8. Property, Plant and Equipment and Asset Retirement Obligations


	Dec. 31, 2011				Dec. 31, 2010
Property, Plant and Equipment	Cost		Net		Cost		Net
	(millions of dollars)

Upstream	$	283,710	$	163,975	$	264,136	$	148,152
Downstream		67,900		28,801		68,652		30,095
Chemical		30,405		14,469		29,524		14,255
Other		11,980		7,419		11,626		7,046
Total	$	393,995	$	214,664	$	373,938	$	199,548

In the Upstream segment, depreciation is generally on a unit-of-production basis, so depreciable life will vary by field. In the Downstream segment, investments in refinery and lubes basestock manufacturing facilities are generally depreciated on a straight-line basis over a 25-year life and service station buildings and fixed improvements over a 20-year life. In the Chemical segment, investments in process equipment are generally depreciated on a straight-line basis over a 20-year life.

Accumulated depreciation and depletion totaled $179,331 million at the end of 2011 and $174,390 million at the end of 2010. Interest capitalized in 2011, 2010 and 2009 was $593 million, $532 million and $425 million, respectively.

Asset Retirement Obligations

The Corporation incurs retirement obligations for its upstream assets. The fair values of these obligations are recorded as liabilities on a discounted basis, which is typically at the time the assets are installed. The Corporation uses estimates, assumptions and judgments regarding such factors as the existence of a legal obligation for an asset retirement obligation; technical assessments of the assets; estimated amounts and timing of settlements; discount rates; and inflation rates. Asset retirement obligations incurred in the current period were Level 3 (unobservable inputs) fair value measurements. The costs associated with these liabilities are capitalized as part of the related assets and depreciated as the reserves are produced. Over time, the liabilities are accreted for the change in their present value. Asset retirement obligations for downstream and chemical facilities generally become firm at the time the facilities are permanently shut down and dismantled. These obligations may include the costs of asset disposal and additional soil remediation. However, these sites have indeterminate lives based on plans for continued operations and as such, the fair value of the conditional legal obligations cannot be measured, since it is impossible to estimate the future settlement dates of such obligations.

The following table summarizes the activity in the liability for asset retirement obligations:


	2011			2010
	(millions of dollars)

Beginning balance	$	9,614		$	8,473
Accretion expense and other provisions		581			563
Reduction due to property sales		(854	)		(183	)
Payments made		(662	)		(638	)
Liabilities incurred		117			1,094
Foreign currency translation		(62	)		(45	)
Revisions		1,844			350
Ending balance	$	10,578		$	9,614