Sunoco 2011 Annual Report Download - page 67

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 prevention of off-site
migration. A change in this approach as a result of changing the intended use of a property or a sale to a third
party could result in a higher cost remediation strategy in the future.
Sunoco currently owns or operates certain retail gasoline outlets where releases of petroleum products 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 remediated 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 reimbursement fund of the
applicable state, after any deductible has been met.
In general, each remediation site/issue is evaluated individually based upon information available for the
site/issue and no pooling or statistical analysis is used to evaluate an aggregate risk for a group of similar items
(e.g., service station sites) in determining the amount of probable loss accrual to be recorded. Sunoco’s estimates
of environmental remediation costs also frequently involve evaluation of a range of estimates. In many cases, it is
difficult to determine that one point in the range of loss estimates is more likely than any other. In these
situations, existing accounting guidance requires that the minimum of the range be accrued. Accordingly, the low
end of the range often represents the amount of loss which has been recorded.
In addition to the probable and estimable losses which have been recorded, 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, 2011, the aggregate of the estimated maximum additional reasonably
possible losses, which relate to numerous individual sites, totaled approximately $165 million. This estimate of
reasonably possible losses associated with environmental remediation is largely based upon analysis during 2011
and continuing into early 2012 of the potential liabilities associated with the establishment of the segregated
environmental fund discussed above. It also includes estimates for remediation activities at current logistics and
retail assets. This reasonably possible loss estimate in many cases reflects the upper end of the loss ranges which
are described above. Such estimates include potentially higher contractor costs for expected remediation
activities, the potential need to use more costly or comprehensive remediation methods and longer operating and
monitoring periods, among other things.
In summary, total future costs for environmental remediation activities 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 nature of operations at each site, 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 and regulations, inflation rates, terms of consent agreements or remediation permits with
regulatory agencies 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. The recognition of additional losses, if and when
they were to occur, would likely extend over many years. Management believes that none of the current
remediation locations, which are in various stages of ongoing remediation, is individually material to Sunoco as
its largest accrual for any one Superfund site, operable unit or remediation area was approximately $14 million at
December 31, 2011. As a result, Sunoco’s exposure to adverse developments with respect to any individual site
is not expected to be material. However, if changes in environmental laws or regulations occur or the
assumptions used to estimate losses at multiple sites are adjusted, such changes could impact multiple Sunoco
facilities, formerly owned facilities and third-party sites at the same time. As a result, from time to time,
significant charges against income for environmental remediation may occur; however, management does not
believe that any such charges would have a material adverse impact on the Company’s consolidated financial
position.
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