Occidental Petroleum 2006 Annual Report Download - page 34
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although not fixed or determinable, involve capital expenditures and are part of the $3.3 to $3.4 billion in capital expenditures estimated for 2007.
Occidental has indemnified various parties against specified liabilities that those parties might incur in the future in connection with
purchases and other transactions that they have entered into with Occidental. These indemnities usually are contingent upon the other party
incurring liabilities that reach specified thresholds. As of December 31, 2006, Occidental is not aware of circumstances that it believes would
reasonably be expected to lead to future indemnity claims against it in connection with these transactions that would result in payments materially
in excess of reserves.
It is impossible at this time to determine the ultimate liabilities that OPC and its subsidiaries may incur resulting from any lawsuits, claims and
proceedings, audits, commitments, contingencies and related matters or the timing of these liabilities. If these matters were to be ultimately
resolved unfavorably at amounts substantially exceeding Occidental’s reserves, an outcome not currently anticipated, it is possible that such
outcome could have a material adverse effect upon Occidental’s consolidated financial position or results of operations. However, after taking into
account reserves, management does not expect the ultimate resolution of any of these matters to have a material adverse effect upon Occidental’s
consolidated financial position or results of operations.
Occidental’s operations are subject to stringent federal, state, local and foreign laws and regulations relating to improving or maintaining
environmental quality. Costs associated with environmental compliance have increased over time and are expected to rise in the future.
Environmental expenditures related to current operations are factored into the overall business planning process and are considered an integral
part of production in manufacturing quality products responsive to market demand.
Environmental Remediation
The laws that require or address environmental remediation may apply retroactively to past waste disposal practices and releases of substances
to the environment. In many cases, the laws apply regardless of fault, legality of the original activities or current ownership or control of sites. 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 domestic and foreign remediation sites, including currently owned facilities and previously owned sites. Also,
OPC or 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., which reports its
results directly to Occidental’s corporate management.
The following table presents Occidental’s environmental remediation reserves at December 31, 2006, 2005 and 2004, grouped by three
categories of environmental remediation sites:
The following table shows environmental reserve activity for the past three years:
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 believes it is reasonably possible that it will continue to incur additional liabilities beyond those
recorded for environmental remediation at these sites. The range of reasonably possible loss for existing environmental remediation matters could
be up to $430 million beyond the amount accrued.
For management’s opinion, refer to the "Lawsuits, Claims, Commitments, Contingencies and Related Matters" section above.
CERCLA and Equivalent Sites
As of December 31, 2006, OPC or certain of its subsidiaries have been named in 105 CERCLA or state equivalent proceedings, as shown
below.