3M 2013 Annual Report Download - page 114

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the Company filed suit against Covington for breach of its fiduciary duties to the Company and for breach of contract
arising out of Covington’s representation of the State of Minnesota in the NRD Lawsuit.
The State of New Jersey filed suit in 2005 against Occidental Chemical Corporation, Tierra Solutions Inc., Maxus Energy
Corporation and five other companies seeking cleanup and removal costs and other damages associated with the
presence of dioxin and other hazardous substances in the sediment of a 17-mile stretch of the Passaic River in New
Jersey. In June 2009, the Company, along with more than 250 other companies, was served with a third-party complaint
by Tierra Solutions Inc. and Maxus Energy Corporation seeking contribution towards the cost and damages asserted or
incurred for investigation and remediation of discharges to the Passaic River. The third-party complaint seeks to spread
those costs among the third-party defendants, including 3M. Allegations asserted against 3M relate to its use of two
commercial drum conditioning facilities in New Jersey. In March 2013, 3M and other third party defendants entered into a
settlement agreement with the state of New Jersey for an amount that is not material to 3M. In December 2013, the Court
approved the settlement and entered the Consent Judgment. The settlement resolves claims or potential claims by the
State of New Jersey regarding discharges or alleged discharges into the Passaic River by the settling parties, and
precludes certain cost recovery actions by the third-party plaintiffs. The settlement with the State of New Jersey does not
include release from potential federal claims yet to be asserted. Total costs for the remedy currently proposed by EPA
could easily exceed $1 billion. While the Company does not yet have a basis for estimating its potential exposure in the
yet to be asserted EPA claim, the Company currently believes its allocable share of the possible loss, if any, is likely to be
a fraction of one percent of the total costs because of the Company’s limited potential involvement at this site.
For environmental litigation matters described in this section for which a liability, if any, has been recorded, the Company
believes the amount recorded, as well as the possible loss or range of loss in excess of the established accrual is not
material to the Company’s consolidated results of operations or financial condition. For those matters for which a liability
has not been recorded, the Company believes such liability is not probable and estimable and the Company is not able to
estimate a possible loss or range of loss at this time, with the exception of the Passaic River litigation, where the
Company’s potential exposure, if any, is likely to be a fraction of one percent of the total costs.
Environmental Liabilities and Insurance Receivables
As of December 31, 2013, the Company had recorded liabilities of $27 million for estimated “environmental remediation”
costs based upon an evaluation of currently available facts with respect to each individual site and also recorded related
insurance receivables of $11 million. The Company records liabilities for remediation costs on an undiscounted basis when
they are probable and reasonably estimable, generally no later than the completion of feasibility studies or the Company’s
commitment to a plan of action. Liabilities for estimated costs of environmental remediation, depending on the site, are based
primarily upon internal or third-party environmental studies, and estimates as to the number, participation level and financial
viability of any other potentially responsible parties, the extent of the contamination and the nature of required remedial
actions. The Company adjusts recorded liabilities as further information develops or circumstances change. The Company
expects that it will pay the amounts recorded over the periods of remediation for the applicable sites, currently ranging up to
20 years.
As of December 31, 2013, the Company had recorded liabilities of $48 million for “other environmental liabilities” based upon
an evaluation of currently available facts to implement the Settlement Agreement and Consent Order with the MPCA, the
remedial action agreement with ADEM, and to address trace amounts of perfluorinated compounds in drinking water
sources in the City of Oakdale, Minnesota, as well as presence in the soil and groundwater at the Company’s manufacturing
facilities in Decatur, Alabama, and Cottage Grove, Minnesota, and at two former disposal sites in Washington County,
Minnesota (Oakdale and Woodbury). The Company expects that most of the spending will occur over the next four years.
As of December 31, 2013, the Company’s receivable for insurance recoveries related to “other environmental liabilities”
was $15 million.
It is difficult to estimate the cost of environmental compliance and remediation given the uncertainties regarding the
interpretation and enforcement of applicable environmental laws and regulations, the extent of environmental contamination
and the existence of alternative cleanup methods. Developments may occur that could affect the Company’s current
assessment, including, but not limited to: (i) changes in the information available regarding the environmental impact of the
Company’s operations and products; (ii) changes in environmental regulations, changes in permissible levels of specific
compounds in drinking water sources, or changes in enforcement theories and policies, including efforts to recover natural
resource damages; (iii) new and evolving analytical and remediation techniques; (iv) success in allocating liability to other
potentially responsible parties; and (v) the financial viability of other potentially responsible parties and third-party
indemnitors. For sites included in both “environmental remediation liabilities” and “other environmental liabilities,” at which
remediation activity is largely complete and remaining activity relates primarily to operation and maintenance of the remedy,
including required post-remediation monitoring, the Company believes the exposure to loss in excess of the amount accrued
would not be material to the Company’s consolidated results of operations or financial condition. However, for locations at