Sunoco 2004 Annual Report Download - page 32

management and the characteristics and composition of fuels. As with the industry gen-
erally, compliance with existing and anticipated laws and regulations increases the overall
cost of operating Sunoco’s businesses, including capital costs to construct, maintain and
upgrade equipment and facilities. Existing laws and regulations have required, and are ex-
pected to continue to require, Sunoco to make significant expenditures of both a capital
and an expense nature. The following table summarizes Sunoco’s expenditures for
environmental projects and compliance activities:
(Millions of Dollars) 2004 2003 2002
Pollution abatement capital* $258 $114 $ 47
Remediation 38 44 49
Operations, maintenance and administration 135 127 147
$431 $285 $243
*Capital expenditures for pollution abatement are expected to approximate $380 and $160 million in 2005 and 2006, respectively.
Remediation Activities
These laws and regulations also result in liabilities and loss contingencies for remediation at
Sunoco’s facilities and at third-party or formerly owned sites. Sunoco accrues environmental
remediation costs for work at identified sites where an assessment has indicated that cleanup
costs are probable and reasonably estimable. Such accruals are undiscounted and are based on
currently available information, estimated timing of remedial actions and related inflation
assumptions, existing technology and presently enacted laws and regulations. If a range of
probable environmental cleanup costs exists for an identified site, FASB Interpretation No.
14, “Reasonable Estimation of the Amount of a Loss,” requires that the minimum of the
range be accrued unless some other point in the range is more likely in which case the most
likely amount in the range is accrued. Engineering studies, historical experience and other
factors are used to identify and evaluate remediation alternatives and their related costs in
determining the estimated accruals for environmental remediation activities. Losses attribut-
able to unasserted claims are also reflected in the accruals to the extent they are probable of
occurrence and reasonably estimable. The accrued liability for environmental remediation is
classified in the consolidated balance sheets as follows:
December 31
(Millions of Dollars) 2004 2003
Accrued liabilities $39 $44
Other deferred credits and liabilities 109 102
$148 $146
The following table summarizes the changes in the accrued liability for environmental
remediation activities by category:
(Millions of Dollars) Refineries
Marketing
Sites
Chemicals
Facilities
Pipelines
and Terminals
Hazardous
Waste Sites Other Total
At December 31, 2001 $ 61 $ 45 $ 10 $ 18 $ 8 $ 3 $ 145
Accruals (2) 36 1 7 — — 42
Payments (7) (24) (3) (12) (3) — (49)
Other* — 15 — 6 — — 21
At December 31, 2002 $ 52 $ 72 $ 8 $ 19 $ 5 $ 3 $ 159
Accruals — 23 1 6 1 (1) 30
Payments (9) (22) (2) (10) (1) — (44)
Other* — 1 — — — — 1
At December 31, 2003 $ 43 $ 74 $ 7 $ 15 $ 5 $ 2 $146
Accruals 220 — 3 2—27
Payments (10) (21) (1) (3) (3) — (38)
Acquisitions and divestments 11 — (1) — — — 10
Other* 21— — ——3
At December 31, 2004 $ 48 $ 74 $ 5 $ 15 $ 4 $ 2 $148
*Consists principally of increases in the accrued liability for which recovery from third parties is probable.
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