v3.25.4
Asset Retirement Obligations and Accrued Environmental Costs
 12 Months Ended
Dec. 31, 2025
Asset Retirement Obligation Disclosure [Abstract]  
Asset Retirement Obligations and Accrued Environmental Costs
Note 6—Asset Retirement Obligations and Accrued Environmental Costs
Asset retirement obligations and accrued environmental costs at December 31 were:
Millions of Dollars
20252024
Asset retirement obligations$8,364 8,215 
Accrued environmental costs220 206 
Total asset retirement obligations and accrued environmental costs8,584 8,421 
Asset retirement obligations and accrued environmental costs due within one year*(370)(332)
Long-term asset retirement obligations and accrued environmental costs$8,214 8,089 
*Classified as a current liability on the balance sheet under “Other accruals.”
Asset Retirement Obligations
We record the fair value of a liability for an ARO when it is incurred (typically when the asset is installed at the production location). When the liability is initially recorded, we capitalize the associated asset retirement cost by increasing the carrying amount of the related PP&E. Over time, the liability increases for the change in its present value, while the capitalized cost depreciates over the useful life of the related asset. If in subsequent periods, our estimate of this liability changes, we will record an adjustment to both the liability and PP&E. Changes to estimated liabilities for assets that are no longer producing are recorded as impairment.
We have numerous AROs 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 several years, or decades, in the future and will be funded from general company resources at the time of removal. Our largest individual obligations involve plugging and abandonment of wells and removal and disposal of offshore oil and gas platforms around the world, as well as oil and gas production facilities and pipelines in Alaska.
During 2025 and 2024, our overall ARO changed as follows:
Millions of Dollars
20252024
Balance at January 1$8,215 7,227 
Accretion of discount366 319 
New obligations, including acquisitions162 926 
Changes in estimates of existing obligations(150)140 
Spending on existing obligations(259)(182)
Property dispositions(186)(6)
Foreign currency translation216 (209)
Balance at December 31
$8,364 8,215 
Accrued Environmental Costs
Total accrued environmental costs at December 31, 2025 and 2024, were $220 million and $206 million, respectively.
We had accrued environmental costs of $142 million and $139 million at December 31, 2025 and 2024, respectively, related to remediation activities in the U.S. and Canada. We had also accrued in Corporate and Other $68 million and $56 million of environmental costs associated with sites no longer in operation at December 31, 2025 and 2024, respectively. In addition, December 31, 2025 and 2024, included a $10 million and $11 million accrual, respectively, where the company has been named a potentially responsible party under the CERCLA, or similar state laws. Accrued environmental liabilities are expected to be paid over periods extending up to 30 years.
Expected expenditures for environmental obligations acquired in various business combinations are discounted using a weighted-average 5 percent discount factor, resulting in an accrued balance for acquired environmental liabilities of $119 million at December 31, 2025. The total expected future undiscounted payments related to the portion of the accrued environmental costs that have been discounted are $133 million.