Sunoco 2006 Annual Report Download - page 64

the estimated maximum additional reasonably possible
losses, which relate to numerous individual sites, totaled
approximately $85 million. However, the Company be-
lieves it is very unlikely that it will realize the maximum
reasonably possible loss at every site. Furthermore, the
recognition of additional losses, if and when they were to
occur, would likely extend over many years and, there-
fore, likely would not have a material impact on the
Company’s financial position.
Under various environmental laws, including the Re-
source Conservation and Recovery Act (“RCRA”) (which
relates to solid and hazardous waste treatment, storage
and disposal), Sunoco has initiated corrective remedial
action at its facilities, formerly owned facilities and third-
party sites. At the Company’s major manufacturing facili-
ties, Sunoco has consistently assumed continued
industrial use and a containment/remediation strategy
focused on eliminating unacceptable risks to human
health or the environment. The remediation accruals for
these sites reflect that strategy. Accruals include amounts
to prevent off-site migration and to contain the impact
on the facility property, as well as to address known, dis-
crete areas requiring remediation within the plants.
Activities include closure of RCRA solid waste manage-
ment units, recovery of hydrocarbons, handling of im-
pacted soil, mitigation of surface water impacts and
prevention of off-site migration.
Many of Sunoco’s current terminals are being addressed
with the above containment/remediation strategy. At
some smaller or less impacted facilities and some pre-
viously divested terminals, the focus is on remediating
discrete interior areas to attain regulatory closure.
Sunoco owns or operates certain retail gasoline outlets
where releases of petroleum products have occurred. Fed-
eral and state laws and regulations require that con-
tamination caused by such releases at these sites and at
formerly owned sites be assessed and remediated to meet
the applicable standards. The obligation for Sunoco to
remediate this type of contamination varies, depending
on the extent of the release and the applicable laws and
regulations. A portion of the remediation costs may be
recoverable from the reimbursement fund of the appli-
cable state, after any deductible has been met.
Future costs for environmental remediation activities at
the Company’s marketing sites also will be influenced by
the extent of MTBE contamination of groundwater, the
cleanup of which will be driven by thresholds based on
drinking water protection. Though not all groundwater is
used for drinking, several states have initiated or proposed
more stringent MTBE cleanup requirements. Cost in-
creases result directly from extended remedial operations
and maintenance on sites that, under prior standards,
could otherwise have been completed. Cost increases will
also result from installation of additional remedial or
monitoring wells and purchase of more expensive equip-
ment because of the presence of MTBE. While actual
cleanup costs for specific sites are variable and depend on
many of the factors discussed above, expansion of similar
MTBE remediation thresholds to additional states or
adoption of even more stringent requirements for MTBE
remediation would result in further cost increases.
Sunoco does not currently, nor does it intend to, manu-
facture or sell gasoline containing MTBE.
The accrued liability for hazardous waste sites is attribut-
able to potential obligations to remove or mitigate the
environmental effects of the disposal or release of certain
pollutants at third-party sites pursuant to the Compre-
hensive Environmental Response Compensation and
Liability Act (“CERCLA”) (which relates to releases and
remediation of hazardous substances) and similar state
laws. Under CERCLA, Sunoco is potentially subject to
joint and several liability for the costs of remediation at
sites at which it has been identified as a “potentially re-
sponsible party” (“PRP”). As of December 31, 2006,
Sunoco had been named as a PRP at 36 sites identified or
potentially identifiable as “Superfund” sites under federal
and state law. The Company is usually one of a number of
companies identified as a PRP at a site. Sunoco has re-
viewed the nature and extent of its involvement at each
site and other relevant circumstances and, based upon the
other parties involved or Sunoco’s negligible partic-
ipation therein, believes that its potential liability asso-
ciated with such sites will not be significant.
Management believes that none of the current re-
mediation locations, which are in various stages of on-
going remediation, is individually material to Sunoco as
its largest accrual for any one Superfund site, operable
unit or remediation area was less than $5 million at De-
cember 31, 2006. As a result, Sunoco’s exposure to ad-
verse developments with respect to any individual site is
not expected to be material. However, if changes in envi-
ronmental regulations occur, such changes could impact
multiple Sunoco facilities and formerly owned and third-
party sites at the same time. As a result, from time to
time, significant charges against income for environ-
mental remediation may occur.
The Company maintains insurance programs that cover
certain of its existing or potential environmental li-
abilities, which programs vary by year, type and extent of
coverage. For underground storage tank remediations, the
Company can also seek reimbursement through various
state funds of certain remediation costs above a deduc-
tible amount. For certain acquired properties, the Com-
pany has entered into arrangements with the sellers or
others that allocate environmental liabilities and provide
indemnities to the Company for remediating con-
tamination that occurred prior to the acquisition dates.
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