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Asset Retirement Obligations and Accrued Environmental Costs
 12 Months Ended
Dec. 31, 2021
Asset Retirement Obligations and Accrued Environmental Costs [Abstract]  
Asset Retirement Obligations and Accrued Environmental Cost
Note 8—Asset Retirement
 
Obligations and Accrued Environmental
 
Costs
Asset retirement obligations
 
and accrued environmental costs
 
at December 31 were:
Millions of Dollars
2021
2020
Asset retirement obligations
$
5,926
5,573
Accrued environmental costs
187
180
Total
 
asset retirement obligations
 
and accrued environmental costs
6,113
5,753
Asset retirement obligations
 
and accrued environmental costs
 
due within one year*
(359)
(323)
Long-term asset retirement obligations
 
and accrued environmental costs
$
5,754
5,430
*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.
 
If, in subsequent
 
periods, our estimate of this liability
changes, we will record an adjustment
 
to both the liability and 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.
 
Reductions to estimated liabilities
 
for assets that are no longer producing
 
are recorded as a credit to
 
impairment, if
the asset had been previously impaired, or as a credit
 
to DD&A, if the asset had not been previously impaired
 
.
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 2021 and 2020, our overall ARO changed as
 
follows:
Millions of Dollars
2021
2020
Balance at January 1
$
5,573
6,206
Accretion of discount
238
248
New obligations
555
262
Changes in estimates of existing
 
obligations
(113)
(307)
Spending on existing obligations
(164)
(116)
Property dispositions
(108)
(771)
Foreign currency translation
(55)
51
Balance at December 31
$
5,926
5,573
Accrued Environmental Costs
Total
 
accrued environmental costs
 
at December 31, 2021 and 2020, were $
187
 
million and $
180
 
million,
respectively.
 
We had accrued environmental
 
costs of $
135
 
million and $
116
 
million at December 31, 2021 and 2020,
respectively,
 
related to remediation
 
activities in the U.S. and Canada.
 
We had also accrued in Corporate
 
and Other
$
36
 
million and $
48
 
million of environmental costs
 
associated with sites no longer in operation
 
at December 31,
2021 and 2020, respectively.
 
In addition, both December 31, 2021 and 2020, included a $
16
 
million accrual, 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 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 $
109
 
million at December 31, 2021.
 
The total expected future undiscounted
 
payments related to the
portion of the accrued environmental costs
 
that have been discounted
 
are $
153
 
million.