Asset Retirement Obligations and Accrued Environmental Costs

Asset retirement obligations and accrued environmental costs at December 31 were:



	Millions of Dollars
	2016			2015

Asset retirement obligations	$	244		251
Accrued environmental costs	496			485
Total asset retirement obligations and accrued environmental costs	740			736
Asset retirement obligations and accrued environmental costs due within one year*	(85		)	(71	)
Long-term asset retirement obligations and accrued environmental costs	$	655		665

*Classified as a current liability on the consolidated balance sheet, under the caption “Other accruals.”

Asset Retirement Obligations

We have asset retirement obligations that we are required to perform under law or contract once an asset is permanently taken out of service. Most of these obligations are not expected to be paid until many years in the future and are expected to be funded from general company resources at the time of removal. Our largest individual obligations involve asbestos abatement at refineries.

During 2016 and 2015, our overall asset retirement obligation changed as follows:



	Millions of Dollars
	2016			2015

Balance at January 1	$	251		279
Accretion of discount	9			9
Changes in estimates of existing obligations	10			(7	)
Spending on existing obligations	(15		)	(20	)
Property dispositions	(5		)	(2	)
Foreign currency translation	(6		)	(8	)
Balance at December 31	$	244		251

Accrued Environmental Costs

Total accrued environmental costs at December 31, 2016 and 2015, were $496 million and $485 million, respectively. The 2016 increase in total accrued environmental costs is due to new accruals, accrual adjustments and accretion exceeding payments and settlements during the year.

We had accrued environmental costs at December 31, 2016 and 2015 of $268 million and $270 million, respectively, primarily related to cleanup at domestic refineries and underground storage tanks at U.S. service stations; $178 million and $168 million, respectively, associated with nonoperator sites; and $50 million and $47 million, respectively, where the company has been named a potentially responsible party under the Federal Comprehensive Environmental Response, Compensation and Liability Act, or similar state laws. Accrued environmental liabilities will be paid over periods extending up to 30 years. Because a large portion of the accrued environmental costs were acquired in various business combinations, the obligations are recorded at a discount. Expected expenditures for acquired environmental obligations are discounted using a weighted-average 5 percent discount factor, resulting in an accrued balance for acquired environmental liabilities of $248 million at December 31, 2016. The expected future undiscounted payments related to the portion of the accrued environmental costs that have been discounted are: $25 million in 2017, $26 million in 2018, $22 million in 2019, $16 million in 2020, $15 million in 2021, and $212 million for all future years after 2021.