Baker Hughes 2004 Annual Report Download - page 61

Regulations.฀Based฀upon฀current฀information,฀we฀believe฀that฀
our฀compliance฀with฀Environmental฀Regulations฀will฀not฀have฀a฀
material฀adverse฀effect฀upon฀our฀capital฀expenditures,฀earnings฀
or฀competitive฀position฀because฀we฀have฀either฀established฀ade-
quate฀reserves฀or฀our฀cost฀for฀that฀compliance฀is฀not฀expected฀
to฀be฀material฀to฀our฀consolidated฀financial฀statements.
During฀the฀year฀ended฀December฀31,฀2004,฀we฀incurred฀
approximately฀$2.3฀million฀in฀capital฀expenditures฀for฀environ-
mental฀control฀equipment,฀and฀we฀estimate฀we฀will฀incur฀
approximately฀$3.9฀million฀during฀2005.฀We฀believe฀these฀capital฀
expenditures฀for฀environmental฀control฀equipment฀will฀not฀have฀
a฀material฀adverse฀effect฀upon฀our฀consolidated฀financial฀state-
ments฀because฀the฀aggregate฀amount฀of฀these฀expenditures฀is฀
not฀expected฀to฀be฀material.
The฀Comprehensive฀Environmental฀Response,฀Compensa-
tion฀and฀Liability฀Act฀(known฀as฀“Superfund”฀or฀“CERCLA”)฀
imposes฀liability฀for฀the฀release฀of฀a฀“hazardous฀substance”฀
into฀the฀environment.฀Superfund฀liability฀is฀imposed฀without฀
regard฀to฀fault฀and฀even฀if฀the฀waste฀disposal฀was฀in฀compli-
ance฀with฀laws฀and฀regulations.฀We฀have฀been฀identified฀as฀
a฀potentially฀responsible฀party฀(“PRP”)฀in฀remedial฀activities฀
related฀to฀various฀Superfund฀sites,฀and฀we฀accrue฀our฀share฀of฀
the฀estimated฀remediation฀costs฀of฀the฀site฀based฀on฀the฀ratio฀
of฀the฀estimated฀volume฀of฀waste฀we฀contributed฀to฀the฀site฀to฀
the฀total฀volume฀of฀waste฀disposed฀at฀the฀site.฀With฀the฀joint฀
and฀several฀liability฀imposed฀under฀Superfund,฀a฀PRP฀may฀be฀
required฀to฀pay฀more฀than฀its฀proportional฀share฀of฀such฀costs.
We฀have฀been฀identified฀as฀PRPs฀at฀various฀Superfund฀sites฀
discussed฀below.฀The฀United฀States฀Environmental฀Protection฀
Agency฀(the฀“EPA”)฀and฀appropriate฀state฀agencies฀supervise฀
investigative฀and฀cleanup฀activities฀at฀these฀sites.฀At฀Decem-
ber฀31,฀2004,฀we฀have฀accrued฀$3.6฀million฀of฀remediation฀
costs฀related฀to฀the฀sites฀detailed฀below.฀When฀used฀in฀the฀
descriptions฀of฀the฀sites฀below,฀the฀word฀de฀minimis฀refers฀to฀the฀
smallest฀PRPs,฀whose฀contribution฀rate฀is฀usually฀less฀than฀1%.
(a)฀ Baker฀Petrolite,฀Hughes฀Christensen,฀an฀INTEQ฀predecessor฀
entity,฀Baker฀Oil฀Tools฀and฀a฀former฀subsidiary฀were฀named฀
in฀April฀1984฀as฀PRPs฀at฀the฀Sheridan฀Superfund฀Site฀
located฀in฀Hempstead,฀Texas.฀The฀Texas฀Commission฀on฀
Environmental฀Quality฀(“TCEQ”)฀is฀overseeing฀the฀remedial฀
work฀at฀this฀site.฀The฀Sheridan฀Site฀Trust฀was฀formed฀to฀
manage฀the฀site฀remediation฀and฀we฀participate฀as฀a฀
member.฀Based฀on฀the฀use฀of฀new฀remedial฀technologies,฀
the฀2004฀cost฀projections฀for฀full฀remediation฀have฀been฀
reduced฀from฀$30฀million฀to฀$6฀million,฀of฀which฀$1.0฀mil-
lion฀has฀been฀collected.฀Our฀contribution฀is฀approximately฀
1.8%฀of฀the฀estimated฀$5฀million฀in฀remaining฀costs.
(b)฀ In฀December฀1987,฀one฀of฀our฀former฀subsidiaries฀was฀
named฀a฀respondent฀in฀an฀EPA฀Administrative฀Order฀for฀
Remedial฀Design฀and฀Remedial฀Action฀associated฀with฀
the฀Middlefield-Ellis-Whisman฀Study฀Area,฀an฀eight฀square฀
mile฀soil฀and฀groundwater฀contamination฀site฀located฀in฀
Mountain฀View,฀California.฀As฀a฀result฀of฀the฀environmen-
tal฀investigations฀and฀a฀resulting฀report฀delivered฀to฀the฀
EPA฀in฀September฀1991,฀the฀EPA฀has฀informed฀us฀that฀no฀
further฀work฀needs฀to฀be฀performed฀on฀the฀site.฀In฀fact,฀
the฀EPA฀has฀indicated฀that฀it฀does฀not฀believe฀there฀is฀a฀
contaminant฀source฀on฀the฀property.฀We฀signed฀a฀settle-
ment฀agreement฀in฀March฀2004,฀which฀transferred฀any฀
future฀liability฀for฀investigation฀and฀remediation฀at฀the฀site฀
to฀the฀PRP฀group.฀The฀settlement฀amount฀was฀not฀material.
