Alcoa 2014 Annual Report Download - page 148

Alcoa’s remediation reserve balance was $543 and $509 at December 31, 2014 and 2013 (of which $70 and $48 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 2014, the remediation reserve was increased by $61 due to a charge of $42 related to the planned demolition of
certain structures at the Massena East, NY, Point Henry and Yennora, Australia, and Portovesme, Italy locations (see
Note D), a charge of $3 related to the Portovesme location (see below), and a net charge of $16 associated with a
number of other sites. In 2013, the remediation reserve was increased by $18 due to a charge of $12 related to the
planned demolition of certain structures at the Massena West, NY and Baie Comeau, Quebec, Canada sites (see Note
D) and a net charge of $6 associated with a number of other sites. Of the changes to the remediation reserve in 2014
and 2013, $47 and $12, respectively was recorded in Restructuring and other charges, while the remainder was
recorded in Cost of goods sold on the accompanying Statement of Consolidated Operations.
Payments related to remediation expenses applied against the reserve were $46 and $40 in 2014 and 2013, respectively.
These amounts include expenditures currently mandated, as well as those not required by any regulatory authority or
third party. In 2014, the change in the reserve also reflects an increase of $19 due to the effects of foreign currency
translation and a reclassification of amounts included in other reserves within Other noncurrent liabilities and deferred
credits on Alcoa’s Consolidated Balance Sheet as of December 31, 2013. In 2013, the change in the reserve also
reflects a decrease of $1 due to the effects of foreign currency translation.
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 an ongoing remediation project related to the Grasse River, which is adjacent to
Alcoa’s Massena plant site. Many years ago, it was determined that sediments and fish in the river contain varying
levels of polychlorinated biphenyls (PCBs). The project, which was selected by the U.S. Environmental Protection
Agency (EPA) in a Record of Decision (ROD) issued in April 2013, is aimed at capping PCB contaminated sediments
with concentration in excess of one part per million in the main channel of the river and dredging PCB contaminated
sediments in the near-shore areas where total PCBs exceed one part per million. At December 31, 2014 and 2013, the
reserve balance associated with this matter was $239 and $241, respectively. Alcoa is in the planning and design phase,
which is expected to take approximately two to three years from mid-2013, followed by the actual remediation
fieldwork that is expected to take approximately four years. The majority of the project funding is expected to be spent
between 2016 and 2020.
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
environmental conditions, as well as a pro rata share of the final closure of the active bauxite residue waste disposal
areas (known as the Copano facility). Alcoa’s share of the closure costs is proportional to the total period of operation
of the active waste disposal areas. At December 31, 2014 and 2013, the reserve balance associated with Sherwin was
$32 and $35, respectively. Approximately half of the project funding is expected to be spent through 2019. The
remainder is not expected to be spent in the foreseeable future as it is dependent upon the operating life of the active
waste disposal areas.
East St. Louis, IL—Alcoa has an ongoing remediation project related to an area used for the disposal of bauxite
residue from former alumina refining operations. The project, which was selected by the EPA in a ROD issued in July
2012, is aimed at implementing a soil cover over the affected area. On November 1, 2013, the U.S. Department of
Justice lodged a consent decree on behalf of the EPA for Alcoa to conduct the work outlined in the ROD. This consent
decree was entered as final in February 2014 by the U.S. Department of Justice. As a result, Alcoa began construction
in March 2014; this project is expected to be completed by mid-2015. At December 31, 2014 and 2013, the reserve
balance associated with this matter was $15 and $24, respectively.
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