Occidental Petroleum 2003 Annual Report Download - page 69

The SIP contains provisions requiring the reduction of 80 percent of nitrogen
oxide emissions and 60 percent of certain volatile organic compound emissions by
November 2007. Occidental operates six facilities that are subject to the SIP's
emissions reduction requirements and estimates that its future capital
expenditures will total approximately $25 to $30 million for environmental
control and monitoring equipment necessary to comply with the SIP. Occidental
expects expenditures to end in 2007, although the timing of the expenditures
will vary by facility.
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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 1997 are closed for U.S. federal income
tax purposes. Taxable years 1997 through 2002 are in various stages of audit by
the Internal Revenue Service. Disputes arise during the course of such audits as
to facts and matters of law.
At December 31, 2003, commitments for major capital expenditures during
2004 and thereafter were approximately $201 million.
Occidental has entered into agreements providing for future payments to
secure terminal and pipeline capacity, drilling services, electrical power,
steam and certain chemical raw materials. At December 31, 2003, the net present
value of the fixed and determinable portion of the obligations under these
agreements, which were used to collateralize financings of the respective
suppliers, aggregated $45 million, which was payable as follows (in millions):
2004--$12, 2005--$11, 2006--$10, 2007--$9 and 2008--$3. Fixed payments under
these agreements were $16 million in 2003, $27 million in 2002 and $20 million
in 2001.
Occidental has certain other commitments under contracts, guarantees and
joint ventures, and certain other contingent liabilities. Many of these
commitments, although not fixed or determinable, involve capital expenditures
and are part of the $1.4 billion capital expenditures estimated for 2004, and
the $250 to $300 million estimated to be spent on the Dolphin Project in 2004.
As discussed in Note 4, FIN 45 requires the disclosure in Occidental's
financial statements of information relating to guarantees issued by Occidental
and outstanding at December 31, 2003.
These guarantees encompass performance bonds, letters of credit,
indemnities, commitments and other forms of guarantees provided by Occidental to
third parties, mainly to provide assurance that Occidental and/or its
subsidiaries and affiliates will meet their various obligations (guarantees).
At December 31, 2003, the notional amount of the guarantees was
approximately $500 million. Of this amount, approximately $400 million relates
to Occidental's guarantee of equity investees' debt and other commitments. The
debt guarantees relating to Elk Hills Power and the guarantees on debt and other
commitments relating to the Ecuador pipeline. The remaining $100 million relates
to various indemnities and guarantees provided to third parties.
Occidental has indemnified various parties against specified liabilities
that those parties might incur in the future in connection with purchases and