|
|
 | | | |
- close
- close
- close
- close
These excerpts taken from the MRO 10-K filed Feb 27, 2009. 27. Contingencies and Commitments We are the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Certain of these matters are discussed below. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to our consolidated financial statements. However, management believes that we will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably. Environmental matters – We are subject to federal, state, local and foreign laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance. At December 31, 2008 and 2007, accrued liabilities for remediation totaled $111 million and $108 million. It is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. Receivables for recoverable costs from certain states, under programs to assist companies in clean-up efforts related to underground storage tanks at retail marketing outlets, were $60 and $66 million at December 31, 2008 and 2007. We are a defendant, along with other refining companies, in 20 cases arising in three states alleging damages for methyl tertiary-butyl ether (“MTBE”) contamination. We have also received seven Toxic Substances Control Act notice letters involving potential claims in two states. Such notice letters are often followed by litigation. Like the cases that were settled in 2008, the remaining MTBE cases are consolidated in a multidistrict litigation in the Southern District of New York for pretrial proceedings. Nineteen of the remaining cases allege damages to water supply wells, similar to the damages claimed in the settled cases. In the other remaining case, the State of New Jersey is seeking natural resources damages allegedly resulting from contamination of groundwater by MTBE. This is the only MTBE contamination case in which we are a defendant and natural resources damages are sought. We are vigorously defending these cases. We, along with a number of other defendants, have engaged in settlement discussions related to the majority of the cases in which we are a defendant. We do not expect our share of liability, if any, for the remaining cases to significantly impact our consolidated results of operations, financial position or cash flows. A lawsuit filed in the United States District Court for the Southern District of West Virginia alleges that our Catlettsburg, Kentucky, refinery distributed contaminated gasoline to wholesalers and retailers for a period prior to August, 2003, causing permanent damage to storage tanks, dispensers and related equipment, resulting in lost profits, business disruption and personal and real property damages. Following the incident, we conducted remediation operations at affected facilities, and we deny that any permanent damages resulted from the incident. Class action certification was granted in August 2007. We have entered into a tentative settlement agreement in this case. Notice of the proposed settlement has been sent to the class members. Approval by the court after a fairness hearing is required before the settlement can be finalized. The fairness hearing is scheduled in the first quarter of 2009. The proposed settlement will not significantly impact our consolidated results of operations, financial position or cash flows. Guarantees – We have provided certain guarantees, direct and indirect, of the indebtedness of other companies. Under the terms of most of these guarantee arrangements, we would be required to perform should the guaranteed party fail to fulfill its obligations under the specified arrangements. In addition to these financial guarantees, we also have various performance guarantees related to specific agreements.
117
Table of ContentsIndex to Financial StatementsMARATHON OIL CORPORATION Notes to Consolidated Financial Statements
Guarantees Related to Indebtedness of Equity Method Investees – We hold interests in an offshore oil port, LOOP LLC, and a crude oil pipeline system, LOCAP LLC. Both LOOP LLC and LOCAP LLC have secured various project financings with throughput and deficiency agreements. Under the agreements, we are required to advance funds if the investees are unable to service their debt. Any such advances are considered prepayments of future transportation charges. The terms of the agreements vary but tend to follow the terms of the underlying debt. Our maximum potential undiscounted payments under these agreements totaled $172 million as of December 31, 2008. We hold an interest in a refined products pipeline through our investment in Centennial, and have guaranteed the repayment of Centennial’s outstanding balance under a Master Shelf Agreement which expires in 2024. The guarantee arose in order for Centennial to obtain adequate financing. Our maximum potential undiscounted payments under this agreement totaled $65 million as of December 31, 2008. Other Guarantees – We have entered into other guarantees with maximum potential undiscounted payments totaling $266 million as of December 31, 2008, which consist primarily of leases of corporate assets containing general lease indemnities and guaranteed residual values, commitments to contribute cash to equity method investees for certain catastrophic events in lieu of procuring insurance coverage, a performance guarantee and a long-term transportation services agreement. United States Steel was the sole general partner of Clairton 1314B Partnership, L.P., which owned certain cokemaking facilities formerly owned by United States Steel. We have agreed, under certain circumstances, to indemnify the limited partners if the partnership’s product sales fail to qualify for the credit under Section 29 of the Internal Revenue Code. The Clairton 1314B Partnership was terminated on October 31, 2008, but we were not released from our obligations. United States Steel has estimated the maximum potential amount of this indemnity obligation, including interest and tax gross-up, was approximately $650 million as of December 31, 2008. General Guarantees Associated with Asset Disposals – Over the years, we have sold various assets in the normal course of our business. Certain of the related agreements contain performance and general guarantees, including guarantees regarding inaccuracies in representations, warranties, covenants and agreements, and environmental and general indemnifications that require us to perform upon the occurrence of a triggering event or condition. These guarantees and indemnifications are part of the normal course of selling assets. We are typically not able to calculate the maximum potential amount of future payments that could be made under such contractual provisions because of the variability inherent in the guarantees and indemnities. Most often, the nature of the guarantees and indemnities is such that there is no appropriate method for quantifying the exposure because the underlying triggering event has little or no past experience upon which a reasonable prediction of the outcome can be based. Contract commitments – At December 31, 2008 and 2007, our contract commitments to acquire property, plant and equipment totaled $4,070 million and $3,893 million. Other contingencies – In November 2006, the government of Equatorial Guinea enacted a new hydrocarbon law governing petroleum operations in Equatorial Guinea. The transitional provision of the law provides that all contractors and the terms of any contract to which they are a party will be subject to the law. The governmental agency responsible for the energy industry was given the authority to renegotiate any contract for the purpose of adapting any terms and conditions that are inconsistent with the new law. We are in the process of determining what impact this law may have on our existing operations in Equatorial Guinea.
