Alcoa 2015 Annual Report Download - page 155

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, 2015 and 2014, the reserve balance associated with Sherwin was
$30 and $32, 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 the end of March 2016 (Alcoa has a second project in East
St. Louis that is separate from the matter presented herein on which Alcoa is expecting an EPA decision in 2016—any
resulting liability is not expected to be material). At December 31, 2015 and 2014, the reserve balance associated with
this matter was $8 and $15, respectively.
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 and Protection of Land and Sea
(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 of the court proceedings while investigations
were conducted and negotiations advanced towards a possible settlement.
In December 2009, Trasformazioni and Ligestra reached an initial agreement for settlement of the liabilities related to
Fusina while negotiations continued related to Portovesme (see below). The agreement outlined 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 was 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 in 2009 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. In October 2013, the MOE approved the project submitted by Alcoa,
resulting in no adjustment to the reserve.
In January 2014, in anticipation of Alcoa reaching a final administrative agreement with the MOE, Alcoa and Ligestra
entered into a final agreement related to Fusina for allocation of payments to the MOE for emergency action and
natural resource damages and the costs for the approved soil remediation project. The agreement resulted in Ligestra
assuming 50% to 80% of all payments and remediation costs. On February 27, 2014, Alcoa and the MOE reached a
final administrative agreement for conduct of work. The agreement includes both a soil and groundwater remediation
project estimated to cost $33 (€24) and requires payments of $25 (€18) to the MOE for emergency action and natural
resource damages. The remediation projects are slated to begin as soon as Alcoa receives final approval from the
Ministry of Infrastructure. Based on the final agreement with Ligestra, Alcoa’s share of all costs and payments is $17
(€12), of which $9 (€6) related to the damages will be paid annually over a 10-year period, which began in April 2014,
and was previously fully reserved.
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