Chevron 2006 Annual Report Download - page 82

80 CHEVRON CORPORATION 2006 ANNUAL REPORT80 CHEVRON CORPORATION 2006 ANNUAL REPORT
Notes to the Consolidated Financial Statements
Millions of dollars, except per-share amounts
Through the end of 2006, the company paid approximately
$48 under these indemnities and continues to be obligated for
possible additional indemnifi cation payments in the future.
The company has also provided indemnities relating to
contingent environmental liabilities related to assets origi-
nally contributed by Texaco to the Equilon and Motiva joint
ventures and environmental conditions that existed prior to
the formation of Equilon and Motiva or that occurred dur-
ing the period of Texaco’s ownership interest in the joint
ventures. In general, the environmental conditions or events
that are subject to these indemnities must have arisen prior
to December 2001. Claims relating to Equilon indemnities
must be asserted either as early as February 2007, or no later
than February 2009, and claims relating to Motiva indem-
nities must be asserted either as early as February 2007,
or no later than February 2012. Under the terms of these
indemnities, there is no maximum limit on the amount of
potential future payments. The company has not recorded
any liabilities for possible claims under these indemnities.
The company posts no assets as collateral and has made no
payments under the indemnities.
The amounts payable for the indemnities described above
are to be net of amounts recovered from insurance carriers
and others and net of liabilities recorded by Equilon or Motiva
prior to September 30, 2001, for any applicable incident.
In the acquisition of Unocal, the company assumed
certain indemnities relating to contingent environmental
liabilities associated with assets that were sold in 1997. Under
the indemnifi cation agreement, the company’s liability is
unlimited until April 2022, when the liability expires. The
acquirer shares in certain environmental remediation costs
up to a maximum obligation of $200, which had not been
reached as of December 31, 2006.
Securitization The company securitizes certain retail and
trade accounts receivable in its downstream business through
the use of qualifying Special Purpose Entities (SPEs). At
December 31, 2006, approximately $1,200, representing
about 7 percent of Chevron’s total current accounts and
notes receivables balance, were securitized. Chevron’s total
estimated fi nancial exposure under these securitizations at
December 31, 2006, was approximately $80. These arrange-
ments have the effect of accelerating Chevron’s collection of
the securitized amounts. In the event that the SPEs experience
major defaults in the collection of receivables, Chevron believes
that it would have no loss exposure connected with third-party
investments in these securitizations.
Long-Term Unconditional Purchase Obligations and Commit-
ments, Including Throughput and Take-or-Pay Agreements The
company and its subsidiaries have certain other contingent
liabilities relating to long-term unconditional purchase obli-
gations and commitments, including throughput and
take-or-pay agreements, some of which relate to suppliers’
fi nancing arrangements. The agreements typically provide
goods and services, such as pipe line and storage capacity,
drilling rigs, utilities, and petroleum products, to be used
or sold in the ordinary course of the company’s business.
The aggregate approximate amounts of required payments
under these various commitments are: 2007 – $3,200;
2008 – $1,700; 2009 – $2,100; 2010 – $1,900; 2011 –
$900; 2012 and after – $4,100. A portion of these
commitments may ultimately be shared with project part-
ners. Total payments under the agreements were
approximately $3,000 in 2006, $2,100 in 2005 and $1,600
in 2004.
Minority Interests The company has commitments of $209
related to minority interests in subsidiary companies.
Environmental The company is subject to loss contingen-
cies pursuant to environmental laws and regulations that in
the future may require the company to take action to cor-
rect or ameliorate the effects on the environment of prior
release of chemicals or petroleum substances, including
MTBE, by the company or other parties. Such contingen-
cies may exist for various sites, including, but not limited
to, federal Superfund sites and analogous sites under state
laws, refi neries, crude oil fi elds, service stations, terminals,
land development areas, and mining operations, whether
operating, closed or divested. These future costs are not
fully determinable due to such factors as the unknown
magnitude of possible contamination, the unknown timing
and extent of the corrective actions that may be required,
the determination of the company’s liability in proportion
to other responsible parties, and the extent to which such
costs are recoverable from third parties.
Although the company has provided for known
environmental obligations that are probable and reason-
ably estimable, the amount of additional future costs
may be material to results of operations in the period in
which they are recognized. The company does not expect
these costs will have a material effect on its consolidated
fi nancial position or liquidity. Also, the company does
not believe its obligations to make such expenditures have
had, or will have, any signifi cant impact on the company’s
competitive position relative to other U.S. or international
petroleum or chemical companies.
Chevron’s environmental reserve as of December
31, 2006, was $1,441. Included in this balance were
remediation activities of 242 sites for which the company
had been identifi ed as a potentially responsible party or
otherwise involved in the remediation by the U.S. Envi-
ronmental Protection Agency (EPA) or other regulatory
agencies under the provisions of the federal Superfund
law or analogous state laws. The company’s remediation
NOTE 23. OTHER CONTINGENCIES AND COMMITMENTS – Continued