Sunoco 2008 Annual Report Download - page 62

marketing properties held for sale in the Company’s Retail Portfolio Management program. The impairment in
2007 related to the permanent shutdown of a previously idled phenol line at the Company’s Haverhill, OH plant.
For a further discussion of these asset impairments, see Note 2 to the Consolidated Financial Statements (Item 8).
There were no asset impairments in 2006.
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
relate to the protection of the environment, waste management and the characteristics and composition of fuels.
These laws and regulations require environmental assessment and/or remediation efforts at many of Sunoco’s
facilities and at formerly owned or third-party sites.
Sunoco’s accrual for environmental remediation activities amounted to $123 million at December 31, 2008.
This accrual is for work at identified sites where an assessment has indicated that cleanup costs are probable and
reasonably estimable. The accrual is undiscounted and is based on currently available information, estimated
timing of remedial actions and related inflation assumptions, existing technology and presently enacted laws and
regulations. It is often extremely difficult to develop reasonable estimates of future site remediation costs due to
changing regulations, changing technologies and their associated costs, and changes in the economic
environment. In the above instances, 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 alternatives and their related costs in determining the estimated accruals for environmental
remediation activities. Losses attributable 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, 2008, the aggregate of the
estimated maximum additional reasonably possible losses, which relate to numerous individual sites, totaled
approximately $95 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 $7 million at December 31, 2008. 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, significant charges against income
for environmental remediation may occur.
Under various environmental laws, including RCRA, Sunoco has initiated corrective remedial 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 remediation 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.
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