Sunoco 2007 Annual Report Download - page 37

costs, and changes in the economic environment. In the above instances, if a range of prob-
able 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 attrib-
utable to unasserted claims are also reflected in the accruals to the extent they are probable
of occurrence and reasonably estimable.
Management believes it is reasonably possible (i.e., less than probable but greater than
remote) that additional environmental remediation losses will be incurred. At
December 31, 2007, the aggregate of the estimated maximum additional reasonably possi-
ble losses, which relate to numerous individual sites, totaled approximately $100 million.
However, the Company believes 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, therefore, likely
would not have a material impact on the Company’s financial position.
Management believes that none of the current remediation locations, which are in various
stages of ongoing remediation, is individually material to Sunoco as its largest accrual for
any one Superfund site, operable unit or remediation area was less than $8 million at De-
cember 31, 2007. As a result, Sunoco’s exposure to adverse developments with respect to
any individual site is not expected to be material. However, if changes in environmental
laws or regulations occur, such changes could impact multiple Sunoco facilities, formerly
owned facilities and third-party sites at the same time. As a result, from time to time, sig-
nificant charges against income for environmental remediation may occur.
Under various environmental laws, including RCRA, Sunoco has initiated corrective re-
medial action at its facilities, formerly owned facilities and third-party sites. At the
Company’s major manufacturing facilities, 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, discrete areas requiring re-
mediation within the plants. Activities include closure of RCRA solid waste management
units, recovery of hydrocarbons, handling of impacted 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 previously 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 prod-
ucts have occurred. Federal and state laws and regulations require that contamination
caused by such releases at these sites and at formerly owned sites be assessed and re-
mediated 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 re-
imbursement fund of the applicable state, after any deductible has been met.
Future costs for environmental remediation activities at the Company’s retail 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 increases result directly from extended re-
medial operations and maintenance on sites that, under prior standards, could otherwise
have been completed. Cost increases will also result from installation of additional re-
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