DuPont 2006 Annual Report Download - page 49

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations, continued
increase the efficiency of energy use and reduce the generation of persistent, bioaccumulative and toxic
materials. The costs to comply with complex environmental laws and regulations, as well as internal voluntary
programs and goals, are significant and will continue for the foreseeable future. While these costs may
increase in the future, they are not expected to have a material impact on the company’s financial position,
liquidity or results of operations.
Pretax environmental expenses charged to current operations totaled $521 million in 2006 compared with
$468 million in 2005 and $455 million in 2004. These expenses include the remediation accruals discussed
below; operating, maintenance and depreciation costs for solid waste, air and water pollution control facilities
and the costs of environmental research activities. While expenses related to the costs of environmental
research activities are not a significant component of the company’s overall environmental expenses, the
company expects these costs to become proportionally greater as the company increases its participation in
businesses for which environmental assessments are required during product development. The largest of the
environmental expenses in 2006 was $109 million for the operation of water pollution control facilities and
$127 million for solid waste management. About 78 percent of total annual environmental expenses resulted
from operations in the U.S.
In 2006, DuPont spent approximately $135 million on environmental capital projects either required by law or
necessary to meet the company’s internal environmental goals. The company currently estimates expenditures
for environmental-related capital projects will total $143 million in 2007. In the U.S., significant capital
expenditures are expected to be required over the next decade for treatment, storage and disposal facilities for
solid and hazardous waste and for compliance with the Clean Air Act (CAA). Until all CAA regulatory
requirements are established and known, considerable uncertainty will remain regarding future estimates for
capital expenditures. Total CAA capital costs over the next two years are currently estimated to range from
$40 million to $70 million.
The goal of the Toxic Substances Control Act (TSCA) is to prevent unreasonable risks of injury to health or
the environment associated with the manufacture, processing, distribution in commerce, use, or disposal of
chemical substances. Under TSCA, the EPA has established reporting, record-keeping, testing and
control-related requirements for new and existing chemicals. In 1998, the EPA challenged the U.S. chemical
industry to voluntarily conduct screening level health and environmental effects testing on nearly 3,000 high
production volume (HPV) chemicals or to make equivalent information publicly available. An HPV chemical
is a chemical listed on the 1990 Inventory Update Rule with annual U.S. cumulative production and imports of
one million pounds or more. The company is sponsoring more than two dozen HPV chemicals under the EPA’s
challenge program. An extended HPV program has been initiated by the American Chemistry Council in
which DuPont has agreed to sponsor an additional eleven new HPV chemicals listed on the 2002 Inventory
Update Rule. Since 2000, the entire chemical industry has spent an estimated $250 million on HPV testing. In
anticipation of the HPV challenge program ending, the EPA adopted two new rules under TSCA that require
manufacturers to submit certain unpublished health and safety data and production/exposure data for certain
HPV chemicals to the EPA.
In December 2006, the European Union adopted a new regulatory framework concerning the Registration,
Evaluation and Authorization of Chemicals. This regulatory framework known as REACH will enter into force
on June 1, 2007. One of its main objectives is the protection of human health and the environment. REACH
requires manufacturers and importers to gather information on the properties of their substances that meet
certain volume or toxicological criteria and register the information in a central database to be maintained by a
Chemical Agency in Finland. The Regulation also calls for the progressive substitution of the most dangerous
chemicals when suitable alternatives have been identified. Management is currently evaluating the impact of
the adoption of REACH on its operations and consolidated financial position.
Global climate change is being addressed by the United Nations Framework Convention on Climate Change
(the Convention) adopted in 1992. The Kyoto Protocol (the Protocol), adopted in December 1997, is an effort
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Part II