Sunoco 2007 Annual Report Download - page 27

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Environmental Matters
General
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 relate to the protection of the environment, waste
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 remediation, operating costs and capital
costs to construct, maintain and upgrade equipment and facilities. Existing laws and regu-
lations have required, and are expected 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) 2007 2006 2005
Pollution abatement capital* $230 $282 $498
Remediation 41 42 50
Operations, maintenance and administration 196 266 192
$467 $590 $740
*Capital expenditures for pollution abatement include amounts to comply with the Tier II low-sulfur fuel requirements (completed in 2006),
the Consent Decrees pertaining to certain alleged Clean Air Act violations at the Company’s refineries and, in 2008 and 2009, the project
at the Tulsa refinery to enable the production of diesel fuel that meets new product specifications. Pollution abatement capital outlays are
expected to approximate $427 and $382 million in 2008 and 2009, respectively.
Remediation Activities
Existing laws and regulations result in liabilities and loss contingencies for remediation at
Sunoco’s facilities and at formerly owned or third-party sites. Sunoco accrues environ-
mental 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 regu-
lations. 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 alter-
natives and their related costs in determining the estimated accruals for environmental
remediation activities. Losses attributable to unasserted claims are also reflected in the ac-
cruals 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) 2007 2006
Accrued liabilities $39 $36
Other deferred credits and liabilities 83 85
$122 $121
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