NOTE 8

ENVIRONMENTAL LIABILITIES AND EXPENDITURES

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, 2014, Occidental participated in or monitored remedial activities or proceedings at 145 sites, excluding seven sites transferred to California Resources prior to December 31, 2014. The following table presents Occidental’s environmental remediation reserves as of December 31, 2014, 2013 and 2012, the current portion of which is included in accrued liabilities ($79 million in 2014, $78 million in 2013 and $80 million in 2012) and the remainder in deferred credits and other liabilities — other ($255 million in 2014, $252 million in 2013 and $264 million in 2012). 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)	2014			2013			2012
	Number of Sites	Reserve Balance		Number of Sites	Reserve Balance		Number of Sites	Reserve Balance
NPL sites	30	$	23	31	$	25	35	$	54
Third-party sites	67	101		74	83		75	84
Occidental-operated sites	17	107		20	118		22	123
Closed or non-operated Occidental sites	31	103		32	104		29	83
Total	145	$	334	157	$	330	161	$	344

As of December 31, 2014, Occidental’s environmental reserves exceeded $10 million each at 11 of the 145 sites described above, and 98 of the sites had reserves from $0 to $1 million each.

As of December 31, 2014, two sites — a landfill in western New York owned by Occidental and a former refinery in Louisiana — accounted for 62 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, 2014, Maxus has also retained the liability and is indemnifying Occidental for 8 of the 67 third-party sites. Four of the remaining 59 third-party sites — a former copper mining and smelting operation in Tennessee, a containment and removal project in Tennessee, a former chemical plant in Ohio and an active refinery in Louisiana where Occidental reimburses the current owner for certain remediation activities — accounted for 56 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 62 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 63 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)	2014			2013			2012
Balance — Beginning of Year	$	330		$	344		$	360
Remediation expenses and interest accretion	79			60			56
Spin-off of California Resources	(7		)	—			—
Payments	(68		)	(74		)	(72		)
Balance — End of Year	$	334		$	330		$	344

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)	2014		2013		2012
Operating Expenses
Oil and Gas	$	103	$	100	$	116
Chemical	80		75		70
Midstream and Marketing	11		13		13
	$	194	$	188	$	199
Capital Expenditures
Oil and Gas	$	143	$	67	$	79
Chemical	35		14		18
Midstream and Marketing	11		5		8
	$	189	$	86	$	105
Remediation Expenses
Corporate	$	79	$	60	$	56

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.