Sunoco 2005 Annual Report Download - page 63

The following table summarizes the changes in the accrued liability for environmental remediation activities by cat-
egory:
(Millions of Dollars) Refineries
Marketing
Sites
Chemicals
Facilities
Pipelines
and Terminals
Hazardous
Waste Sites Other Total
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
Accruals 2 20 — 3 2 — 27
Payments (10) (21) (1) (3) (3) — (38)
Acquisitions and divestments 11 — (1) — — — 10
Other 2 1 — — — — 3
At December 31, 2004 $ 48 $ 74 $ 5 $ 15 $ 4 $ 2 $148
Accruals 222 1 6 1—32
Payments (14) (25) (2) (7) (2) — (50)
Other —7(1) 1——7
At December 31, 2005 $ 36 $ 78 $ 3 $ 15 $ 3 $ 2 $137
Sunoco’s accruals for environmental remediation activ-
ities reflect management’s estimates of the most likely
costs that will be incurred over an extended period to
remediate identified conditions 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 estimated accruals for
environmental remediation activities. Losses attributable
to unasserted claims are also reflected in the accruals to
the extent they are probable of occurrence and reason-
ably 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, 2005,
the aggregate of the estimated maximum additional rea-
sonably possible losses, which relate to numerous in-
dividual sites, totaled approximately $90 million.
However, the Company believes it is very unlikely that it
will realize the maximum reasonably possible 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 facilities, formerly owned facilities and third-party
sites. At the Company’s major manufacturing facilities,
Sunoco has consistently assumed continued industrial use
and a containment/remediation strategy focused on elimi-
nating unacceptable risks to human health or the
environment. The remediation accruals for these sites re-
flect 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 requir-
ing remediation within the plants. Activities include clo-
sure of RCRA solid waste management units, recovery of
hydrocarbons, handling of impacted soil, mitigation of sur-
face 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 pre-
viously divested terminals, the focus is on remediating
discrete interior areas to attain regulatory closure.
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