
10.	ACCRUED EXPENSES AND OTHER LONG-TERM LIABILITIES

Accrued expenses and other long-term liabilities consisted of the following as of December 31 (in millions):



	Accrued Expenses				Other Long-Term Liabilities
	2012		2011		2012		2011
Defined benefit plan liabilities (see Note 14)	$	32	$	37	$	982	$	795
Wage and other employee-related liabilities	282		259		91		79
Uncertain income tax position liabilities (see Note 16)	—		—		391		337
Environmental liabilities	27		39		242		235
Accrued interest expense	96		108		—		—
Derivative liabilities	14		25		—		—
Asset retirement obligations	5		6		103		81
Other accrued liabilities	134		121		321		354
Accrued expenses and other long-term liabilities	$	590	$	595	$	2,130	$	1,881

Environmental Liabilities

Changes in our environmental liabilities were as follows (in millions):



	Year Ended December 31,
	2012			2011			2010
Balance as of beginning of year	$	274		$	268		$	279
Pembroke Acquisition	—			30			—
Additions to liability	23			18			50
Reductions to liability	(1		)	(5		)	(21		)
Payments, net of third-party recoveries	(29		)	(35		)	(42		)
Foreign currency translation	2			(2		)	2
Balance as of end of year	$	269		$	274		$	268

In connection with our Pembroke Acquisition, we assumed certain environmental liabilities including, but not limited to, certain remediation obligations, site restoration costs, and certain liabilities relating to soil and groundwater remediation. There were no significant environmental liabilities assumed in connection with the Meraux Acquisition.

Asset Retirement Obligations

We have asset retirement obligations with respect to certain of our refinery assets due to various legal obligations to clean and/or dispose of various component parts of each refinery at the time they are retired. However, these component parts can be used for extended and indeterminate periods of time as long as they are properly maintained and/or upgraded. It is our practice and current intent to maintain our refinery assets and continue making improvements to those assets based on technological advances. As a result, we believe that our refineries have indeterminate lives for purposes of estimating asset retirement obligations because dates or ranges of dates upon which we would retire refinery assets cannot reasonably be estimated at this time. When a date or range of dates can reasonably be estimated for the retirement of any component part of a refinery, we estimate the cost of performing the retirement activities and record a liability for the fair value of that cost using established present value techniques.

We also have asset retirement obligations for the removal of underground storage tanks (USTs) at owned and leased retail sites. There is no legal obligation to remove USTs while they remain in service. However, environmental laws in the U.S. and Canada require that unused USTs be removed within certain periods of time after the USTs are no longer in service, usually one to two years depending on the jurisdiction in which the USTs are located. We have estimated that USTs at our owned retail sites will remain in service approximately 20 years and that we will have an obligation to remove those USTs at that time. For our leased retail sites, our lease agreements generally require that we remove certain improvements, primarily USTs and signage, upon termination of the lease.

Changes in our asset retirement obligations were as follows (in millions).



	Year Ended December 31,
	2012			2011			2010
Balance as of beginning of year	$	87		$	101		$	179
Additions to accrual	28			4			3
Reductions to accrual	(1		)	—			(34		)
Accretion expense	5			4			7
Settlements	(11		)	(22		)	(54		)
Balance as of end of year	$	108		$	87		$	101

There are no assets that are legally restricted for purposes of settling our asset retirement obligations.

One-Time Severance Benefits

As described in Note 4, we decided to reorganize the Aruba Refinery into a crude oil and refined products terminal in September 2012 resulting in a decrease in required personnel for our operations in Aruba. We notified 495 employees in September 2012 of the termination of their employment effective November 15, 2012. Benefits to each terminated employee consisted primarily of a cash payment based on a formula that considered the employee’s current compensation and years of service, among other factors. We recognized a severance liability of $41 million in September 2012, which approximated fair value. We paid $31 million of these benefits in the fourth quarter of 2012. We expect to pay the remaining termination benefits in the first and second quarters of 2013. Because of the short discount period, the remaining liability of $10 million as of December 31, 2012, which is included in “other accrued liabilities” in the detail of accrued expense and other long-term liabilities, is not materially different from its fair value. Total severance expense of $41 million is included in refining operating expenses for the year ended December 31, 2012 and relates to our refining segment.