Occidental Petroleum 2008 Annual Report Download - page 67

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 Occidental’s
reserves associated with its 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. For management’s opinion with respect to
environmental matters, refer to Note 9.
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.
NOTE 9 LAWSUITS, CLAIMS, COMMITMENTS, CONTINGENCIES AND RELATED MATTERS
OPC or certain of its subsidiaries are named, in the normal course of business, in lawsuits, claims and other legal proceedings that
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 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, civil penalties and injunctive relief; 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.
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.
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During the course of its operations, Occidental is subject to audit by tax authorities for varying periods in various federal, state, local