Baker Hughes 2013 Annual Report Download - page 106

2013 Annual Report 76
Baker Hughes Incorporated
Notes to Consolidated Financial Statements
Requirement provision defined in the Supply Agreement; in the alternative, Hi-Crush sought an unspecified amount
of actual damages. On December 17, 2012, BHOO filed a responsive pleading denying Hi-Crush's allegations and
also filed a counter claim for breach of contract. On October 10, 2013, BHOO and Hi-Crush entered into a
settlement agreement pursuant to which both parties agreed to jointly dismiss the above litigation. In connection
with this settlement agreement, the parties have entered into a new supply agreement. The settlement agreement
did not have a material impact on our financial position, results of operations or cash flows.
We were among several unrelated companies who received a subpoena from the Office of the New York Attorney
General, dated June 17, 2011. The subpoena received by the Company seeks information and documents relating
to, among other things, natural gas development and hydraulic fracturing. We are discussing the subpoena with the
New York Attorney General's office.
ENVIRONMENTAL MATTERS
Our past and present operations include activities which are subject to extensive domestic (including U.S.
federal, state and local) and international environmental regulations with regard to air, land and water quality and
other environmental matters. Our environmental procedures, policies and practices are designed to ensure
compliance with existing laws and regulations and to minimize the possibility of significant environmental damage.
We are involved in voluntary remediation projects at some of our present and former manufacturing locations or
other facilities, the majority of which relate to properties no longer actively used in operations. On rare occasions,
remediation activities are conducted as specified by a government agency-issued consent decree or agreed order.
Remediation costs are accrued based on estimates of probable exposure using currently available facts, existing
environmental permits, technology and presently enacted laws and regulations. Remediation cost estimates
include direct costs related to the environmental investigation, external consulting activities, governmental oversight
fees, treatment equipment and costs associated with long-term operation, maintenance and monitoring of a
remediation project.
We have also been identified as a potentially responsible party (“PRP”) in remedial activities related to various
Superfund sites. In these instances, we participate in the process set out in the Joint Participation and Defense
Agreement to negotiate with government agencies, identify other PRPs, and determine each PRP’s allocation and
estimate remediation costs. We have accrued what we believe to be our pro-rata share of the total estimated cost
of remediation and associated management of these Superfund sites. This share is based upon the ratio that the
estimated volume of waste we contributed to the site bears to the total estimated volume of waste disposed at the
site. Applicable U.S. federal law imposes joint and several liability on each PRP for the cleanup of these sites
leaving us with the uncertainty that we may be responsible for the remediation cost attributable to other PRPs who
are unable to pay their share. No accrual has been made under the joint and several liability concept for those
Superfund sites where our participation is de minimis since we believe that the probability that we will have to pay
material costs above our volumetric share is remote. We believe there are other PRPs who have greater
involvement on a volumetric calculation basis, who have substantial assets and who may be reasonably expected
to pay their share of the cost of remediation. For those Superfund sites where we are a significant PRP,
remediation costs are estimated to include recalcitrant parties. In some cases, we have insurance coverage or
contractual indemnities from third parties to cover a portion of the ultimate liability.
Our total accrual for environmental remediation is $34 million and $32 million, which includes accruals of $4
million and $4 million for the various Superfund sites, at December 31, 2013 and 2012, respectively. The
determination of the required accruals for remediation costs is subject to uncertainty, including the evolving nature
of environmental regulations and the difficulty in estimating the extent and type of remediation activity that is
necessary.
OTHER
In the normal course of business with customers, vendors and others, we have entered into off-balance sheet
arrangements, such as surety bonds for performance, letters of credit and other bank issued guarantees, which
totaled approximately $1.5 billion at December 31, 2013. It is not practicable to estimate the fair value of these
financial instruments. None of the off-balance sheet arrangements either has, or is likely to have, a material effect