1. FIN 47 and Environmental Remediation Liabilities C. Gregory Rogers, J.D., CPA Advanced Environmental Dimensions Brownfields 2006 – Boston – November 14, 2006

2. Advanced Environmental Dimensions What is an Asset Retirement Obligation?

3. Advanced Environmental Dimensions Elements of an ARO A legal obligation that: –Is associated with retirement of a tangible, long-lived asset –Arises from the acquisition, construction, development, or normal operation of the asset

4. Advanced Environmental Dimensions Examples of AROs from FAS 143 and FIN 47 Legal obligations associated with: –Decontamination of radioactive materials upon cessation of operations of a nuclear power plant –Pre-demolition/renovation abatement of ACM –Disposal of treated utility poles –Disposal of contaminated kiln bricks

5. Advanced Environmental Dimensions Examples of AROs from FAS 143 and FIN 47… Legal obligations associated with: –Reforestation of land upon termination of timber lease –Landfill capping, closure, and post-closure activities –Cleanup of spillage inherent in the normal operations of a fuel storage facility –Building demolition and restoration of the underlying land upon termination of plant operations –Decontamination of process equipment and cleanup of soil contamination at an oil refinery upon cessation of operations

6. Advanced Environmental Dimensions Examples of AROs from the SEC Staff Accounting Bulletin 103 –FAS 143 applies to “legal obligations associated with restoration, post-closure, and monitoring commitments, or other exit costs that may occur on the sale, disposal, or abandonment of a property….”

7. Advanced Environmental Dimensions FIN 47 - Part of a Larger Picture SFAS 123 133 141 142 143 144 123R FIN47 FVM 141R ??? Future “Market-driven” financial statements New FASB Standard on FVM (FAS 157) FASB/IASB convergence Redefining the concept of “contingent liability” Source: Gregory E. Scheig, Kroll, Inc.

8. Advanced Environmental Dimensions Implications for Environmental Liabilities No “probability” threshold for recognition –Pollution condition + obligation = liability –Liabilities may arise before claims asserted –Liabilities may arise before claims accrue –Willful ignorance less defensible –Requires new audit procedures –More liabilities will be recognized Uncertainty factored into valuation –Uncertainty drives values higher –Information reduces uncertainty FAS 143 / FIN 47 –Many existing accruals must be reclassified and revalued –Mothballing is no longer a viable risk management strategy

9. Advanced Environmental Dimensions Liability Recognition and Measurement BEFORE AFTER Probability of Loss Ability to Estimate Loss Probable Reasonably Possible Remote Single Most Likely Value Range of Values Not Reasonably Estimable

10. Advanced Environmental Dimensions “Oh, that three billion dollars.” More Liabilities, Higher Estimates EH&S

11. Advanced Environmental Dimensions Contact Information C. Gregory Rogers Advanced Environmental Dimensions, LLC 750 N. St. Paul St. Suite 200 Dallas, Texas 75201 866.599.0009 rogers@FIN47.com www.FIN47.com Online Resources Affect of FIN 47 adoptionwww.FIN47.com/fin47_adoption.htmwww.FIN47.com/fin47_adoption.htm Reported control deficiencieswww.FIN47.com/control_deficiencies.htmwww.FIN47.com/control_deficiencies.htm Restatementswww.FIN47.com/restatements.htmwww.FIN47.com/restatements.htm SEC comment letterswww.FIN47.com/sec_comments.htmwww.FIN47.com/sec_comments.htm