International Paper 2012 Annual Report Download - page 31

RESEARCH AND DEVELOPMENT
The Company operates its primary research and
development center in Loveland, Ohio, as well as
several product laboratories. Additionally, the
Company has an interest in ArborGen, Inc., a joint
venture with certain other forest products compa-
nies.
We direct research and development activities to
short-term, long-term and technical assistance needs
of customers and operating divisions, and to proc-
ess, equipment and product innovations. Activities
include product development within the operating
divisions; studies on innovation and improvement of
pulping, bleaching, chemical recovery, papermaking,
converting and coating processes; packaging design
and materials development; mechanical packaging
systems, environmentally sensitive printing inks and
reduction of environmental discharges; re-use of raw
materials in manufacturing processes; recycling of
consumer and packaging paper products; energy
conservation; applications of computer controls to
manufacturing operations; innovations and
improvement of products; and development of vari-
ous new products. Our development efforts specifi-
cally address product safety as well as the
minimization of solid waste. The cost to the Com-
pany of its research and development operations
was $13 million in 2012, $13 million in 2011 and $12
million in 2010.
We own numerous patents, copyrights, trademarks,
trade secrets and other intellectual property rights
relating to our products and to the processes for
their production. We also license intellectual prop-
erty rights to and from others where necessary.
Many of the manufacturing processes are among
our trade secrets. Some of our products are covered
by U.S. and non-U.S. patents and are sold under well
known trademarks. We derive a competitive advan-
tage by protecting our trade secrets, patents, trade-
marks and other intellectual property rights, and by
using them as required to support our businesses.
ENVIRONMENTAL PROTECTION
International Paper is subject to extensive federal
and state environmental regulation as well as similar
regulations internationally. Our continuing objectives
include: (1) controlling emissions and discharges
from our facilities into the air, water and ground-
water to avoid adverse impacts on the environment,
and (2) maintaining compliance with applicable laws
and regulations. A total of $60 million was spent in
2012 for capital projects to control environmental
releases into the air and water, and to assure
environmentally sound management and disposal of
waste. We expect to spend approximately $90 mil-
lion in 2013 for similar capital projects, including
expenditures associated with the Environmental
Protection Agency’s (EPA) Boiler MACT (maximum
achievable control technology) rule. Projected capital
expenditures for 2014 environmental capital projects
are anticipated to be approximately $285 million,
much of which is associated with the new Boiler
MACT rule. Preliminary cost projections for 2015
environmental capital projects are estimated to be
$300 million, much of which is again associated with
Boiler MACT. In March 2011, the EPA published four
inter-related final rules commonly and collectively
referred to as “Boiler MACT.” As finalized, these
rules required owners of specified boilers to meet
very strict air emissions standards for certain sub-
stances. The rule was immediately subject to admin-
istrative reconsideration by the EPA and several
lawsuits. On December 20, 2012, the EPA issued its
final reconsidered Boiler MACT suite of rules.
International Paper is actively analyzing the rules to
determine, among other things, its costs and this
process is in its early stages. As such, the projected
capital expenditures for environmental capital proj-
ects represent our current best estimate of future
expenditures with the recognition that the Boiler
MACT analysis is in the early stages and subject to
change.
In the U.S., the EPA proposed or finalized a number
of new rules, including Greenhouse Gas Mandatory
Reporting (see Climate Change section), and more
restrictive National Ambient Air Quality Standards
(NAAQSs). The EPA has promulgated new NAAQSs
for nitrogen oxide (NOx) and sulfur dioxide (SO2)and
we anticipate that additional NAAQSs will also be
forthcoming. Additionally, the EPA published Phase I
of its Pulp and Paper National Emission Standard for
Hazardous Air Pollutants (NESHAP). To date, these
regulations have not had a material impact on Inter-
national Paper operations. However, once fully
implemented these rules could require significant
investments of capital and/or operational changes
that could potentially have a material impact.
CLIMATE CHANGE
In 1997, an international conference on global warm-
ing concluded with an agreement known as the
Kyoto Protocol. The Kyoto Protocol called for reduc-
tions of certain emissions that may contribute to
increases in atmospheric greenhouse gas concen-
trations. While the U.S. and many other countries did
not ratify the Kyoto Protocol, it has formed the basis
for a range of international, national and sub-
national proposals and regulations focusing on
greenhouse gas reduction. Some of these regu-
lations apply currently or will apply in countries
where we currently have, or may in the future have,
manufacturing facilities or investments.
Although the Kyoto Protocol expired in 2012, a suc-
cessor protocol is currently under negotiation at the
international level. Several countries or geographic
areas in which we operate, such as the EU, India,
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