118
Table of ContentsIndex to Financial StatementsMARATHON OIL CORPORATION Notes to Consolidated Financial Statements
27. Contingencies and Commitments We are the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Certain of these matters are discussed below. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to our consolidated financial statements. However, management believes that we will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably. Environmental matters – We are subject to federal, state, local and foreign laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance. At December 31, 2008 and 2007, accrued liabilities for remediation totaled $111 million and $108 million. It is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. Receivables for recoverable costs from certain states, under programs to assist companies in clean-up efforts related to underground storage tanks at retail marketing outlets, were $60 and $66 million at December 31, 2008 and 2007. We are a defendant, along with other refining companies, in 20 cases arising in three states alleging damages for methyl tertiary-butyl ether (“MTBE”) contamination. We have also received seven Toxic Substances Control Act notice letters involving potential claims in two states. Such notice letters are often followed by litigation. Like the cases that were settled in 2008, the remaining MTBE cases are consolidated in a multidistrict litigation in the Southern District of New York for pretrial proceedings. Nineteen of the remaining cases allege damages to water supply wells, similar to the damages claimed in the settled cases. In the other remaining case, the State of New Jersey is seeking natural resources damages allegedly resulting from contamination of groundwater by MTBE. This is the only MTBE contamination case in which we are a defendant and natural resources damages are sought. We are vigorously defending these cases. We, along with a number of other defendants, have engaged in settlement discussions related to the majority of the cases in which we are a defendant. We do not expect our share of liability, if any, for the remaining cases to significantly impact our consolidated results of operations, financial position or cash flows. A lawsuit filed in the United States District Court for the Southern District of West Virginia alleges that our Catlettsburg, Kentucky, refinery distributed contaminated gasoline to wholesalers and retailers for a period prior to August, 2003, causing permanent damage to storage tanks, dispensers and related equipment, resulting in lost profits, business disruption and personal and real property damages. Following the incident, we conducted remediation operations at affected facilities, and we deny that any permanent damages resulted from the incident. Class action certification was granted in August 2007. We have entered into a tentative settlement agreement in this case. Notice of the proposed settlement has been sent to the class members. Approval by the court after a fairness hearing is required before the settlement can be finalized. The fairness hearing is scheduled in the first quarter of 2009. The proposed settlement will not significantly impact our consolidated results of operations, financial position or cash flows. Guarantees – We have provided certain guarantees, direct and indirect, of the indebtedness of other companies. Under the terms of most of these guarantee arrangements, we would be required to perform should the guaranteed party fail to fulfill its obligations under the specified arrangements. In addition to these financial guarantees, we also have various performance guarantees related to specific agreements.
