Exxon Mobil Corporation and Affiliated Companies, f.k.a. Exxon Corporation and Affiliated Companies - Page 39




                                       - 39 -                                         
               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.                                                        






Page:  Previous  29  30  31  32  33  34  35  36  37  38  39  40  41  42  43  44  45  46  47  48  Next

Last modified: May 25, 2011