Alcoa 2009 Annual Report Download - page 119

As assessments and cleanups proceed, the liability is adjusted based on progress made in determining the extent of
remedial actions and related costs and damages. The liability can change substantially due to factors such as the nature
and extent of contamination, changes in remedial requirements, and technological changes, among others.
Alcoa’s remediation reserve balance was $307 and $316 at December 31, 2009 and December 31, 2008 (of which $27
and $39 was classified as a current liability), respectively, and reflects the most probable costs to remediate identified
environmental conditions for which costs can be reasonably estimated. In 2009, the remediation reserve was increased
by $25 due to a $15 reserve adjustment related to two sites in Italy discussed below and $10 associated with various
sites. In 2008, the remediation reserve was increased by $69 due to $56 in reserve adjustments related to the Grasse
River and former Vancouver property, both of which are discussed below, and $13 associated with various sites. The
changes to the remediation reserve were recorded in Cost of goods sold on the accompanying Statement of
Consolidated Operations in both periods. Payments related to remediation expenses applied against the reserve were
$34 and $32 in 2009 and 2008, respectively. These amounts include expenditures currently mandated, as well as those
not required by any regulatory authority or third party.
Included in annual operating expenses are the recurring costs of managing hazardous substances and environmental
programs. These costs are estimated to be approximately 2% of cost of goods sold.
The following discussion provides details regarding the current status of certain significant reserves related to current
or former Alcoa sites. It is possible that Alcoa’s financial position, liquidity, or results of operations, in a particular
period, could be materially affected by matters relating to these sites. However, based on facts currently available,
management believes that adequate reserves have been provided and that the disposition of these matters will not have
a materially adverse effect on the financial position, liquidity, or the results of operations of the Company.
Massena, NY—Alcoa has been conducting investigations and studies of the Grasse River, adjacent to Alcoa’s
Massena plant site, under a 1989 order from the U.S. Environmental Protection Agency (EPA) issued under CERCLA.
Sediments and fish in the river contain varying levels of polychlorinated biphenyls (PCBs).
Alcoa submitted various Analysis of Alternatives Reports to the EPA starting in 1998 through 2002 that reported the
results of river and sediment studies, potential alternatives for remedial actions related to the PCB contamination, and
additional information requested by the EPA.
In June 2003, the EPA requested that Alcoa gather additional field data to assess the potential for sediment erosion
from winter river ice formation and breakup. The results of these additional studies, submitted in a report to the EPA in
April 2004, suggest that this phenomenon has the potential to occur approximately every 10 years and may impact
sediments in certain portions of the river under all remedial scenarios. The EPA informed Alcoa that a final remedial
decision for the river could not be made without substantially more information, including river pilot studies on the
effects of ice formation and breakup on each of the remedial techniques. Alcoa submitted to the EPA, and the EPA
approved, a Remedial Options Pilot Study (ROPS) to gather this information. The scope of this study included
sediment removal and capping, the installation of an ice control structure, and significant monitoring.
From 2004 through 2008, Alcoa completed the work outlined in the ROPS. In November 2008, Alcoa submitted an
update to the EPA incorporating the new information obtained from the ROPS related to the feasibility and costs
associated with various capping and dredging alternatives, including options for ice control. As a result, Alcoa
increased the reserve associated with the Grasse River by $40 for the estimated costs of a proposed ice control remedy
and for partial settlement of potential damages of natural resources.
This new information will be used by the EPA to select a remedy for the entire river. The EPA’s ultimate selection of a
remedy could result in additional liability. Alcoa may be required to record a subsequent reserve adjustment at the time
the EPA’s Record of Decision is issued, which is expected in 2010 or later.
Sherwin, TX—In connection with the sale of the Sherwin alumina refinery, which was required to be divested as part
of the Reynolds merger in 2000, Alcoa agreed to retain responsibility for the remediation of the then existing
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