After years of deferring liability costs from contaminated work sites, companies now must either deal with them or Take a hit on the balance sheet when accounting rules change next year

After more than a century of oil drilling and refining and mergers with other energy concerns like Getty, Texaco and Unocal, Chevron Corp. has inherited literally thousands of what are called brownfield sites–properties that could pose potential environmental liabilities because of the presence of a hazardous substance, pollutant or contaminant. Over the years Chevron has collected reams of information on the soil, groundwater and potential for contamination of nearby properties. With this data, Chevron risk managers have attempted to develop a reliable dollar figure for the cost of prospective bodily injury and property damage related to each. The work was daunting, but necessary.

While these properties were on the books, the full financial impact of potential liabilities associated with them was never felt because of accounting provisions that allowed Chevron and other companies to defer them indefinitely. All that changes in 2009 with a raft of new accounting rules–specifically FAS 143 and 141R and FIN 47–that will force companies like Chevron to account for the net present values of such properties on the balance sheet. For Chevron, this is forcing fast and difficult decisions on which impaired properties were best to divest, clean up and redevelop, or hold onto for some long-term use. "We were faced with diverse information on the properties from numerous internal databases," says Jane Anderson, surplus property manager at Chevron EMC, an environmental management unit formed within Chevron to manage its distressed, underutilized and surplus properties. "Pulling it all together for senior-level decision-making purposes was demanding."

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