Chevron 2012 Annual Report Download - page 66

64 Chevron Corporation 2012 Annual Report
Notes to the Consolidated Financial Statements
Millions of dollars, except per-share amounts
claimed by an unrelated taxpayer. It is reasonably possible
that the specic ndings from this assessment could result
in a signicant increase in unrecognized tax benets, which
may have a material eect on the company’s results of opera-
tions in any one reporting period. e company does not
expect settlement of income tax liabilities associated with
uncertain tax positions to have a material eect on its con-
solidated nancial position or liquidity.
Guarantees e company’s guarantee of $562 is associ-
ated with certain payments under a terminal use agreement
entered into by an equity aliate. Over the approximate
15-year remaining term of the guarantee, the maximum
guarantee amount will be reduced over time as certain fees
are paid by the aliate. ere are numerous cross-indemnity
agreements with the aliate and the other partners to permit
recovery of amounts paid under the guarantee. Chevron has
recorded no liability for its obligation under this guarantee.
Indemnications e company provided certain indemni-
ties of contingent liabilities of Equilon and Motiva to Shell
and Saudi Rening, Inc., in connection with the February
2002 sale of the company’s interests in those investments.
rough the end of 2012, the company paid $48 under these
indemnities and continues to be obligated up to $250 for
possible additional indemnication payments in the future.
e company has also provided indemnities relating to
contingent environmental liabilities of assets originally con-
tributed by Texaco to the Equilon and Motiva joint ventures
and environmental conditions that existed prior to the for-
mation of Equilon and Motiva, or that occurred during the
period of Texaco’s ownership interest in the joint ventures. In
general, the environmental conditions or events that are sub-
ject to these indemnities must have arisen prior to December
2001. Claims had to be asserted by February 2009 for
Equilon indemnities and February 2012 for Motiva indem-
nities. In February 2012, Motiva Enterprises LLC delivered
a letter to the company purporting to preserve unmatured
claims for certain Motiva indemnities. e company had
previously provided a negative response to similar claims.
e letter itself provides no estimate of the ultimate claim
amount. Management does not believe this letter or any
other information provides a basis to estimate the amount, if
any, of a range of loss or potential range of loss with respect
to either the Equilon or the Motiva indemnities. e com-
pany posts no assets as collateral and has made no payments
under the indemnities.
rough December 31, 2012, the company has not
received further correspondence from Equilon and Motiva
Enterprises LLC, and the company does not expect further
action to occur related to the indemnities described in the
preceding paragraphs.
In the acquisition of Unocal, the company assumed
certain indemnities relating to contingent environmental
liabilities associated with assets that were sold in 1997. e
acquirer of those assets shared in certain environmental
remediation costs up to a maximum obligation of $200,
which had been reached at December 31, 2009. Under the
indemnication agreement, after reaching the $200 obliga-
tion, Chevron is solely responsible until April 2022, when
the indemnication expires. e environmental conditions or
events that are subject to these indemnities must have arisen
prior to the sale of the assets in 1997.
Although the company has provided for known obliga-
tions under this indemnity that are probable and reasonably
estimable, the amount of additional future costs may be
material to results of operations in the period in which they
are recognized. e company does not expect these costs will
have a material eect on its consolidated nancial position or
liquidity.
Long-Term Unconditional Purchase Obligations and
Commitments, Including roughput and Take-or-Pay
Agreements e company and its subsidiaries have certain
other contingent liabilities with respect to long-term uncon-
ditional purchase obligations and commitments, including
throughput and take-or-pay agreements, some of which relate
to suppliers’ nancing arrangements. e agreements typi-
cally provide goods and services, such as pipeline and storage
capacity, drilling rigs, utilities, and petroleum products,
to be used or sold in the ordinary course of the company’s
business. e aggregate approximate amounts of required
payments under these various commitments are: 2013 –
$3,700; 2014 – $3,900; 2015 – $4,100; 2016 – $2,400; 2017
– $1,800; 2018 and after – $6,500. A portion of these com-
mitments may ultimately be shared with project partners.
Total payments under the agreements were approximately
$3,600 in 2012, $6,600 in 2011 and $6,500 in 2010.
Environmental e company is subject to loss contingen-
cies pursuant to laws, regulations, private claims and legal
proceedings related to environmental matters that are subject
to legal settlements or that in the future may require the
company to take action to correct or ameliorate the eects on
the environment of prior release of chemicals or petroleum
substances, including MTBE, by the company or other par-
ties. Such contingencies may exist for various sites, including,
but not limited to, federal Superfund sites and analogous sites
under state laws, reneries, crude oil elds, service stations,
terminals, land development areas, and mining operations,
whether operating, closed or divested. ese 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,
Note 22 Other Contingencies and Commitments – Continued