(c)฀ In฀1997,฀we฀entered฀into฀a฀settlement฀agreement฀with฀
Prudential฀Insurance฀Company฀(“Prudential”)฀regarding฀
cost฀recovery฀for฀the฀San฀Fernando฀Valley฀–฀Glendale฀
Superfund.฀One฀of฀our฀predecessors฀operated฀on฀the฀฀
Prudential฀property฀in฀Glendale.฀Prudential฀was฀identified฀
as฀a฀PRP฀for฀the฀Glendale฀Superfund.฀Prudential฀instituted฀
legal฀proceedings฀against฀us฀for฀cost฀recovery฀under฀CER-
CLA.฀Without฀any฀admission฀of฀liability,฀we฀agreed฀to฀pay฀
40%฀of฀Prudential’s฀costs฀attributed฀to฀cleanup฀at฀the฀site,฀
limited฀to฀a฀cap฀of฀$0.3฀million.฀A฀pump฀and฀treat฀system฀
was฀selected฀as฀the฀cleanup฀remedy฀at฀Glendale,฀and฀it฀is฀
expected฀to฀operate฀until฀2012.฀We฀continue฀to฀contribute฀
our฀portion฀of฀ongoing฀assessments฀to฀fund฀this฀remedia-
tion฀strategy.
(d)฀ In฀June฀1999,฀the฀EPA฀named฀a฀Hughes฀Christensen฀prede-
cessor฀as฀a฀PRP฀at฀the฀Li฀Tungsten฀Site฀in฀Glen฀Cove,฀New฀
York.฀We฀contributed฀a฀de฀minimis฀amount฀of฀hazardous฀
substances฀to฀the฀site.฀In฀December฀2004,฀the฀EPA฀issued฀
us฀a฀special฀de฀minimis฀settlement฀offer฀based฀on฀the฀fact฀
that฀our฀contribution฀was฀limited฀to฀metals฀contamination,฀
not฀radiological฀contamination,฀at฀the฀site.฀The฀settlement฀
offer฀has฀been฀signed฀and฀is฀not฀material.
(e)฀ In฀January฀1999,฀Baker฀Oil฀Tools,฀Baker฀Petrolite฀and฀pre-
decessor฀entities฀of฀Baker฀Petrolite฀were฀named฀as฀PRPs฀by฀
the฀State฀of฀California’s฀Department฀of฀Toxic฀Substances฀
Control฀for฀the฀Gibson฀site฀in฀Bakersfield,฀California.฀The฀
cost฀estimate฀for฀remediation฀of฀the฀site฀is฀approximately฀
$14฀million.฀The฀combined฀volume฀that฀we฀contributed฀to฀
the฀site฀is฀estimated฀to฀be฀less฀than฀0.5%฀for฀liquids฀and฀
0.25%฀for฀solids.
(f)฀ In฀2001,฀a฀Hughes฀Christensen฀predecessor,฀Baker฀Oil฀
Tools,฀INTEQ฀and฀one฀of฀our฀former฀subsidiaries฀were฀
named฀as฀PRPs฀in฀the฀Force฀Road฀State฀Superfund฀Site฀
located฀in฀Brazoria฀County,฀Texas.฀The฀TCEQ฀is฀overseeing฀
the฀investigation฀and฀remediation฀at฀the฀Force฀Road฀State฀
Site.฀We฀participate฀as฀a฀member฀of฀the฀technical฀commit-
tee฀to฀effectively฀manage฀the฀project,฀since฀our฀contribu-
tion฀is฀estimated฀to฀be฀71%.฀The฀initial฀investigation฀at฀the฀
site฀is฀complete฀and฀a฀detailed฀report฀has฀been฀submitted฀
to฀the฀TCEQ฀along฀with฀a฀proposed฀work฀plan.฀The฀most฀
current฀cost฀projections฀for฀closure฀of฀the฀site฀are฀in฀the฀
range฀of฀$5฀million฀to฀$7฀million;฀however,฀this฀projection฀
may฀change฀once฀the฀remedial฀options฀are฀fully฀evaluated.
(g)฀ In฀2002,฀Baker฀Petrolite฀predecessors,฀Hughes฀Christensen฀
predecessors฀and฀two฀of฀our฀former฀subsidiaries฀were฀
identified฀as฀PRPs฀for฀the฀Malone฀site฀located฀on฀Campbell฀
Bayou฀Road฀in฀Texas฀City,฀Texas.฀The฀EPA฀oversees฀the฀
investigation฀and฀remediation฀of฀the฀Malone฀site.฀The฀EPA฀
has฀engaged฀in฀some฀emergency฀removal฀actions฀at฀the฀
site.฀The฀investigation฀is฀underway฀and฀when฀complete,฀
remedial฀options฀will฀be฀developed฀and฀submitted฀to฀the฀
2004฀Form฀10-K฀฀฀฀฀11