Sunoco 2008 Annual Report Download - page 56

after-tax adjustment to the accumulated other comprehensive loss component of shareholders’ equity at
December 31, 2008. In addition, the poor investment results for the plans during 2008 will result in an increase of
approximately $40 million after tax in pension expense for 2009 due to lower expected returns on plan assets and
higher amortization of actuarial losses. The Company also may make up to $80 million of contributions to its
funded defined benefit plans in 2009.
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 generally, 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 regulations 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 (in
millions of dollars):
2008 2007 2006
Pollution abatement capital* .................................. $356 $230 $282
Remediation .............................................. 42 41 42
Operations, maintenance and administration .................... 210 196 266
$608 $467 $590
*Capital expenditures for pollution abatement include amounts to comply with the Tier II low-sulfur fuel requirements (completed in
2006) and the Consent Decrees pertaining to certain alleged Clean Air Act violations at the Company’s refineries. Pollution
abatement capital outlays are expected to approximate $223 and $111 million in 2009 and 2010, respectively.
Remediation Activities
Information regarding remediation activities at Sunoco’s facilities and at formerly owned or third-party sites
is included in the discussion under “Environmental Remediation Activities” in Note 14 to the Consolidated
Financial Statements (Item 8) and is incorporated herein by reference.
Regulatory Matters
The U.S. Environmental Protection Agency (“EPA”) adopted rules under the Clean Air Act (which relates
to emissions of materials into the air) that phased in limits on the sulfur content of gasoline beginning in 2004
and the sulfur content of on-road diesel fuel beginning in mid-2006 (“Tier II”). Tier II capital spending, which
was completed in 2006, totaled $755 million. In addition, higher operating costs are being incurred as the
low-sulfur fuels are produced. In May 2004, the EPA adopted another rule which is phasing in limits on the
allowable sulfur content in off-road diesel fuel that began in June 2007. This rule provides for banking and
trading credit systems and largely relates to operations at Sunoco’s Tulsa refinery. In connection with the
phase-in of these off-road diesel fuel rules, Sunoco had initiated an approximately $400 million capital project at
the Tulsa refinery, which included a new 24 thousand barrels-per-day hydrotreating unit, sulfur recovery unit and
tail gas treater. In 2008, Sunoco elected not to proceed with this project. Sunoco intends to sell the Tulsa refinery
or convert it to a terminal by the end of 2009.
National Ambient Air Quality Standards (“NAAQS”) for ozone and fine particles promulgated by the EPA
have resulted in identification of non-attainment areas throughout the country, including Texas, Pennsylvania,
Ohio, New Jersey and West Virginia, where Sunoco operates facilities. Areas designated by EPA as “moderate”
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