117
Table of ContentsIndex to Financial StatementsMARATHON OIL CORPORATION Notes to Consolidated Financial Statements
Guarantees Related to Indebtedness of Equity Method Investees – We hold interests in an offshore oil port, LOOP LLC, and a crude oil pipeline system, LOCAP LLC. Both LOOP LLC and LOCAP LLC have secured various project financings with throughput and deficiency agreements. Under the agreements, we are required to advance funds if the investees are unable to service their debt. Any such advances are considered prepayments of future transportation charges. The terms of the agreements vary but tend to follow the terms of the underlying debt. Our maximum potential undiscounted payments under these agreements totaled $172 million as of December 31, 2008. We hold an interest in a refined products pipeline through our investment in Centennial, and have guaranteed the repayment of Centennial’s outstanding balance under a Master Shelf Agreement which expires in 2024. The guarantee arose in order for Centennial to obtain adequate financing. Our maximum potential undiscounted payments under this agreement totaled $65 million as of December 31, 2008. Other Guarantees – We have entered into other guarantees with maximum potential undiscounted payments totaling $266 million as of December 31, 2008, which consist primarily of leases of corporate assets containing general lease indemnities and guaranteed residual values, commitments to contribute cash to equity method investees for certain catastrophic events in lieu of procuring insurance coverage, a performance guarantee and a long-term transportation services agreement. United States Steel was the sole general partner of Clairton 1314B Partnership, L.P., which owned certain cokemaking facilities formerly owned by United States Steel. We have agreed, under certain circumstances, to indemnify the limited partners if the partnership’s product sales fail to qualify for the credit under Section 29 of the Internal Revenue Code. The Clairton 1314B Partnership was terminated on October 31, 2008, but we were not released from our obligations. United States Steel has estimated the maximum potential amount of this indemnity obligation, including interest and tax gross-up, was approximately $650 million as of December 31, 2008. General Guarantees Associated with Asset Disposals – Over the years, we have sold various assets in the normal course of our business. Certain of the related agreements contain performance and general guarantees, including guarantees regarding inaccuracies in representations, warranties, covenants and agreements, and environmental and general indemnifications that require us to perform upon the occurrence of a triggering event or condition. These guarantees and indemnifications are part of the normal course of selling assets. We are typically not able to calculate the maximum potential amount of future payments that could be made under such contractual provisions because of the variability inherent in the guarantees and indemnities. Most often, the nature of the guarantees and indemnities is such that there is no appropriate method for quantifying the exposure because the underlying triggering event has little or no past experience upon which a reasonable prediction of the outcome can be based. Contract commitments – At December 31, 2008 and 2007, our contract commitments to acquire property, plant and equipment totaled $4,070 million and $3,893 million. Other contingencies – In November 2006, the government of Equatorial Guinea enacted a new hydrocarbon law governing petroleum operations in Equatorial Guinea. The transitional provision of the law provides that all contractors and the terms of any contract to which they are a party will be subject to the law. The governmental agency responsible for the energy industry was given the authority to renegotiate any contract for the purpose of adapting any terms and conditions that are inconsistent with the new law. We are in the process of determining what impact this law may have on our existing operations in Equatorial Guinea.
118
Table of ContentsIndex to Financial StatementsMARATHON OIL CORPORATION Notes to Consolidated Financial Statements
27. Contingencies and Commitments SIZE="2">We are the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Certain of these matters are Environmental matters – We are subject to We are a defendant, along with other refining companies, in 20 cases distributed contaminated gasoline to wholesalers and retailers for a period prior to August, 2003, causing permanent damage to storage tanks, dispensers and related equipment, resulting in lost profits, business disruption and personal and real property damages. Following the incident, we conducted remediation operations at affected facilities, and we deny that any permanent damages resulted from the incident. Class action certification was granted in August 2007. We have entered into a tentative settlement agreement in this case. Notice of the proposed settlement has been sent to the class members. Approval by the court after a fairness hearing is required before the settlement can be finalized. The fairness hearing is scheduled in the first quarter of 2009. The proposed settlement will not significantly impact our consolidated results of operations, financial position or cash flows.
