Occidental Petroleum 2006 Annual Report Download - page 33
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At December 31, 2006, the notional amount of the guarantees that are subject to the reporting requirements of Financial Accounting
Standards Board (FASB) Interpretation No. (FIN) 45 was approximately $270 million, which consists of Occidental’s guarantee of equity investees’
debt, primarily from the Dolphin Project equity investment, and other commitments.
Contractual Obligations
The table below summarizes and cross-references certain contractual obligations that are reflected in the Consolidated Balance Sheets as of
December 31, 2006 and/or disclosed in the accompanying Notes.
OPC or certain of its subsidiaries have been named in many 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 or certain of its subsidiaries also have been named in proceedings under the Comprehensive Environmental
Response, Compensation, and Liability Act (CERCLA) and similar federal, state, local and foreign 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.
Since 2004, Occidental Chemical Corporation (OCC) has been served with ten lawsuits filed in Nicaragua by approximately 2,600 individual
plaintiffs. These individuals allege that they have sustained several billion dollars of personal injury damages as a result of their alleged exposure
to a pesticide. OCC is aware of, but has not been served in, 24 additional cases in Nicaragua, which Occidental understands make similar
allegations. In the opinion of management, the claims against OCC are without merit because, among other things, OCC believes that none of
the pesticide it manufactured was ever sold or used in Nicaragua. Under the applicable Nicaraguan statute, defendants are required to pay pre-
trial deposits so large as to effectively prohibit defendants from participating fully in their defense. OCC filed a response to the complaints
contesting jurisdiction without posting such pre-trial deposit. In 2004, the judge in one of the cases (Osorio Case), ruled the court had jurisdiction
over the defendants, including OCC, and that the plaintiffs had waived the requirement of the pre-trial deposit. In order to preserve its
jurisdictional defense, OCC elected not to make a substantive appearance in the Osorio Case. In 2005, the judge in the Osorio Case entered
judgment against several defendants, including OCC, for damages totaling approximately $97 million. In December 2006, the court in a second
case in Nicaragua (Rios Case) entered a judgment against several defendants, including OCC, for damages totaling approximately $800 million.
While preserving its jurisdictional defenses, OCC has appealed the judgments in the Osorio and Rios Cases. OCC has no assets in Nicaragua
and, in the opinion of management, any judgment rendered under the statute, including in the Osorio and Rios Cases, would be unenforceable
in the United States.
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 2001 are generally closed for U.S. federal corporate income tax purposes. Corporate tax returns for
taxable years 2001 through 2003 are in various stages of audit by the U.S. Internal Revenue Service. Disputes may arise during the course of
such audits as to facts and matters of law.
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, 2006, 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 $16 million, which was
payable as follows (in millions): 2007 – $12 and 2008 – $4. Fixed payments under these agreements were $18 million in 2006, $17 million in 2005
and $19 million in 2004. See "Off-Balance-Sheet Arrangements — Contractual Obligations" for further information.
Occidental has certain other commitments under contracts, guarantees and joint ventures, including purchase commitments for goods and
services at market-related prices and certain other contingent liabilities. See "Off-Balance-Sheet Arrangements" for further information. Some of
these commitments,
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