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.

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.

ENVIRONMENTAL REMEDIATION

As of December 31, 2016, Occidental participated in or monitored remedial activities or proceedings at 147 sites. The following table presents Occidental’s environmental remediation reserves as of December 31, 2016, 2015 and 2014, the current portion of which is included in accrued liabilities ($131 million in 2016, $70 million in 2015, and $79 million in 2014) and the remainder in deferred credits and other liabilities — other ($739 million in 2016, $316 million in 2015, and $255 million in 2014). The reserves are grouped as environmental remediation sites listed or proposed for listing by the U.S. Environmental Protection Agency on the CERCLA 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)	2016			2015			2014
	Number of Sites	Reserve Balance		Number of Sites	Reserve Balance		Number of Sites	Reserve Balance
NPL sites	33	$	461	34	$	27	30	$	23
Third-party sites	68	163		66	128		67	101
Occidental-operated sites	17	106		18	107		17	107
Closed or non-operated Occidental sites	29	140		31	124		31	103
Total	147	$	870	149	$	386	145	$	334

As of December 31, 2016, Occidental’s environmental reserves exceeded $10 million each at 16 of the 147 sites described above, and 88 of the sites had reserves from $0 to $1 million each.

As of December 31, 2016, three sites — the Diamond Alkali Superfund Site, and a former chemical plant in Ohio (both of which are indemnified by Maxus Energy Corporation, as discussed below), and a landfill in Western New York — accounted for 95 percent of its reserves associated with NPL sites. The reserve balance above includes 17 NPL sites subject to indemnification by Maxus.

Four of the 68 third-party sites — a Maxus-indemnified chrome site in New Jersey, a former copper mining and smelting operation in Tennessee, an active plant outside of the United States and an active refinery in Louisiana where Occidental reimburses the current owner for certain remediation activities — accounted for 53 percent of Occidental’s reserves associated with these sites. The reserve balance above includes 9 third-party sites subject to indemnification by Maxus.

Three sites — chemical plants in Kansas, Louisiana, and Texas — accounted for 48 percent of the reserves associated with the Occidental-operated sites.

Six other sites — a landfill in western New York, former chemical plants in Tennessee, Delaware, Washington and California, and a closed coal mine in Pennsylvania — accounted for 69 percent of the reserves associated with closed or non-operated Occidental sites.

When Occidental acquired Diamond Shamrock Chemicals Company (DSCC) in 1986, Maxus Energy Corporation (Maxus), currently a subsidiary of YPF S.A. (YPF), agreed to indemnify Occidental for a number of environmental sites, including the Diamond Alkali Superfund Site (Site) along a portion of the Passaic River. On June 17, 2016, Maxus and several affiliated companies filed for Chapter 11 bankruptcy in Federal District Court in the State of Delaware. Prior to filing for bankruptcy, Maxus defended and indemnified Occidental in connection with clean-up and other costs associated with the sites subject to the indemnity, including the Site. Occidental is pursuing Maxus and its parent company, YPF, as the alter ego of Maxus, to recover all indemnified costs, which will include costs to be incurred at the Site.

In March 2016, the EPA issued a Record of Decision (ROD) specifying remedial actions required for the lower 8.3 miles of the Lower Passaic River. The ROD does not address any potential remedial action for the upper nine miles of the Lower Passaic River or Newark Bay. During the third quarter of 2016, and following Maxus’s bankruptcy filing, Occidental and the EPA entered into an Administrative Order on Consent (AOC) to complete the design of the proposed clean-up plan outlined in the ROD at an estimated cost of $165 million. The EPA announced that it will pursue similar agreements with other potentially responsible parties.

Occidental has accrued a reserve relating to its estimated allocable share of the costs to perform the design and the remediation called for in the AOC and the ROD, as well as for certain other Maxus-indemnified sites. Occidental’s ultimate share of this liability may be higher or lower than the reserved amount, and is subject to final design plans and the resolution of Occidental's allocable share with other potentially responsible parties. Occidental continues to evaluate the costs to be incurred to comply with the AOC, the ROD and to perform remediation at other Maxus-indemnified sites in light of the Maxus bankruptcy and the share of ultimate liability of other potentially responsible parties.

Environmental reserves vary over time depending on factors such as acquisitions or dispositions, identification of additional sites and remedy selection and implementation.

Based on current estimates, Occidental expects to expend funds corresponding to approximately 40 percent 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 $1.0 billion.

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)	2016		2015		2014
Operating Expenses
Oil and Gas	$	65	$	93	$	103
Chemical	75		74		80
Midstream and Marketing	11		13		11
	$	151	$	180	$	194
Capital Expenditures
Oil and Gas	$	43	$	122	$	143
Chemical	25		41		35
Midstream and Marketing	5		4		11
	$	73	$	167	$	189
Remediation Expenses
Corporate	$	61	$	117	$	79

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.