Over the past several years, ERCI has assembled the historical environmental reserve balance data from major corporations. We have been trying to learn if environmental remediation liabilities have been increasing, flat or decreasing,and whether industry consolidation alters trends.

On our website, http://www.erci.com/Reserver.aspx we present the environmental remediation liabilities and exploration and production reserves of the oil industry since 1991. Using publicly-filed data,we combined the reserves of legacy companies to give a long-term view.

Our conclusions? Environmental reserves are not following a pattern. BP, Chevron and ConocoPhillips saw their reserves go up the first year or two after a major merger or acquisition, but there, each company’s experience diverges: BP’s was worked down, Chevron’s went up, and ConocoPhillips stayed more or less even.

We also tried to gauge the “effective lifespan” of environmental reserves, by dividing the reserve by then-year spending. Our finding is that companies are changing the rate at which they work down their environmental reserves,sometimes dramatically. Chevron and ExxonMobil are somewhat stable, but Shell and BP have changed the intensity of their spending over the last five years.

While E&P reserves are not measured the same way as remediation liabilities, the dollars reserved are much higher, and have basically gone one direction since SFAS 143 and FIN 47 (conditional asset retirement obligations): up. The factors behind this increase would be a great research topic. Weaker dollar? More wells to abandon? Higher unit costs? Better measurement?

Please take a look at our research, and if you’re in the academic field, we may be able to provide you with our raw data. We hope you find this useful.