Occidental Petroleum 2008 Annual Report Download - page 39

As of December 31, 2008, Occidental’s environmental reserves exceeded $10 million each at 14 of the 166 sites described above,
and 115 of the sites had reserves from $0 to $1 million each.
As of December 31, 2008, two landfills in western New York owned by Occidental accounted for 65 percent of its reserves associated
with CERCLA NPL sites. Maxus Energy Corporation has retained the liability and indemnified Occidental for 17 of the remaining 38
CERCLA NPL sites.
As of December 31, 2008, Maxus has also retained the liability and indemnified Occidental for 14 of the 76 other third-party sites. Two
of the remaining 62 other third-party sites — a former copper mining and smelting operation in Tennessee and an active refinery in
Louisiana where Occidental reimburses the current owner and operator for certain remedial activities — accounted for 60 percent of
Occidental’s reserves associated with these sites.
Five sites — chemical plants in Kansas, Louisiana and New York and two groups of oil and gas properties in the southwestern United
States — accounted for 71 percent of Occidental’s reserves associated with its operated sites. Five other sites — former chemical plants in
Delaware, Michigan, Tennessee and Washington and a closed coal mine in Pennsylvania — accounted for 71 percent of the reserves
associated with Occidental's closed or non-operated sites.
The following table shows environmental reserve activity for the past three years:
In millions 2008 2007 2006
Balance - Beginning of Year $457 $412 $418
Remediation expenses and
interest accretion 29 108 48
Changes from
acquisitions/dispositions 25 5 17
Payments (72) (68) (71)
Balance - End of Year $439 $457 $412
Occidental expects to expend funds corresponding to about half of the current environmental reserves over the next four years and the
balance over the subsequent ten or more years. Occidental believes its range of reasonably possible additional loss beyond those liabilities
recorded for environmental remediation at the sites described above could be up to $400 million. See "Critical Accounting Policies and
Estimates — Environmental Liabilities and Expenditures" for additional information.
Environmental Costs
Occidental’s environmental costs, some of which may include estimates, are shown below for each segment for the years ended
December 31:
In millions 2008 2007 2006
Operating Expenses
Oil and Gas $127 $99 $87
Chemical 85 80 73
Midstream and Marketing 20 9 8
$232 $188 $168
Capital Expenditures
Oil and Gas $104 $55 $51
Chemical 18 14 25
Midstream and Marketing 6 4 4
$128 $73 $80
Remediation Expenses
Corporate $28 $107 $47
Operating expenses are incurred on a continual basis. Capital expenditures relate to longer-lived improvements in currently operating
properties. Remediation expenses relate to existing conditions from past operations.
Occidental presently estimates capital expenditures for environmental compliance of approximately $120 million for 2009.
FOREIGN INVESTMENTS
Many of Occidental’s assets are located outside of North America. At December 31, 2008, the carrying value of Occidental’s assets in
countries outside North America aggregated approximately $11.2 billion, or approximately 27 percent of Occidental’s total assets at that date.
Of such assets, approximately $6.9 billion are located in the Middle East/North Africa and approximately $4.3 billion are located in Latin
America. For the year ended December 31, 2008, net sales outside North America totaled $8.8 billion, or approximately 36 percent of total
net sales.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
The process of preparing financial statements in accordance with GAAP requires the management of Occidental to make estimates
and judgments regarding certain items and transactions. It is possible that materially different amounts could be recorded if these estimates
and judgments change or if the actual results differ from these estimates and judgments. Occidental considers the following to be its most
critical accounting policies and estimates that involve the judgment of Occidental’s management. There has been no material change to
these policies over the past three years. The selection and development of these critical accounting policies and estimates have been
discussed with the Audit Committee of the Board of Directors.
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Oil and Gas Properties