Sunoco 2003 Annual Report Download - page 59

with the protection of the environment, waste manage-
ment and the characteristics and composition of fuels. As
with the industry generally, compliance with existing and
anticipated laws and regulations increases the overall cost
of operating Sunoco’s businesses, including capital costs
to construct, maintain and upgrade equipment and facili-
ties. Existing laws and regulations result in liabilities and
loss contingencies for remediation at Sunoco’s facilities
and at third-party or formerly owned sites. The accrued
liability for environmental remediation is classified in the
consolidated balance sheets as follows:
December 31
(Millions of Dollars) 2003 2002
Accrued liabilities $44 $43
Other deferred credits and liabilities 102 116
$146 $159
The following table summarizes the changes in the ac-
crued liability for environmental remediation activities by
category:
(Millions of Dollars) Refineries
Marketing
Sites
Chemicals
Facilities
Pipelines
and Terminals
Hazardous
Waste Sites Other Total
At December 31, 2000 $ 69 $ 42 $— $ 19 $ 8 $ 3 $141
Accruals (2) 21 — 10 2 — 31
Payments (6) (19) — (11) (2) — (38)
Acquisitions — — 10 — — — 10
Other* — 1 — — — — 1
At December 31, 2001 $ 61 $ 45 $ 10 $ 18 $ 8 $ 3 $145
Accruals (2) 36 1 7 — — 42
Payments (7) (24) (3) (12) (3) — (49)
Other* — 15 — 6 — — 21
At December 31, 2002 $ 52 $ 72 $ 8 $ 19 $ 5 $ 3 $159
Accruals — 23 1 6 1(1)30
Payments (9) (22) (2) (10) (1) — (44)
Other* — 1— ———1
At December 31, 2003 $43 $ 74 $ 7 $ 15 $ 5 $ 2 $146
* Consists of increases in the accrued liability for which recovery from third parties is probable.
Sunoco’s accruals for environmental remediation activities
reflect its estimates of the most likely costs that will be in-
curred over an extended period to remediate identified con-
ditions for which the costs are both probable and reasonably
estimable. Engineering studies, historical experience and
other factors are used to identify and evaluate remediation
alternatives and their related costs in determining the esti-
mated accruals for environmental remediation activities.
Losses attributable to unasserted environmental claims are
also reflected in the accruals to the extent they are probable
of occurrence and reasonably estimable.
Total future costs for the environmental remediation ac-
tivities identified above will depend upon, among other
things, the identification of any additional sites, the
determination of the extent of the contamination at each
site, the timing and nature of required remedial actions,
the technology available and needed to meet the various
existing legal requirements, the nature and terms of cost
sharing arrangements with other potentially responsible
parties, the availability of insurance coverage, the nature
and extent of future environmental laws, inflation rates
and the determination of Sunoco’s liability at the sites, if
any, in light of the number, participation level and
financial viability of the other parties. Management be-
lieves it is reasonably possible (i.e., less than probable but
greater than remote) that additional environmental re-
mediation losses will be incurred. At December 31, 2003,
the aggregate of the estimated maximum additional reason-
ably possible losses, which relate to numerous individual
sites, totaled $95 million. However, the Company believes it
is very unlikely that it will realize the maximum loss at every
site. Furthermore, the recognition of additional losses, if and
when they were to occur, would likely extend over many
years and, therefore, likely would not have a material impact
on the Company’s financial position.
Under various environmental laws, including the Resource
Conservation and Recovery Act (“RCRA”) (which relates to
solid and hazardous waste treatment, storage and disposal),
Sunoco has initiated corrective remedial action at its facili-
ties, formerly owned facilities and third-party sites. At the
Company’s major manufacturing facilities, Sunoco has con-
sistently assumed continued industrial use and a contain-
ment/remediation strategy focused on eliminating
unacceptable risks to human health or the environment.
The remediation accruals for these sites reflect that strategy.
Accruals include amounts to prevent off-site migration and
to contain the impact on the facility property, as well as to
address known, discrete areas requiring remediation within
the plants. Activities include closure of RCRA solid waste
management units, recovery of hydrocarbons, handling of
impacted soil, mitigation of surface water impacts and pre-
vention of off-site migration.
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