Sunoco 2004 Annual Report Download - page 65

tion, the Company accrues for any obligations under
these agreements when a loss is probable and reasonably
estimable. The Company cannot reasonably estimate the
maximum potential amount of future payments under
these agreements.
Sunoco is a party under agreements which provide for
future payments to secure wastewater treatment services
at its Toledo refinery and coal handling services at its
Indiana Harbor cokemaking facility. The fixed and
determinable amounts of the obligations under these
agreements are as follows (in millions of dollars):
Year ending December 31:
2005 $ 9
2006 9
2007 9
2008 8
2009 8
2010 through 2018 46
Total 89
Less: Amount representing interest (28)
Total at present value $ 61
Payments under these agreements, including variable
components, totaled $19, $18 and $18 million for the
years 2004, 2003 and 2002, respectively.
Effective January 1, 2001, Sunoco completed the acquis-
ition of Aristech Chemical Corporation (“Aristech”), a
wholly owned subsidiary of Mitsubishi Corporation
(“Mitsubishi”), for $506 million in cash and the assump-
tion of $163 million of debt. Contingent payments with a
net present value as of the acquisition date of up to $167
million (the “earn out”) may also be made if realized mar-
gins for polypropylene and phenol exceed certain agreed-
upon thresholds through 2006. As of December 31, 2004,
no such payments have been earned. Since the $167 mil-
lion represents a present value as of January 1, 2001, the
actual amounts that could ultimately be paid under the
earn out provisions increase over time by a contract-
specified 11 percent per year. However, the contingent
payments are limited to $90 million per year. Any earn
out payments would be treated as adjustments to the pur-
chase price. In addition, Mitsubishi is responsible for up to
$100 million of any potential environmental liabilities of
the business identified through 2026 arising out of or re-
lated to the period prior to the acquisition date.
Environmental Remediation Activities
Sunoco is subject to extensive and frequently changing
federal, state and local laws and regulations, including,
but not limited to, those relating to the discharge of
materials into the environment or that otherwise deal
with the protection of the environment, waste manage-
ment and the characteristics and composition of fuels. As
with the industry generally, 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 facili-
ties. Existing laws and regulations result in liabilities and
loss contingencies for remediation at Sunoco’s facilities
and at third-party or formerly owned sites. 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 ac-
crued 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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