117 Table of ContentsIndex to Financial StatementsMARATHON OIL CORPORATION ALIGN="center">Notes to Consolidated Financial Statements
Guarantees Related to Indebtedness of Equity Method Investees – We hold interests in an We hold an interest in a refined products pipeline Other Guarantees States Steel. We have agreed, under certain circumstances, to indemnify the limited partners if the partnership’s product sales fail to qualify for the credit under Section 29 of the Internal Revenue Code. The Clairton 1314B Partnership was terminated on October 31, 2008, but we were not released from our obligations. United States Steel has estimated the maximum potential amount of this indemnity obligation, including interest and tax gross-up, was approximately $650 million as of December 31, 2008. General Guarantees Associated with Asset Disposals – Over the years, we have sold various assets $4,070 million and $3,893 million. Other contingencies – In November 2006, the government of Equatorial Guinea enacted
118 Table of ContentsIndex to Financial StatementsMARATHON OIL CORPORATION ALIGN="center">Notes to Consolidated Financial Statements
These excerpts taken from the MRO 10-K filed Feb 29, 2008. 28. Contingencies and Commitments Marathon is the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Certain of these matters are discussed below. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to Marathon’s consolidated financial statements. However, management believes that Marathon will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably. Environmental matters – Marathon is subject to federal, state, local and foreign laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance. At December 31, 2007 and 2006, accrued liabilities for remediation totaled $108 million and $101 million. It is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. Receivables for recoverable costs from certain states, under programs to assist companies in clean-up efforts related to underground storage tanks at retail marketing outlets, were $66 million at December 31, 2007 and 2006. On May 11, 2001, Marathon entered into a consent decree with the U.S. Environmental Protection Agency which commits the Company to complete certain agreed-upon environmental projects over an eight-year period primarily aimed at reducing air emissions at its seven refineries. The court approved this consent decree on August 28, 2001. The total one-time expenditures for these environmental projects are estimated to be approximately $447 million over the eight-year period, with approximately $420 million incurred through December 31, 2007. Marathon is a defendant along with many other refining companies in over 50 cases in 12 states alleging methyl tertiary-butyl ether (“MTBE”) contamination in groundwater. All of these cases have been consolidated in a multi-district litigation in the Southern District of New York for preliminary proceedings. Marathon stopped producing MTBE at its refineries in October 2002. The potential impact of these recent cases and future potential similar cases is uncertain. Marathon is engaged in ongoing settlement discussions related to the majority of the cases in which it is a defendant, and established a related reserve in 2007, the amount of which is not significant to Marathon’s consolidated results of operations, financial position or cash flows. Guarantees – Marathon has provided certain guarantees, direct and indirect, of the indebtedness of other companies. Under the terms of most of these guarantee arrangements, Marathon would be required to perform should the guaranteed party fail to fulfill its obligations under the specified arrangements. In addition to these financial guarantees, Marathon also has various performance guarantees related to specific agreements. Guarantees Related to Indebtedness of Equity Method Investees – Marathon holds interests in an offshore oil port, LOOP LLC (“LOOP”), and a crude oil pipeline system, LOCAP LLC (“LOCAP”). Both LOOP and LOCAP have secured various project financings with throughput and deficiency agreements. Under the agreements, Marathon is required to advance funds if the investees are unable to service their debt. Any such advances are considered prepayments of future transportation charges. The terms of the agreements vary but tend to follow the terms of the underlying debt. Marathon’s maximum potential undiscounted payments under these agreements totaled $183 million as of December 31, 2007. Marathon holds an interest in a refined products pipeline through its investment in Centennial, and has guaranteed the repayment of Centennial’s outstanding balance under a Master Shelf Agreement which expires in 2024. The guarantee arose in order for Centennial to obtain adequate financing. Marathon’s maximum potential undiscounted payments under this agreement totaled $70 million as of December 31, 2007. Other Guarantees – Marathon has entered into other guarantees with maximum potential undiscounted payments totaling $262 million as of December 31, 2007, which consist primarily of leases of corporate assets containing general lease indemnities and guaranteed residual values, commitments to contribute cash to equity method investees for certain catastrophic events in lieu of procuring insurance coverage, a performance guarantee and a long-term transportation services agreement.
