Honeywell 2003 Annual Report Download - page 19

We are and have been engaged in the handling, manufacture, use and disposal
of many substances classified as hazardous or toxic by one or more regulatory
agencies. We believe that, as a general matter, our policies, practices and
procedures are properly designed to prevent unreasonable risk of environmental
damage and personal injury, and that our handling, manufacture, use and disposal
of these substances are in accord with environmental and safety laws and
regulations. It is possible, however, that future knowledge or other
developments, such as improved capability to detect substances in the
environment or increasingly strict environmental laws and standards and
enforcement policies, could bring into question our handling, manufacture, use
or disposal of these substances.
Among other environmental requirements, we are subject to the federal
superfund law, and similar state laws, under which we have been designated as a
potentially responsible party that may be liable for cleanup costs associated
with various hazardous waste sites, some of which are on the U.S. Environmental
Protection Agency's superfund priority list. Although, under some court
interpretations of these laws, there is a possibility that a responsible party
might have to bear more than its proportional share of the cleanup costs if it
is unable to obtain appropriate contribution from other responsible parties, we
have not had to bear significantly more than our proportional share in multi-
party situations taken as a whole.
In the matter entitled Interfaith Community Organization, et al. v.
Honeywell International Inc., et al., the United States District Court for the
District of New Jersey held in May 2003 that a predecessor Honeywell site
located in Jersey City, New Jersey constituted an imminent and substantial
endangerment and ordered Honeywell to conduct the excavation and transport for
offsite disposal of approximately one million tons of chromium residue present
at the site. Honeywell strongly disagrees with the Court's determinations and
has appealed the Court's decision to the Third Circuit Court of Appeals. Per the
Appeals Court's order, the parties are engaged in mediation. In October 2003,
the District Court denied Honeywell's motion for a stay of certain aspects of
its May 2003 order, and we are considering whether to appeal such ruling. The
site at issue is one of twenty-one sites located in Jersey City, New Jersey
which are the subject of an Administrative Consent Order (ACO) entered into with
the New Jersey Department of Environmental Protection (NJDEP) in 1993. Under the
ACO, Honeywell agreed to study and remediate these sites in accordance with
NJDEP's directions, provided that the total costs of such studies and
remediation do not exceed $60 million. Honeywell has cooperated with the NJDEP
under the ACO and believes that decisions regarding site cleanups should be made
by the NJDEP under the ACO. We are confident that proceeding under the ACO will
ensure a safe remediation and allow the property to be placed back into
productive use much faster and at a cost significantly less than the remedies
required by the Court's order. We have not completed development of a remedial
action plan for the excavation and offsite disposal directed under the Court's
order and therefore are unable to estimate the cost of such actions. At trial,
plaintiff's expert testified that the excavation and offsite disposal cost might
be $400 million. However, there are significant variables in the implementation
of the Court's order and depending on the method of implementation chosen, the
estimate could increase or decrease. Prior to 2003, provisions were made in our
financial statements as to remedial costs consistent with the ACO and during the
three months ended June 30, 2003 we provided for additional costs which are
likely to be incurred during the pendency of our appeal, which provisions do not
assume excavation and offsite removal of chromium from the site. There are
alternative outcomes and remedies beyond the scope of the ACO that could result
from the remanding, reversal or replacement of the Court's decision and order.
At this time, we can neither identify a probable alternative outcome nor
reasonably estimate the cost of an alternative remedy. Although we expect the
Court's decision and order to be remanded, reversed or replaced, should the
remedies prescribed in the Court's decision and order ultimately be upheld, such
outcome could have a material adverse impact on our consolidated results of
operations or operating cash flows in the periods recognized or paid. We do not
expect that this matter will have a material adverse effect on our consolidated
financial position.
In accordance with a 1992 consent decree with the State of New York,
Honeywell is studying environmental conditions in and around Onondaga Lake (the
Lake), in Syracuse, New York. The purpose of the study is to identify, evaluate
and propose remedial measures that can be taken to remedy historic industrial
contamination in the Lake. A predecessor company to Honeywell operated a
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