International Paper 2015 Annual Report Download - page 79

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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. Remediation 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 $93
million in the aggregate as of December 31, 2015.
Cass Lake: One of the matters included above arises
out of a closed wood treating facility located in Cass
Lake, Minnesota. During 2009, in connection with an
environmental site remediation action under CERCLA,
International Paper submitted to the United States
Environmental Protection Agency (EPA) a remediation
feasibility 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 $47 million to address
the 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 decision 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 significantly 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 perform 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.
Other Remediation Costs
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 as of December 31, 2015. Other than as
described above, completion of required remedial
actions is not expected to have a material effect on our
consolidated financial statements.
LEGAL PROCEEDINGS
Environmental
Kalamazoo River: The Company is a potentially
responsible party (PRP) with respect to the Allied Paper,
Inc./Portage Creek/Kalamazoo River Superfund Site in
Michigan. The EPA asserts that the site is contaminated
by polychlorinated biphenyls (PCBs) primarily as a
result of discharges from various paper mills located
along the Kalamazoo River, including a paper mill
formerly owned by St. Regis Paper Company (St.
Regis). The Company is a successor in interest to St.
Regis. Although the Company has not received any
orders from the EPA, in December 2014, the EPA sent
the Company a letter demanding payment of $19 million
to reimburse the EPA for costs associated with a Time
Critical Removal Action of PCB contaminated
sediments from a portion of the site. The Company’s
CERCLA liability has not been finally determined with
respect to this or any other portion of the site and we
have declined to reimburse the EPA at this time. As
noted below, the Company is involved in allocation/
apportionment litigation with regard to the site.
Accordingly, it is premature to predict the outcome or
estimate our maximum reasonably possible loss with
respect to this site. However, we do not believe that any
material loss is probable.
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 site. The suit
seeks contribution under CERCLA for costs purportedly
expended by plaintiffs ($79 million as of the filing of the
complaint) 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. NCR Corporation and
Weyerhaeuser Company are also named as
defendants in the suit. In mid-2011, the suit was
transferred from the District Court for the Eastern
District of Wisconsin to the District Court for the Western
District of Michigan. The trial of the initial liability phase
took place in February 2013. Weyerhaeuser conceded
prior to trial that it was a liable party with respect to the
site. In September 2013, an opinion and order was
issued in the suit. The order concluded that the
Company (as the successor to St. Regis) was not an
“operator,” but was an “owner,” of the mill at issue during
a portion of the relevant period and is therefore liable
under CERCLA. The order also determined that NCR
is a liable party as an "arranger for disposal" of PCBs
in waste paper that was de-inked and recycled by mills
along the Kalamazoo River. The order did not address
the Company's responsibility, if any, for past or future
costs, which is the subject of a separate trial, in which
trial testimony was given between September and
December 2015 and post-trial briefing is currently
scheduled to be completed in March 2016. The Court
has not yet ruled to what extent it will decide
responsibility for future costs. We are unable to predict
the outcome or estimate our maximum reasonably
possible loss. However, we do not believe that any
material loss is probable.
Harris County: International Paper and McGinnis
Industrial Maintenance Corporation, a subsidiary of