F-47
Table of ContentsIndex to Financial StatementsUnited States Steel is the sole general partner of Clairton 1314B Partnership, L.P., which owns certain cokemaking facilities formerly owned by United States Steel. Marathon has guaranteed to the limited partners all obligations of United States Steel under the partnership documents through 2012. In addition to the commitment to fund operating cash shortfalls of the partnership discussed in Note 3, United States Steel, under certain circumstances, is required to indemnify the limited partners if the partnership’s product sales fail to qualify for the credit under Section 29 of the Internal Revenue Code. United States Steel has estimated the maximum potential amount of this indemnity obligation, including interest and tax gross-up, was approximately $660 million as of December 31, 2007. Furthermore, United States Steel under certain circumstances has indemnified the partnership for environmental obligations. General Guarantees Associated with Asset Disposals – Over the years, Marathon has sold various assets in the normal course of its business. Certain of the related agreements contain performance and general guarantees, including guarantees regarding inaccuracies in representations, warranties, covenants and agreements, and environmental and general indemnifications that require Marathon to perform upon the occurrence of a triggering event or condition. These guarantees and indemnifications are part of the normal course of selling assets. Marathon is not typically able to calculate the maximum potential amount of future payments that could be made under such contractual provisions because of the variability inherent in the guarantees and indemnities. Most often, the nature of the guarantees and indemnities is such that there is no appropriate method for quantifying the exposure because the underlying triggering event has little or no past experience upon which a reasonable prediction of the outcome can be based. Contract commitments – At December 31, 2007 and 2006, Marathon’s contract commitments to acquire property, plant and equipment totaled $3.893 billion and $1.703 billion. The $2.190 billion increase is primarily related to the Detroit, Michigan refinery heavy oil upgrading and expansion project and the Garyville, Louisiana refinery expansion. Agreements with joint owners – As part of the formation of PTC, MPC and Pilot Corporation (“Pilot”) entered into a Put/Call and Registration Rights Agreement (the “Agreement”). The Agreement provides that any time after September 1, 2008, Pilot will have the right to sell its interest in PTC to MPC for an amount of cash and/or Marathon, MPC or Ashland equity securities equal to the product of 90 percent (95 percent if paid in securities) of the fair market value of PTC at the time multiplied by Pilot’s percentage interest in PTC. At any time after September 1, 2011, under certain conditions, MPC will have the right to purchase Pilot’s interest in PTC for an amount of cash and/or Marathon, MPC or Ashland equity securities equal to the product of 105 percent (110 percent if paid in securities) of the fair market value of PTC at the time multiplied by Pilot’s percentage interest in PTC. Under the Agreement, MPC would determine the form of consideration to be paid upon exercise of the rights. Other contingencies – In November 2006, the government of Equatorial Guinea enacted a new hydrocarbon law governing petroleum operations in Equatorial Guinea. The transitional provision of the law provides that all contractors and the terms of any contract to which they are a party will be subject to the law. The governmental agency responsible for the energy industry was given the authority to renegotiate any contract for the purpose of adapting any terms and conditions that are inconsistent with the new law. Marathon is in the process of determining what impact this law may have on its existing operations in Equatorial Guinea.
28. Contingencies and Marathon is the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance. At December 31, 2007 and 2006, accrued liabilities for remediation totaled $108 million and $101 million. It is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. Receivables for recoverable costs from certain states, under programs to assist companies in clean-up efforts related to underground storage tanks at retail marketing outlets, were $66 million at December 31, 2007 and 2006. agreed-upon environmental projects over an eight-year period primarily aimed at reducing air emissions at its seven refineries. The court approved this consent decree on August 28, 2001. The total one-time expenditures for these environmental projects are estimated to be approximately $447 million over the eight-year period, with approximately $420 million incurred through December 31, 2007.
Guarantees – Marathon has provided certain SIZE="2">Guarantees Related to Indebtedness of Equity Method Investees – Marathon holds interests in an offshore oil port, LOOP LLC (“LOOP”), and a crude oil pipeline system, LOCAP LLC (“LOCAP”). Both LOOP and LOCAP Marathon holds an interest in a refined products pipeline through its investment in Centennial, and has guaranteed the repayment of Other Guarantees – Marathon has entered into other guarantees F-47 Table of ContentsIndex to Financial StatementsUnited States Steel is the sole general partner of Clairton 1314B Partnership, L.P., which owns certain General Guarantees Associated with Asset Contract commitments – At December 31, 2007 and 2006, Marathon’s contract commitments to acquire property, plant and Rights Agreement (the “Agreement”). The Agreement provides that any time after September 1, 2008, Pilot will have the right to sell its interest in PTC to MPC for an amount of cash and/or Marathon, MPC or Ashland equity securities equal to the product of 90 percent (95 percent if paid in securities) of the fair market value of PTC at the time multiplied by Pilot’s percentage interest in PTC. At any time after September 1, 2011, under certain conditions, MPC will have the right to purchase Pilot’s interest in PTC for an amount of cash and/or Marathon, MPC or Ashland equity securities equal to the product of 105 percent (110 percent if paid in securities) of the fair market value of PTC at the time multiplied by Pilot’s percentage interest in PTC. Under the Agreement, MPC would determine the form of consideration to be paid upon exercise of the rights. SIZE="2">Other contingencies – In November 2006, the government of Equatorial Guinea enacted a new hydrocarbon law governing petroleum operations in Equatorial Guinea. The transitional provision of the law provides that all
SIZE="2">29. Accounting Standards Not Yet Adopted In December 2007, the FASB issued SFAS No. 141 (Revised 2007), “Business Also in December 2007, the FASB issued SFAS No. 160 “Noncontrolling Interests in
F-48 Table of ContentsIndex to Financial Statements
permits entities to choose to measure many financial instruments and certain other items at fair value that are not currently required to be measured at fair value. It requires that unrealized gains and losses on items for which the fair value option has been elected be recorded in net income. The statement also establishes presentation and disclosure requirements designed to facilitate comparisons between entities that choose different measurement attributes for similar types of assets and liabilities. For Marathon, SFAS No. 159 is effective January 1, 2008, and retrospective application is not permitted. Marathon did not elect the fair value option when this standard became effective. measuring fair value in generally accepted accounting principles and expands disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements but may require some entities to change their measurement practices. In February 2008, the FASB issued FSP FAS 157-1, “Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13,” which removes certain leasing transactions from the scope of SFAS No. 157, and FSP FAS 157-2, “Effective Date of FASB Statement No. 157,” which defers the effective date of SFAS No. 157 for one year for certain nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis. For Marathon, except for the nonfinancial assets and liabilities subject to the one-year deferral, SFAS No. 157 is effective January 1, 2008. Marathon does not expect adoption of this statement to have a significant effect on its consolidated results of operations, financial position or cash flows.
