Alcoa 2012 Annual Report Download - page 130

while Alcoa believes that any additional cost would only be assessed for the year 2005, it is possible that the EC could
extend its investigation to later years. If the EC’s investigation concludes that the regulated electricity tariffs for
industries are unlawful, Alcoa will have an opportunity to challenge the decision in the EU courts.
Environmental Matters. Alcoa continues to participate in environmental assessments and cleanups at a number of
locations (more than 100). These include owned or operating facilities and adjoining properties, previously owned or
operating facilities and adjoining properties, and waste sites, including Superfund (Comprehensive Environmental
Response, Compensation and Liability Act (CERCLA)) sites. A liability is recorded for environmental remediation
when a cleanup program becomes probable and the costs or damages can be reasonably estimated.
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 $532 and $347 at December 31, 2012 and 2011 (of which $74 and $58 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 2012, the remediation reserve was increased by $206 due to charges of $165 related to the Massena West, NY site
(see below), charges totaling $45 related to smelter sites in Canada and Norway (see below), a charge of $14 related to
the former East St. Louis, IL site (see below), a reversal of $30 related to the former Sherwin, TX site (see below), and
a net increase of $12 associated with a number of other sites. In 2011, the remediation reserve was increased by $31
due to charges of $18 related to the decision to permanently shut down and demolish a U.S. smelter (see Note D) and a
net increase of $13 associated with a number of other sites. In both periods, the changes to the remediation reserve,
except for the aforementioned $18 in 2011, were recorded in Cost of goods sold on the accompanying Statement of
Consolidated Operations.
Payments related to remediation expenses applied against the reserve were $22 and $19 in 2012 and 2011, respectively.
These amounts include expenditures currently mandated, as well as those not required by any regulatory authority or
third party. In 2012 and 2011, the change in the reserve also reflects an increase of $1 and a decrease of $1,
respectively, due to the effects of foreign currency translation. Additionally, the change in the 2011 reserve reflects an
increase of $3 related to the acquisition of an aerospace fasteners business (see Note F).
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.
Massena West, 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
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