Occidental Petroleum 2008 Annual Report Download - page 66

DERIVATIVE AND FAIR VALUE DISCLOSURES
The following table summarizes net after-tax derivative activity recorded in AOCI:
In millions 2008 2007
Beginning Balance $(441)$(259)
Gains (losses) from changes in cash flow hedges 207 (243)
Losses reclassified to income 84 61
Ending Balance $(150)$(441)
During the next twelve months, Occidental expects that approximately $48 million of net derivative after-tax gains included in AOCI,
based on their valuation as of December 31, 2008, will be reclassified into earnings. Hedge ineffectiveness did not have a material impact on
earnings for the years ended December 31, 2008, 2007 and 2006. See Note 15 for further information regarding derivative financial
instruments included in the consolidated balance sheets.
NOTE 8 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, the current portion of which is
included in accrued liabilities ($68 million in 2008, $69 million in 2007 and $79 million in 2006) and the remainder in deferred credits and
other liabilities — other ($371 million in 2008, $388 million in 2007 and $333 million in 2006). The reserves are 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 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
Number of
Sites
Reserve
Balance
Number of
Sites
Reserve
Balance
Number 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
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.
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Five sites — chemical plants in Kansas, Louisiana and New York and two groups of oil and gas properties in the southwestern United