Lockheed Martin 2002 Annual Report Download - page 40

FORTY-SEVEN
ENVIRONMENTAL MATTERS
As more fully described in Note 15 to the financial statements,
we have property that is subject to environmental matters. In
our opinion, the probability is remote that the outcome of
these matters will have a material adverse effect on our con-
solidated results of operations, financial position or cash
flows. Certain expenditures related to the recorded liabilities
discussed below, after deducting any recoveries from insur-
ance or other PRPs, are allowable in establishing the prices of
our products and services under contracts with the U.S.
Government. The recorded amounts do not reflect the possible
future recoveries of portions of the environmental costs
through insurance policy coverage or from other PRPs, which
we are pursuing as required by agreement and U.S. Gov-
ernment regulation. These matters include the following items:
We are responding to three administrative orders issued
by the California Regional Water Quality Control Board in
connection with our former facilities in Redlands, California.
We are also coordinating with the U.S. Air Force, which is
working with the aerospace and defense industry to conduct
preliminary studies of the potential health effects of perchlo-
rate exposure associated with several sites across the country,
including the Redlands site. The results of these studies are
intended to assist us in determining our ultimate clean-up obli-
gation, if any, with respect to perchlorates. In January 2002,
the State of California reduced the provisional standard for
perchlorate concentration in water from 18 parts per billion
(ppb) to 4 ppb. Although this provisional standard does not
create a legally enforceable requirement for us at this time, we
have developed a preliminary remediation plan that would
meet the provisional standard if it were to become final.
Because this plan entails a long lead-time to be implemented,
we have decided to begin implementing the plan and recog-
nize the increased costs that are associated with the plan. The
balance sheet at December 31, 2002 includes a liability of
approximately $185 million which is our estimate of the
remaining expenditures necessary to implement the remedia-
tion and other work at the site over the next 30 years. This
amount is approximately $100 million more than the amount
recorded at December 31, 2001. As at other sites, we are pursu-
ing claims against other potentially responsible parties (PRPs),
including the U.S. Government, to help with clean-up costs.
We have also been conducting remediation activities to
address soil and groundwater contamination by chlorinated
solvents at our former operations in Great Neck, New York.
Until the third quarter of 2002, all of the remediation work
associated with this site had been performed on the site itself.
In the third quarter, we entered into negotiations with the State
of New York to implement an off-site interim remedial meas-
ure intended to address an off-site plume of groundwater con-
tamination that was found to be moving more rapidly than
originally anticipated. This has led to an increase of approxi-
mately $50 million in the projected future costs for the site.
Total projected future costs are now estimated to be about $70
million through 2025. This amount is included in our balance
sheet at December 31, 2002. As at other sites, we are pursuing
claims against other PRPs, including the U.S. Government, to
help with clean-up costs.
Since 1990, we have been responding to various consent
decrees and orders relating to soil and regional groundwater
contamination in the San Fernando Valley associated with our
former operations in Burbank and Glendale, California. Under
an agreement reached with the U.S. Government in 2000, we
will continue to be reimbursed in an amount equal to about
50% of future expenditures for certain remediation activities
by the U.S. Government in its capacity as a PRP under the
Comprehensive Environmental Response, Compensation and
Liability Act. We have recorded a liability of approximately
$60 million representing our estimate of the total expenditures
required over the remaining terms of the consent decrees and
orders for the Glendale and Burbank sites, net of the effects of
the agreement.
We are a party to other proceedings and potential pro-
ceedings for environmental clean-up issues, including matters
at various sites where we have been designated a PRP by the
EPA or by a state agency. If we are ultimately found to have
liability at those sites where we have been designated a PRP,
we expect that the actual burden for the costs of remediation
will be shared with other liable PRPs. Generally, PRPs that are
ultimately determined to be responsible parties are strictly
liable for site clean-up and usually agree among themselves to
share, on an allocated basis, the costs and expenses for investi-
gation and remediation of hazardous materials. Under existing
environmental laws, however, responsible parties are jointly
Lockheed Martin Corporation