OCCIDENTAL PETROLEUM CORP /DE/ | 2013 | FY |

 

 

 

Occidental’s operations are subject to stringent federal, state, local and foreign laws and regulations related to improving or maintaining environmental quality.

 

ENVIRONMENTAL REMEDIATION

The laws that require or address environmental remediation, including CERCLA and similar federal, state, local and foreign laws, may apply retroactively and regardless of fault, the legality of the original activities or the current ownership or control of sites.  OPC or certain of its subsidiaries participate in or actively monitor a range of remedial activities and government or private proceedings under these laws with respect to alleged past practices at operating, closed and third-party sites.  Remedial activities may include one or more of the following:  investigation involving sampling, modeling, risk assessment or monitoring; cleanup measures including removal, treatment or disposal; or operation and maintenance of remedial systems.  The environmental proceedings seek funding or performance of remediation and, in some cases, compensation for alleged property damage, punitive damages, civil penalties, injunctive relief and government oversight costs.

As of December 31, 2013, Occidental participated in or monitored remedial activities or proceedings at 157 sites.  The following table presents Occidental’s environmental remediation reserves as of December 31, 2013, 2012 and 2011, the current portion of which is included in accrued liabilities ($78 million in 2013, $80 million in 2012 and $79 million in 2011) and the remainder in deferred credits and other liabilities — other ($252 million in 2013, $264 million in 2012 and $281 million in 2011).  The reserves are grouped as environmental remediation sites listed or proposed for listing by the U.S. Environmental Protection Agency on the CERCLA National Priorities List (NPL sites) and three categories of non-NPL sites — third-party sites, Occidental-operated sites and closed or non-operated Occidental sites.

 

$ amounts in millions		2013					2012					2011
		Number of Sites		Reserve Balance			Number of Sites		Reserve Balance			Number of Sites		Reserve Balance
NPL sites		31		$	25		35		$	54		36		$	63
Third-party sites		74		83			75		84			73		88
Occidental-operated sites		20		118			22		123			22		120
Closed or non-operated Occidental sites		32		104			29		83			29		89
Total		157		$	330		161		$	344		160		$	360

 

As of December 31, 2013, Occidental’s environmental reserves exceeded $10 million each at 10 of the 157 sites described above, and 108 of the sites had reserves from $0 to $1 million each.

As of December 31, 2013, two sites — a landfill in western New York owned by Occidental and a former facility in New York — accounted for 60 percent of its reserves associated with NPL sites.  In connection with a 1986 acquisition, Maxus Energy Corporation has retained the liability and is indemnifying Occidental for 14 of the remaining NPL sites.

As of December 31, 2013, Maxus has also retained the liability and is indemnifying Occidental for 8 of the 74 third-party sites.  Three of the remaining 66 third-party sites — a former copper mining and smelting operation in Tennessee, a containment and removal project in Tennessee and an active refinery in Louisiana where Occidental reimburses the current owner for certain remediation activities — accounted for 52 percent of Occidental’s reserves associated with these sites.

Four sites — chemical plants in Kansas, Louisiana and New York and a group of oil and gas properties in the southwestern United States — accounted for 61 percent of the reserves associated with the Occidental-operated sites.

Four other sites — a landfill in western New York, former chemical plants in Tennessee and Delaware and a closed coal mine in Pennsylvania — accounted for 64 percent of the reserves associated with closed or non-operated Occidental sites.

Environmental reserves vary over time depending on factors such as acquisitions or dispositions, identification of additional sites and remedy selection and implementation.  The following table presents environmental reserve activity for the past three years:

 

In millions		2013			2012			2011
Balance — Beginning of Year		$	344		$	360		$	366
Remediation expenses and interest accretion		60			56			53
Changes from acquisitions/dispositions		—			—			14
Payments		(74		)	(72		)	(73		)
Balance — End of Year		$	330		$	344		$	360

 

Based on current estimates, Occidental expects to expend funds corresponding to approximately half of the current environmental reserves at the sites described above over the next three to four years and the balance at these sites over the subsequent 10 or more years.  Occidental believes its range of reasonably possible additional losses beyond those liabilities recorded for environmental remediation at these sites could be up to $380 million.

 

ENVIRONMENTAL COSTS

Occidental’s environmental costs, some of which include estimates, are presented below for each segment for each of the years ended December 31:

 

In millions		2013			2012			2011
Operating Expenses
Oil and Gas		$	137		$	160		$	158
Chemical		75			70			68
Midstream and Marketing		17			20			21
		$	229		$	250		$	247
Capital Expenditures
Oil and Gas		$	97		$	122		$	110
Chemical		14			18			15
Midstream and Marketing		7			12			15
		$	118		$	152		$	140
Remediation Expenses
Corporate		$	60		$	56		$	52

 

Operating expenses are incurred on a continual basis.  Capital expenditures relate to longer-lived improvements in  properties currently operated by Occidental.  Remediation expenses relate to existing conditions from past operations.