Sunoco 2011 Annual Report Download - page 101

The following table summarizes the changes in the accrued liability for environmental remediation activities
which is largely attributable to activities at Sunoco’s retail sites (in millions of dollars):
2011 2010 2009
Balance at beginning of period ..................................... $115 $116 $123
Accruals ....................................................... 25 28 32
Payments ...................................................... (31) (31) (39)
Other ......................................................... 1 2 —
Balance at end of period .......................................... $110 $115 $116
In February 2012, Sunoco announced that it intends to contribute approximately $250 million by the end of
2012 to establish a segregated environmental fund by means of a captive insurance company to be used for the
remediation of legacy environmental obligations. These legacy sites that are subject to environmental
assessments include formerly owned terminals and other logistics assets, retail sites that Sunoco no longer
operates, closed and/or sold refineries and other formerly owned sites.
Sunoco’s accruals for environmental remediation activities reflect management’s estimates of the most
likely costs that will be incurred over an extended period to remediate identified conditions for which the costs
are both probable and reasonably estimable. 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. Such accruals are undiscounted. In general,
each remediation site/issue is evaluated individually based upon information available for the site/issue and no
pooling or statistical analysis is used to evaluate an aggregate risk for a group of similar items (e.g., service
station sites) in determining the amount of probable loss accrual to be recorded. Sunoco’s estimates of
environmental remediation costs also frequently involve evaluation of a range of estimates. In many cases, it is
difficult to determine that one point in the range of loss estimates is more likely than any other. In these
situations, existing accounting guidance requires that the minimum of the range be accrued. Accordingly, the low
end of the range often represents the amount of loss which has been recorded.
Total future costs for the environmental remediation activities identified above will depend upon, among
other things, the identification of any additional sites, the determination of the extent of the contamination at each
site, the timing and nature of required remedial actions, the nature of operations at each site, the technology
available and needed to meet the various existing legal requirements, the nature and terms of cost-sharing
arrangements with other potentially responsible parties, the availability of insurance coverage, the nature and
extent of future environmental laws and regulations, inflation rates, terms of consent agreements or remediation
permits with regulatory agencies and the determination of Sunoco’s liability at the sites, if any, in light of the
number, participation level and financial viability of the other parties. 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, 2011, the aggregate of the estimated maximum additional reasonably possible losses,
which relate to numerous individual sites, totaled approximately $165 million. This estimate of reasonably
possible losses associated with environmental remediation is largely based upon analysis during 2011 and
continuing into early 2012 of the potential liabilities associated with the establishment of the segregated
environmental fund described above. It also includes estimates for remediation activities at current logistics and
retail assets. This reasonably possible loss estimate in many cases reflects the upper end of the loss ranges which
are described above. Such estimates include potentially higher contractor costs for expected remediation
activities, the potential need to use more costly or comprehensive remediation methods and longer operating and
monitoring periods, among other things.
Under various environmental laws, including the Resource Conservation and Recovery Act (“RCRA”)
(which relates to solid and hazardous waste treatment, storage and disposal), Sunoco has initiated corrective
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