Occidental Petroleum 2008 Annual Report Download - page 38

Lawsuits have been filed in Nicaragua against OxyChem and other companies that once manufactured or used a pesticide,
dibromochloropropane (DBCP). These lawsuits claim damages of several billion dollars for alleged personal injuries. In the opinion of
management, the claims against OxyChem are without merit because, among other things, the DBCP it manufactured was never sold or
used in Nicaragua. In order to preserve its jurisdictional defense, OxyChem elected not to make a substantive appearance in these cases.
Nicaraguan courts have entered judgments of approximately $900 million against four defendants, including OxyChem. Under Nicaraguan
law, the judgments would be shared equally among the defendants. The plaintiffs attempted to enforce one judgment in Miami. In January
2009, the federal district court in Miami granted summary judgment in favor of OxyChem and refused to enforce the judgment. OxyChem
has no assets in Nicaragua and, in the opinion of management, no such Nicaraguan judgment would be enforceable 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. While the audits for taxable years through 2007 have concluded for U.S. federal income tax purposes, the 2008
taxable year is currently under audit by the U.S. Internal Revenue Service pursuant to its compliance assurance program (CAP). Foreign
government tax authorities are in various stages of auditing Occidental, and income taxes for taxable years from 2000 through 2008 remain
subject to examination in certain jurisdictions. During the course of such audits, disputes have arisen and other disputes may arise as to
facts and matters of law.
Occidental has entered into agreements providing for future payments to secure terminal and pipeline capacity, drilling rigs and
services, electrical power, steam and certain chemical raw materials. 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.
Occidental's capital spending estimate for 2009 is approximately $3.5 billion. At December 31, 2008, commitments for major fixed and
determinable capital expenditures during 2009 and thereafter were approximately $1.1 billion.
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, 2008, 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.
The ultimate amount of losses and the timing of any such losses that OPC and its subsidiaries may incur resulting from currently
outstanding lawsuits, claims and proceedings, audits, commitments, contingencies and related matters cannot be determined reliably at this
time. If these matters were ultimately resolved unfavorably at amounts substantially exceeding Occidental’s reserves, an outcome not
currently expected, 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.
ENVIRONMENTAL LIABILITIES AND EXPENDITURES
Occidental’s operations are subject to stringent federal, state, local and foreign laws and regulations relating to improving or
maintaining environmental quality. Occidental’s environmental compliance costs have generally increased over time and could continue to
rise in the future. Occidental factors environmental expenditures for its operations into its business planning process as an integral part of
producing quality products responsive to market demand.
Environmental Remediation
The laws that require or address environmental remediation, including CERCLA and similar federal, state, local and foreign laws,
may apply retroactively and regardless of fault, the legality of the original activities or the current ownership or control of sites. OPC or certain
of its subsidiaries participate in or actively monitor a range of remedial activities and government or private proceedings under these laws
with respect to alleged past practices at operating, closed and third-party sites. Remedial activities may include one or more of the following:
investigation involving sampling, modeling, risk assessment or monitoring; cleanup measures involving removal, treatment or disposal; or
operation and maintenance of remedial systems. The environmental proceedings seek funding or performance of remediation and, in some
cases, compensation for alleged property damage, punitive damages, civil penalties, injunctive relief and government oversight costs.
As of December 31, 2008, Occidental participated in or monitored remedial activities or proceedings at 166 sites.
The following table presents Occidental’s environmental remediation reserves as of December 31, 2008, 2007 and 2006, grouped in
the following four categories of environmental remediation sites: (1) sites listed or proposed for listing by the U.S. Environmental Protection
Agency on the CERCLA National Priorities List (CERCLA NPL); (2) other third-party sites; (3) Occidental-operated sites; and (4)
Occidental's closed or non-operated sites.
$ amounts in millions 2008 2007 2006
# of
Sites
Reserve
Balance
# of
Sites
Reserve
Balance
# of
Sites
Reserve
Balance
CERCLA NPL sites 40 $60 39 $81 37 $77
Other third-party sites 76 117 79 124 84 123
Occidental-operated sites 19 127 18 121 20 138
Occidental's closed or
non-operated sites 31 135 27 131 25 74
Total 166 $439 163 $457 166 $412
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As of December 31, 2008, Occidental’s environmental reserves exceeded $10 million each at 14 of the 166 sites described above,