Oil and Gas Mineral Rights: The oil and gas industry is currently discussing the appropriate balance sheet classifi- cation of oil and gas mineral rights held by lease or con- tract. The Corporation classifies these assets as property, plant and equipment in accordance with its interpretation of FAS No. 19 and common industry practice. There is also a view that these mineral rights are intangible assets as defined in FAS No. 141,  Business Combinations , and, there- fore, should be classified separately on the balance sheet as intangible assets. If the accounting for mineral rights held by lease or contract is ultimately changed, the Corporation believes that any such reclassification of min- eral rights could amount to approximately $2.3 billion at December 31, 2003 and $2.2 billion at December 31, 2002, if the Corporation is required to include the purchase price allocated to hydrocarbon reserves obtained in acquisitions of oil and gas properties. The determination of this amount is based on the Corporation’s current understanding of this evolving issue and how the provisions of FAS No. 141 might be applied to oil and gas mineral rights. If mineral rights are reclassified to intangible assets, FAS No. 142, Goodwill and Other Intangible Assets, will require addition- al disclosures in the financial statement notes. This poten- tial balance sheet reclassification would not affect results of operations or cash flows. The Corporation has implemented a values-based, social- responsibility strategy focused on improved environment, health, and safety performance and making a positive impact on communities and the environment. The strategy is supported by the Corporation’s environment, health, safety and social responsibility policies and management systems that help protect the Corporation’s workforce, cus- tomers and local communities. Overall governance is the responsibility of senior management. To ensure that the Corporation meets its goals and regulatory requirements, the Corporation has programs in place for compliance eval- uation, facility auditing and employee training. Environment and safety management systems, based on international standards, are used throughout the Corporation to ensure consistency and adherence to policy objectives. Improved performance in environment, health and safety may raise the Corporation’s operating costs and require increased capital expenditures while reducing potential risks to corpo- rate assets, reputation and ability to operate. The Port Reading refining facility and the HOVENSA refinery manufacture conventional and reformulated gasolines that are cleaner burning than required under U.S. regulations currently in effect. In addition, the benzene and sulfur con- tent in the Corporation’s gasoline is approximately one-half of the national average (excluding California), resulting in significantly lower toxic emissions than the industry average. The regulation of motor fuels in the United States and elsewhere continues to be an area of considerable change and will likely require large capital expenditures in future years. In December 1999, the United States Environmental Protection Agency (“EPA”) adopted rules that phase in limitations on the sulfur content of gasoline beginning in 2004. In December 2000, the EPA adopted regulations to substantially reduce the allowable sulfur content of diesel fuel by 2006. The Corporation and HOVENSA continue to review options to determine the most cost effective compliance strategies for these fuel regulations. The costs to comply will depend on a variety of factors, including the availability of suitable technology and contractors and the credit trading programs. The estimated capital expenditures necessary to comply with the low-sulfur gasoline requirements at Port Reading are approximately $70 million over the next several years. Capital expenditures to comply with low-sulfur gasoline and diesel fuel requirements at HOVENSA are presently expected to be $450 million over the next three years. HOVENSA expects to finance these capital expenditures through cash flow and, if necessary, future borrowings. Legislation to restrict or ban the use of MTBE, a gasoline oxygenate, and to require the use of ‘renewable’ fuels was considered by the United States Congress in 2002 and will likely be reconsidered. The Corporation and HOVENSA both manufacture and use MTBE primarily to meet the federal requirement for oxygen in reformulated gasoline, and do not presently use ethanol. Several states in the Corporation’s market area have enacted bans on MTBE use, including Connecticut and New York (effective January 2004), and other states are considering them. If Congress bans MTBE or if additional state bans take effect, or if an obligation to use ethanol or other renewable fuels is imposed, the effect on the Corporation and HOVENSA could be significant. Whether the effect is significant will depend on several fac- tors, including the extent and timing of any such bans or obligations, requirements for maintenance of certain air 31 Environment, Health and Safety 