Marathon Oil (MRO)

MTBE Litigation

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

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Table of Contents

Index to Financial Statements

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.

MTBE Litigation

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

32

Table of Contents

Index to Financial Statements

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.

MTBE Litigation

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, after their removal from state to federal court, have been consolidated in a multi-district litigation (“MDL”) in the Southern District of New York for pretrial proceedings. The plaintiffs generally are water providers or governmental authorities and they allege that refiners, manufacturers and sellers of gasoline containing MTBE are collectively liable, under market share and/or other “alternative liability” theories, for manufacturing a defective product. Several of these lawsuits allege contamination in areas that are outside of Marathon’s marketing area. All of the cases seek punitive damages or treble damages under a variety of statutes and theories. In one of the cases, the State of New Jersey is seeking natural resources damages allegedly resulting from contamination of groundwater by MTBE. This is the only case in which Marathon is a defendant and natural resources damages are sought. Marathon stopped producing MTBE at its refineries in October 2002.

The MDL court has identified four “test” cases to proceed ahead of the remaining MDL cases. The first of these test cases (County of Suffolk (NY) and Suffolk County Water Authority v. Amerada Hess Corporation, et al.) is scheduled for trial in September 2008. Marathon is a defendant in this test case. Marathon is engaged in ongoing settlement discussions related to the majority of the cases in which it is defendant, including the Suffolk County, New York test case, and such settlement, if any, is not expected to significantly impact Marathon’s consolidated results of operations, financial position or cash flows.

MTBE Litigation

SIZE="2">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, after their removal from state to
federal court, have been consolidated in a multi-district litigation (“MDL”) in the Southern District of New York for pretrial proceedings. The plaintiffs generally are water providers or governmental authorities and they allege that
refiners, manufacturers and sellers of gasoline containing MTBE are collectively liable, under market share and/or other “alternative liability” theories, for manufacturing a defective product. Several of these lawsuits allege
contamination in areas that are outside of Marathon’s marketing area. All of the cases seek punitive damages or treble damages under a variety of statutes and theories. In one of the cases, the State of New Jersey is seeking natural resources
damages allegedly resulting from contamination of groundwater by MTBE. This is the only case in which Marathon is a defendant and natural resources damages are sought. Marathon stopped producing MTBE at its refineries in October 2002.

MTBE Litigation

We are a defendant, along with many other companies with refining operations, in over 50 cases in 12 states alleging methyl tertiary-butyl ether (“MTBE”) contamination in groundwater.  There have been two recent developments in these matters.  The federal Second Circuit Court of Appeals ruled in two of the MTBE cases brought by the states of New Hampshire and California (Marathon was not a party in these cases.) that the cases had been improperly removed to federal court based upon federal officer jurisdiction.  The parties are briefing to the court whether other grounds for federal jurisdiction exist.  If federal jurisdiction is found to be not proper in these cases, the issue of federal jurisdiction may then be raised in all of the MTBE cases.  If removal is found to be improper in any case, it would be returned to state court.  Also, the state of New Jersey has recently sued Marathon and the other refiners.  This is the only case Marathon is involved with which has a state as a plaintiff and it is the only case where natural resources damages are sought.  We continue to defend all of these MTBE cases vigorously.

MTBE Litigation

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We are a defendant, along with many other companies with refining operations, in over 50 cases in 12 states alleging methyl tertiary-butyl ether (“MTBE”) contamination in groundwater.  There have been two recent developments in these matters.  The federal Second Circuit Court of Appeals ruled in two of the MTBE cases brought by the states of New Hampshire and California (Marathon was not a party in these cases.) that the cases had been improperly removed to federal court based upon federal officer jurisdiction.  The parties are briefing to the court whether other grounds for federal jurisdiction exist.  If federal jurisdiction is found to be not proper in these cases, the issue of federal jurisdiction may then be raised in all of the MTBE cases.  If removal is found to be improper in any case, it would be returned to state court.  Also, the state of New Jersey has recently sued Marathon and the other refiners.  This is the only case Marathon is involved with which has a state as a plaintiff and it is the only case where natural resources damages are sought.  We continue to defend all of these MTBE cases vigorously.

MTBE Litigation

We are a defendant along with many other refining companies in over forty cases in eleven 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.  The judge in this multi-district litigation ruled on April 20, 2005 that some form of market share liability would apply.  Market share liability enables a plaintiff to sue manufacturers who represent a substantial share of a market for a particular product and shift the burden of identification of who actually made the product to the defendants, effectively forcing a defendant to show that it did not produce the MTBE which allegedly caused the damage.  The judge further allowed cases to go forward in New York and eleven other states, based upon varying theories of collective liability and predicted that a new theory of market share liability would be recognized in Connecticut, Indiana, and Kansas.  The plaintiffs generally are water providers or governmental authorities and they allege that refiners, manufacturers and sellers of gasoline containing MTBE are liable for manufacturing a defective product and that owners and operators of retail gasoline sites have allowed MTBE to be discharged into the groundwater.  Several of these lawsuits allege contamination that is outside of our marketing area.  A few of the cases seek approval as class actions.  Many of the cases seek punitive damages or treble damages under a variety of statutes and theories.  We stopped producing MTBE at our refineries in October 2002.  The potential impact of these recent cases and future potential similar cases is uncertain. We will defend these cases vigorously.