International Paper 2012 Annual Report Download - page 93

At December 31, 2012, total future minimum
commitments under existing non-cancelable operat-
ing leases and purchase obligations were as follows:
In millions 2013 2014 2015 2016 2017 Thereafter
Lease obligations $ 198 $136 $106 $ 70 $ 50 $ 141
Purchase obligations (a) 3,213 828 722 620 808 2,654
Total $3,411 $964 $828 $690 $858 $2,795
(a) Includes $3.6 billion relating to fiber supply agreements
entered into at the time of the Company’s 2006 Transformation
Plan forestland sales and in conjunction with the 2008 acquis-
ition of Weyerhaeuser Company’s Containerboard, Packaging
and Recycling business.
Rent expense was $231 million, $205 million and
$210 million for 2012, 2011 and 2010, respectively.
GUARANTEES
In connection with sales of businesses, property,
equipment, forestlands and other assets, Interna-
tional Paper commonly makes representations and
warranties relating to such businesses or assets, and
may agree to indemnify buyers with respect to tax
and environmental liabilities, breaches of
representations and warranties, and other matters.
Where liabilities for such matters are determined to
be probable and subject to reasonable estimation,
accrued liabilities are recorded at the time of sale as
a cost of the transaction.
ENVIRONMENTAL PROCEEDINGS
International Paper has been named as a potentially
responsible party in environmental remediation
actions under various federal and state laws, includ-
ing the Comprehensive Environmental Response,
Compensation and Liability Act (CERCLA). Many of
these proceedings involve the cleanup of hazardous
substances at large commercial landfills that
received waste from many different sources. While
joint and several liability is authorized under CERCLA
and equivalent state laws, as a practical matter,
liability for CERCLA cleanups is typically allocated
among the many potential responsible parties.
Remedial costs are recorded in the consolidated
financial statements when they become probable
and reasonably estimable. International Paper has
estimated the probable liability associated with these
matters to be approximately $92 million in the
aggregate at December 31, 2012.
One of the matters referenced above is a closed
wood treating facility located in Cass Lake, Minneso-
ta. During 2009, in connection with an environmental
site remediation action under CERCLA, International
Paper submitted to the EPA a site remediation feasi-
bility study. In June 2011, the EPA selected and
published a proposed soil remedy at the site
with an estimated cost of $46 million. The overall
remediation reserve for the site is currently $48 mil-
lion to address this selection of an alternative for the
soil remediation component of the overall site
remedy. In October 2011, the EPA released a public
statement indicating that the final soil remedy deci-
sion would be delayed. In the unlikely event that the
EPA changes its proposed soil remedy and approves
instead a more expensive clean-up alternative, the
remediation costs could be material, and sig-
nificantly higher than amounts currently recorded. In
October 2012, the Natural Resource Trustees for this
site provided notice to International Paper and other
potentially responsible parties of their intent to per-
form a Natural Resource Damage Assessment. It is
premature to predict the outcome of the assessment
or to estimate a loss or range of loss, if any, which
may be incurred.
In addition to the above matters, other remediation
costs typically associated with the cleanup of
hazardous substances at the Company’s current,
closed or formerly-owned facilities, and recorded as
liabilities in the balance sheet, totaled approximately
$46 million at December 31, 2012. Other than as
described above, completion of required remedial
actions is not expected to have a material effect on
our consolidated financial statements.
The Company is a potentially responsible party with
respect to the Allied Paper, Inc./Portage Creek/
Kalamazoo River Superfund Site (Kalamazoo River
Superfund Site) in Michigan. The EPA asserts that
the site is contaminated primarily by PCBs as a result
of discharges from various paper mills located along
the river, including a paper mill formerly owned by
St. Regis. The Company is a successor in interest to
St. Regis. International Paper has not received any
orders from the EPA with respect to the site and is in
the process of collecting information from the EPA
and other parties relative to the Kalamazoo River
Superfund Site to evaluate the extent of its liability, if
any, with respect to the site. Accordingly, it is pre-
mature to estimate a loss or range of loss with
respect to this site.
Also in connection with the Kalamazoo River
Superfund Site, the Company was named as a
defendant by Georgia-Pacific Consumer Products
LP, Fort James Corporation and Georgia Pacific
LLC in a contribution and cost recovery action for
alleged pollution at the Kalamazoo River Super-
fund Site. The suit seeks contribution under
CERCLA for $79 million in costs purportedly
expended by plaintiffs as of the filing of the com-
plaint, and for future remediation costs. The suit
alleges that a mill, during the time it was allegedly
owned and operated by St. Regis, discharged PCB
contaminated solids and paper residuals resulting
from paper de-inking and recycling. Also named as
defendants in the suit are NCR Corporation and
Weyerhaeuser Company. In mid-2011, the suit was
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