Alcoa 2012 Annual Report Download - page 132

For a number of years, Alcoa has been working with Sherwin Alumina Company to develop a sustainable closure plan
for the active waste disposal areas, which is partly conditioned on Sherwin’s operating plan for the Copano facility. In
2012, Alcoa received the technical analysis of the closure plan and the operating plan from Sherwin in order to develop
a closure cost estimate, including an assessment of Alcoa’s potential liability. It was determined that the most probable
course of action would result in a smaller liability than originally reserved due to new information related to the
amount of storage capacity in the waste disposal areas and revised assumptions regarding Alcoa’s share of the
obligation based on the operating plan provided by Sherwin. As such, Alcoa reduced the reserve associated with
Sherwin by $30.
East St. Louis, IL—In response to questions regarding environmental conditions at the former East St. Louis
operations, Alcoa and the City of East St. Louis, the owner of the site, entered into an administrative order with the
EPA in December 2002 to perform a remedial investigation and feasibility study of an area used for the disposal of
bauxite residue from historic alumina refining operations. A draft feasibility study was submitted to the EPA in April
2005. The feasibility study included remedial alternatives that ranged from no further action to significant grading,
stabilization, and water management of the bauxite residue disposal areas. As a result, Alcoa increased the
environmental reserve for this location by $15 in 2005.
In April 2012, in response to comments from the EPA and other stakeholders, Alcoa submitted a revised feasibility
study to the EPA, which soon thereafter issued a PRAP identifying a soil cover as the EPA’s recommended alternative.
Based on this recommendation, Alcoa submitted a detailed design and cost estimate for implementation of the remedy.
A draft consent decree was issued in May 2012 by the EPA and all parties are actively engaged in negotiating a final
consent decree and statement of work. As a result, Alcoa increased the reserve associated with East St. Louis by $14 to
reflect the necessary costs for this remedy.
On July 30, 2012, the EPA issued a ROD for this matter and Alcoa began the process of bidding and contracting for the
construction work. The ultimate outcome of negotiations and the bidding of the construction work could result in
additional liability.
Fusina and Portovesme, Italy—In 1996, Alcoa acquired the Fusina smelter and rolling operations and the Portovesme
smelter, both of which are owned by Alcoa’s subsidiary Alcoa Trasformazioni S.r.l. (“Trasformazioni”), from Alumix, an
entity owned by the Italian Government. At the time of the acquisition, Alumix indemnified Alcoa for pre-existing
environmental contamination at the sites. In 2004, the Italian Ministry of Environment (MOE) issued orders to
Trasformazioni and Alumix for the development of a clean-up plan related to soil contamination in excess of allowable limits
under legislative decree and to institute emergency actions and pay natural resource damages. Trasformazioni appealed the
orders and filed suit against Alumix, among others, seeking indemnification for these liabilities under the provisions of the
acquisition agreement. In 2009, Ligestra S.r.l. (“Ligestra”), Alumix’s successor, and Trasformazioni agreed to a stay on the
court proceedings while investigations were conducted and negotiations advanced towards a possible settlement.
In December 2009, Trasformazioni and Ligestra reached an agreement for settlement of the liabilities related to Fusina
while negotiations continued related to Portovesme. The agreement outlines an allocation of payments to the MOE for
emergency action and natural resource damages and the scope and costs for a proposed soil remediation project, which
was formally presented to the MOE in mid-2010. The agreement is contingent upon final acceptance of the remediation
project by the MOE. As a result of entering into this agreement, Alcoa increased the reserve by $12 for Fusina. Based
on comments received from the MOE and local and regional environmental authorities, Trasformazioni submitted a
revised remediation plan in the first half of 2012; however, such revisions did not require any change to the existing
reserve.
Additionally, due to new information derived from the site investigations conducted at Portovesme, Alcoa increased
the reserve by $3 in 2009. In November 2011, Trasformazioni and Ligestra reached an agreement for settlement of the
liabilities related to Portovesme, similar to the one for Fusina. A proposed soil remediation project for Portovesme was
formally presented to the MOE in June 2012. Neither the agreement with Ligestra nor the proposal to the MOE
resulted in a change to the reserve for Portovesme.
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