Scope of Report Message From the Chairman Our Company 2006 Highlights 2006 At A Glance 2006 Performance Data How We Operate Review of Operations Safety Performance Environmental Performance Global Workforce Community & Social Performance Global Compact Index GRI & IPIECA/API Index Verification Statement

ENVIRONMENTAL PERFORMANCE

We are committed to meeting the highest standards of corporate citizenship by safeguarding the environment.

EXCEEDANCES AND ENFORCEMENT ACTIONS

Corporate policy has long stressed our fundamental commitment to comply with applicable environment, health and safety laws and regulations. Although 100% compliance is our goal, exceedances of permitted levels can occur, as do citations from regulatory authorities. A total of $187,931 was paid in penalties in 2006.

LEGAL PROCEEDINGS

Hess Corporation has been a party to multiple lawsuits and claims related to the use of methyl tertiary butyl ether (MTBE) in gasoline. The principal allegation is that gasoline containing MTBE is a defective product and that the parties are liable for damage to groundwater resources. Hess believes that significant uncertainty remains regarding the validity of these suits and that there is insufficient information on which to evaluate our exposure in these cases.

Many refiners have entered into consent agreements to resolve the United States Environmental Protection Agency (EPA) assertions that refining facilities were modified or expanded without complying with New Source Review (NSR) regulations that require permits and new emission controls in certain circumstances. These consent agreements have typically imposed substantial civil fines and penalties, required significant capital expenditures to install emissions control equipment, and resulted in changes to operations which increased operating costs. Hess is engaged in discussions with the EPA regarding the Petroleum Refining Initiative, although we have already installed many of the pollution controls required of other refiners under the consent agreements. While the effect on the company cannot be estimated at this time, additional future capital expenditures and operating expenses may be incurred.

Hess Corporation is among 60 companies that have received a directive from the New Jersey Department of Environmental Protection (NJDEP) to remediate contamination in the sediments of the lower Passaic River. The directive relates to alleged prior releases from a bulk storage terminal in Newark, New Jersey now owned by Hess. A remedial investigation and feasibility study is currently being conducted on a portion of the Passaic River by the EPA under an agreement with Hess and over 40 other companies. Based on currently known facts, we do not believe that this matter will result in material liability to Hess.

The company has been served with a complaint from the New York State Department of Environmental Conservation (DEC) relating to alleged violations at its petroleum terminal in Brooklyn, New York. We believe that many of the allegations are factually inaccurate or based on an incorrect interpretation of applicable law and that we have already addressed the primary conditions discussed in the complaint. We are presently involved in settlement discussions with DEC.

In 2006, Hess was one of several companies to settle with New Jersey regulators for allegedly raising gas prices illegally in September 2005 after Hurricane Katrina. The company agreed to pay $372,000.

In July 2005, the Securities and Exchange Commission (SEC) commenced a private investigation into payments made to the government of Equatorial Guinea or to officials and persons affiliated with officials of the government of Equatorial Guinea. Hess has been cooperating and continues to cooperate with the SEC investigation.

ENVIRONMENTAL EXPENDITURES

Capital expenditures necessary to comply with low sulfur gasoline requirements at Port Reading were $72 million, of which $23 million was spent in 2005 and the remainder was spent in 2006. Additional capital expenditures for facilities, to comply with environmental standards, other than for the low sulfur projects were $22 million in 2006.

The company also accrues for environmental assessment and remediation expenses when the future costs are probable and reasonably estimable. At year end 2006, the company reserve for its estimated environmental liability was approximately $75 million. The company expects that existing reserves for environmental liabilities will adequately cover costs to assess and remediate known sites. The company’s remediation spending was $15 million in 2006 .