Sunoco 2011 Annual Report Download - page 103

MTBE Litigation
Sunoco, along with other refiners, manufacturers and sellers of gasoline, is a defendant in lawsuits alleging
MTBE contamination of groundwater. The plaintiffs typically include water purveyors and municipalities
responsible for supplying drinking water and governmental authorities. The plaintiffs are asserting primarily
product liability claims and additional claims including nuisance, trespass, negligence, violation of
environmental laws and deceptive business practices. The plaintiffs in all of the cases are seeking to recover
compensatory damages, and in some cases, injunctive relief, punitive damages and attorneys’ fees.
As of December 31, 2011, Sunoco was a defendant in approximately three lawsuits involving two states and
Puerto Rico. Two of the cases are venued in a multidistrict proceeding in a New York federal court. The
remaining lawsuit is pending in a New Hampshire state court. All three cases assert natural resource damage
claims. In addition, Sunoco recently received notice from another state that it intends to file an MTBE lawsuit in
the near future asserting natural resource damage claims.
Discovery is proceeding in all of these cases and accruals have been established where the losses are probable
and reasonably estimable. In two of the cases, there has been insufficient information developed about the plaintiffs’
legal theories or the facts in the natural resource damage claims that would be relevant to an analysis of the ultimate
liability of Sunoco in these matters; however, it is reasonably possible that a loss may be realized. Management
believes that the MTBE cases could have a significant impact on results of operations for any future period, but does
not believe that the cases will have a material adverse effect on its consolidated financial position.
During 2011, Sunoco settled seven MTBE contamination cases and several unfiled claims. The settlements
were not material to Sunoco’s results of operations or cash flows for 2011. During the third quarter of 2010, the
Company reached agreement concerning insurance coverage for certain previously incurred and potential future
costs related to MTBE litigation, including the matters described above. In connection with this settlement, the
Company recognized a $16 million gain ($9 million after tax).
Other
SunCoke Energy is subject to indemnity agreements with current and former third-party investors of Indiana
Harbor and Jewell related to certain tax benefits that they earned as limited partners. Based on the partnerships’
statute of limitations, as well as published filings of the limited partners, SunCoke Energy believes that tax audits
for years 2006 and 2007 may still be open for the limited partners and subject to examination. Sunoco guarantees
SunCoke Energy’s performance under the indemnification to the current third party investor of Indiana Harbor
and the former investor at Jewell which includes approximately $53 million of tax credits that were taken by such
investors. As of December 31, 2011, SunCoke Energy has not been notified by the limited partners that such
items are under examination and further believes that the potential for any claims under the indemnity
agreements is remote.
Conclusion
Many other legal and administrative proceedings are pending or may be brought against Sunoco arising out of its
current and past operations, including matters related to commercial and tax disputes, product liability, antitrust,
employment claims, leaks from pipelines and underground storage tanks, natural resource damage claims, premises-
liability claims, allegations of exposures of third parties to toxic substances (such as benzene or asbestos) and general
environmental claims. Although the ultimate outcome of these proceedings and other matters identified above cannot
be ascertained at this time, it is reasonably possible that some of these matters could be resolved unfavorably to
Sunoco. Management believes that these matters could have a significant impact on results of operations for any future
period. However, management does not believe that any additional liabilities which may arise pertaining to such
matters would be material in relation to the consolidated financial position of Sunoco at December 31, 2011.
14. Shareholders’ Equity
Each share of Company common stock is entitled to one full vote. The Company reduced the quarterly cash
dividend on its common stock by 50 percent to $.15 per share ($.60 per year) beginning with the first quarter of
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