F-49 Table of ContentsIndex to Financial StatementsThis excerpt taken from the MRO 10-Q filed May 9, 2005. 13. Contingencies and Commitments
Marathon is the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Certain of these matters are discussed below. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to Marathon’s consolidated financial statements. However, management believes that Marathon will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably.
Environmental matters – Marathon is subject to federal, state, local and foreign laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance. At March 31, 2005 and December 31, 2004, accrued liabilities for remediation totaled $104 million and $110 million, respectively. It is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. Receivables for recoverable costs from certain states, under programs to assist companies in cleanup efforts related to underground storage tanks at retail marketing outlets, were $61 million at March 31, 2005, and $65 million at December 31, 2004.
Contract commitments – At March 31, 2005, Marathon’s contract commitments to acquire property, plant and equipment and long-term investments totaled $1,301 million. Included in these contract commitments is $64 million related to the approximately $300 million in refinery upgrade and expansion projects for its 74,000 bpd Detroit, Michigan refinery. Marathon will loan MAP the funds necessary for the Detroit, Michigan refinery upgrade and expansion projects. The MAP LLC Agreement has been amended to allow the Detroit refinery cash flows to be dedicated to service this debt. The Put/Call Agreement was amended to provide that, in the event Marathon exercises its call right, the Detroit refinery will not be valued at an amount less than the working capital related to the Detroit refinery, excluding working capital additions related to the expansion and clean fuels project.
10
Agreements with joint owners – In connection with the formation of Equatorial Guinea LNG Holdings Limited (“EGHoldings”), Compania Nacional de Petroleos de Guinea Ecuatorial (“GEPetrol”) was given certain contractual rights with respect to the purchase and resale to a third party of a 13 percent interest in EGHoldings currently held by Marathon. These rights give GEPetrol the option to purchase this 13 percent interest and resell it to a third party. These rights specify that Marathon will be reimbursed for its historical costs plus an additional specified rate of return. If GEPetrol’s rights are not exercised within one year from date of project sanction on June 22, 2004, the rights expire. In March 2005 these rights were extended until September 22, 2005.
This excerpt taken from the MRO 10-K filed Mar 10, 2005. 28. Contingencies and Commitments Marathon is the subject of, or party to, a number of pending or threatened legal actions, contingencies and commitments involving a variety of matters, including laws and regulations relating to the environment. Certain of these matters are discussed below. The ultimate resolution of these contingencies could, individually or in the aggregate, be material to Marathon's consolidated financial statements. However, management believes that Marathon will remain a viable and competitive enterprise even though it is possible that these contingencies could be resolved unfavorably. Environmental matters – Marathon is subject to federal, state, local and foreign laws and regulations relating to the environment. These laws generally provide for control of pollutants released into the environment and require responsible parties to undertake remediation of hazardous waste disposal sites. Penalties may be imposed for noncompliance. At December 31, 2004 and 2003, accrued liabilities for remediation totaled $110 million and $117 million. It is not presently possible to estimate the ultimate amount of all remediation costs that might be incurred or the penalties that may be imposed. Receivables for recoverable costs from certain states, under programs to assist companies in cleanup efforts related to underground storage tanks at retail marketing outlets, were $65 million and $86 million at December 31, 2004 and 2003, respectively. | EXCERPTS ON THIS PAGE:
|
| |||||||
