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the type of standards which will be applicable to final
cleanup at the PBU. Far from the AOGCC regulations
being somehow distinct and inapplicable, there is every
reason to conclude that the State of Alaska will
enforce DRR obligations under State leases consistent
with the approach applied under these regulations.
To the contrary, “expectations” or reasonable and probable
“predictions” on the part of Alaska government officials and
Exxon’s experts regarding what eventually may be required from
the oil companies in the way of Prudhoe Bay fieldwide DRR do not
provide a sufficiently fixed and definite basis on which to base
the tax accruals sought herein. During the years before us, such
expectations and predictions simply do not satisfy the all-events
test of section 461. They do not rise to the level of fixed and
definite legal obligations.
The fact that Exxon annually on its financial income
statements accrued a depreciation deduction for DRR costs based
on units of oil produced each year does suggest, as Exxon argues,
that Exxon’s management considered some accrual of estimated
Prudhoe Bay DRR costs appropriate and consistent with Exxon’s
financial accounting policies and with generally accepted
financial accounting principles. As explained, under FAS 19 oil
companies are required to accrue as an expense future DRR costs
where the company is under an existing obligation to incur such
costs and where such future DRR costs can be estimated with
reasonable accuracy.
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