Sunoco 2009 Annual Report Download - page 35

in the issuance of a citation in September 2009 in excess of $100 thousand. Sunoco has formally contested the
citation and is engaged in settlement discussions with OSHA. (See also the Company’s Quarterly Report on
Form 10-Q for the quarterly period ended September 30, 2009.)
In addition, Sunoco Logistics Partners L.P., the master limited partnership in which Sunoco has a 33 percent
ownership interest, is a party in the following administrative proceedings:
In January 2007, the Pipeline Hazardous Materials Safety Administration (“PHMSA”) proposed penalties
totaling $200 thousand based on alleged violations of various pipeline safety requirements relating to meter
facilities in Sunoco Pipeline L.P.’s crude oil pipeline system. The timing or outcome of the resolution of this
matter cannot reasonably be determined at this time. (See also the Company’s Annual Reports on Form 10-K for
the fiscal year ended December 31, 2008 and 2007.)
In August 2009, PHMSA proposed penalties totaling approximately $200 thousand based on alleged
violations of various pipeline safety regulations relating to the November 2008 product release by Sunoco
Pipeline, L.P. in Murrysville, PA. The Partnership has appealed the finding of violation and the proposed penalty.
The timing or outcome of this appeal cannot reasonably be determined at this time. (See also the Company’s
Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.)
In September 2009, PHMSA issued a final order for $150 thousand relating to a tank overfill incident that
occurred at the Darby Creek Tank Farm in November 2005. In October 2009, PHMSA denied the Partnership’s
request for reconsideration of this final decision and the Partnership subsequently paid the assessed fine. (See
also the Company’s Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2009.)
MTBE Litigation
Sunoco, along with other refiners, and manufacturers and sellers of gasoline is a defendant in approximately
29 lawsuits in 5 states and the Commonwealth of Puerto Rico, which allege MTBE contamination in
groundwater. Plaintiffs, who include water purveyors and municipalities responsible for supplying drinking water
and private well owners, allege that refiners and suppliers of gasoline containing MTBE are responsible for
manufacturing and distributing a defective product that contaminates groundwater. Plaintiffs are asserting
primarily product liability claims and additional claims including nuisance, trespass, negligence, violation of
environmental laws and deceptive business practices. In addition, several actions commenced by state authorities
allege natural resource damages. Plaintiffs may seek to rely on a “joint liability of industry” theory at trial,
although there has been no ruling as to whether the plaintiffs will be permitted to pursue this theory. Plaintiffs are
seeking compensatory damages, and in some cases injunctive relief, punitive damages and attorneys’ fees.
In December 2007, Sunoco, along with other refiners, entered into a settlement in principle which covers 53
MTBE cases. The settlement required a cash payment by the group of settling refiner defendants of
approximately $422 million (which included attorneys’ fees) plus an agreement in the future to fund costs of
treating existing wells as to which MTBE has not currently been detected but which later is detected, over four
consecutive quarters, above certain concentration levels. As MTBE is no longer used, and based on a generally
declining trend in MTBE contamination, the Company does not anticipate substantial costs associated with the
future treatment of existing wells. The Company established a $17 million after-tax accrual, representing its
allocation percentage of the settlement, in 2007 and recognized an $11 million after-tax gain in 2008 in
connection with an insurance recovery. During 2008, Sunoco made a cash payment of approximately $28 million
and recovered $18 million of proceeds from the insurance settlement.
In 2008, Sunoco settled four cases related to MTBE contamination in the Fort Montgomery, NY area which
included two federal cases and two state cases. A case involving the City of New York was also recently settled.
The impact of these settlements was not material.
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