Baker Hughes 2013 Annual Report Download - page 39

Baker Hughes Incorporated9
ENVIRONMENTAL MATTERS
We are committed to the health and safety of people, protection of the environment and compliance with laws,
regulations and our policies. Our past and present operations include activities that are subject to extensive
domestic (including U.S. federal, state and local) and international regulations with regard to air and water quality
and other environmental matters. We believe we are in substantial compliance with these regulations. Regulation
in this area continues to evolve, and changes in standards of enforcement of existing regulations, as well as the
enactment and enforcement of new legislation, may require us and our customers to modify, supplement or replace
equipment or facilities or to change or discontinue present methods of operation. Our environmental compliance
expenditures and our capital costs for environmental control equipment may change accordingly.
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.
Estimated remediation costs are accrued using currently available facts, existing environmental permits, technology
and presently enacted laws and regulations. For sites where we are primarily responsible for the remediation, our
cost estimates are developed based on internal evaluations and are not discounted. We record accruals when it is
probable that we will be obligated to pay amounts for environmental site evaluation, remediation or related activities,
and such amounts can be reasonably estimated. In general, we seek to accrue costs for the most likely scenario,
where known. Accruals are recorded even if significant uncertainties exist over the ultimate cost of the remediation.
Ongoing environmental compliance costs, such as obtaining environmental permits, installation of pollution control
equipment and waste disposal, are expensed as incurred.
The Comprehensive Environmental Response, Compensation and Liability Act (known as “Superfund”) imposes
liability for the release of a “hazardous substance” into the environment. Superfund liability is imposed without
regard to fault, even if the waste disposal was in compliance with laws and regulations. The U.S. Environmental
Protection Agency (the “EPA”) and appropriate state agencies supervise investigative and cleanup activities at
Superfund sites. 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. PRPs
in Superfund actions have joint and several liability for all costs of remediation. Accordingly, a PRP may be required
to pay more than its proportional share of such costs. For some projects, it is not possible to quantify our ultimate
exposure because the projects are either in the investigative or early remediation stage, or allocation information is
not yet available. However, based upon current information, we do not believe that probable or reasonably possible
expenditures in connection with the sites are likely to have a material adverse effect on our consolidated financial
statements because we have recorded adequate reserves to cover the estimate we presently believe will be our
ultimate liability in the matter. Further, other PRPs involved in the sites have substantial assets and may reasonably
be expected to pay their share of the cost of remediation, and, in some circumstances, we have insurance coverage
or contractual indemnities from third parties to cover a portion of the ultimate liability.
Based upon current information, we believe that our overall compliance with environmental regulations,
including routine environmental compliance costs and capital expenditures for environmental control equipment, will
not have a material adverse effect upon our capital expenditures, earnings or competitive position because we have
either established adequate reserves or our cost for that compliance is not expected to be material to our
consolidated financial statements. 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.
We are subject to various other governmental proceedings and regulations, including foreign regulations,
relating to environmental matters, but we do not believe that any of these matters are likely to have a material
adverse effect on our consolidated financial statements. We continue to focus on reducing future environmental
liabilities by maintaining appropriate company standards and improving our assurance programs.
ITEM 1A. RISK FACTORS
An investment in our common stock involves various risks. When considering an investment in Baker Hughes,
one should carefully consider all of the risk factors described below, as well as other information included and
incorporated by reference in this report. There may be additional risks, uncertainties and matters not listed below,