of Year $ 393 $ 454 $ 402
Increases to provision including interest accretion 64 25 111
Changes from acquisitions/dispositions -- -- 5
Payments (83) (84) (75)
Other (2) (2) 11
---------- ---------- ----------
Balance -- End of Year $ 372 $ 393 $ 454
=========================================================================== ========== ========== ==========
Occidental expects to expend funds equivalent to about half of the current
environmental reserve over the next three years and the balance over the next
ten or more years. Occidental expects that it may continue to incur additional
liabilities beyond those recorded for environmental remediation at these and
other sites. The range of reasonably possible loss for existing environmental
remediation matters could be up to $400 million beyond the amount accrued. For
management's opinion, refer to Note 9.