Sunoco 2004 Annual Report Download - page 33

Total future costs for the environmental remediation activities identified above will de-
pend upon, among other things, the identification of any additional sites, the determi-
nation 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 par-
ties. Management believes it is reasonably possible (i.e., less than probable but greater than
remote) that additional environmental remediation losses will be incurred. At December
31, 2004, the aggregate of the estimated maximum additional reasonably possible losses,
which relate to numerous individual sites, totaled approximately $90 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 might 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 facilities, formerly owned facilities
and third-party sites. At the Company’s major manufacturing facilities, Sunoco has con-
sistently assumed continued industrial use and a containment/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, miti-
gation of surface water impacts and prevention of off-site migration.
Many of Sunoco’s current terminals are being addressed with the above containment/
remediation strategy. At some smaller or less impacted facilities and some previously di-
vested terminals, the focus is on remediating discrete interior areas to attain regulatory
closure.
Sunoco owns or operates certain retail gasoline outlets where releases of petroleum prod-
ucts have occurred. Federal and state laws and regulations require that contamination
caused by such releases at these sites and at formerly owned sites be assessed and re-
mediated to meet the applicable standards. The obligation for Sunoco to remediate this
type of contamination varies, depending on the extent of the release and the applicable
laws and regulations. A portion of the remediation costs may be recoverable from the re-
imbursement fund of the applicable state, after any deductible has been met.
Future costs for environmental remediation activities at the Company’s marketing sites
also will be influenced by the extent of MTBE contamination of groundwater, the cleanup
of which will be driven by thresholds based on drinking water protection. Though not all
groundwater is used for drinking, several states have initiated or proposed more stringent
MTBE cleanup requirements. Cost increases result directly from extended remedial oper-
ations and maintenance on sites that, under prior standards, could otherwise have been
completed. Cost increases will also result from installation of additional remedial or mon-
itoring wells and purchase of more expensive equipment because of the presence of MTBE.
While actual cleanup costs for specific sites are variable and depend on many of the factors
discussed above, expansion of similar MTBE remediation thresholds to additional states or
adoption of even more stringent requirements for MTBE remediation would result in fur-
ther cost increases.
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