3M 2012 Annual Report Download - page 113
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drum conditioning facilities in New Jersey. Currently, the State of New Jersey is actively negotiating with third-party
defendants, including 3M, to settle pending claims related to the state’s response costs. The potential scope of a state
settlement remains uncertain and would not include release from potential federal claims, yet to be asserted, related to
the final cleanup costs. Total costs for the remedy currently proposed by EPA could easily exceed $1 billion. While the
Company does not yet have a basis for estimating its potential exposure in this case, or in the yet to be asserted EPA
claim, the Company currently believes its allocable share of the possible loss, if any, is likely to be a fraction of one
percent of the total costs because of the Company’s limited potential involvement at this site.
For environmental litigation matters described in this section for which a liability, if any, has been recorded, the Company
believes the amount recorded, as well as the possible loss or range of loss in excess of the established accrual is not
material to the Company’s consolidated results of operations or financial condition. For those matters for which a liability
has not been recorded, the Company believes such liability is not probable and estimable and the Company is not able to
estimate a possible loss or range of loss at this time, with the exception of the Passaic River litigation, where the
Company’s potential exposure, if any, is likely to be a fraction of one percent of the total costs.
Environmental Liabilities and Insurance Receivables
As of December 31, 2012, the Company had recorded liabilities of $29 million for estimated “environmental remediation”
costs based upon an evaluation of currently available facts with respect to each individual site and also recorded related
insurance receivables of $11 million. The Company records liabilities for remediation costs on an undiscounted basis when
they are probable and reasonably estimable, generally no later than the completion of feasibility studies or the Company’s
commitment to a plan of action. Liabilities for estimated costs of environmental remediation, depending on the site, are based
primarily upon internal or third-party environmental studies, and estimates as to the number, participation level and financial
viability of any other potentially responsible parties, the extent of the contamination and the nature of required remedial
actions. The Company adjusts recorded liabilities as further information develops or circumstances change. The Company
expects that it will pay the amounts recorded over the periods of remediation for the applicable sites, currently ranging up to
20 years.
As of December 31, 2012, the Company had recorded liabilities of $57 million for “other environmental liabilities” based upon
an evaluation of currently available facts to implement the Settlement Agreement and Consent Order with the MPCA, the
remedial action agreement with ADEM, and to address trace amounts of perfluorinated compounds in drinking water
sources in the City of Oakdale, Minnesota, as well as presence in the soil and groundwater at the Company’s manufacturing
facilities in Decatur, Alabama, and Cottage Grove, Minnesota, and at two former disposal sites in Washington County,
Minnesota (Oakdale and Woodbury). The Company expects that most of the spending will occur over the next four years.
In 2012, the Company recorded expected insurance recoveries of $15 million related to “other environmental liabilities.”
It is difficult to estimate the cost of environmental compliance and remediation given the uncertainties regarding the
interpretation and enforcement of applicable environmental laws and regulations, the extent of environmental contamination
and the existence of alternative cleanup methods. Developments may occur that could affect the Company’s current
assessment, including, but not limited to: (i) changes in the information available regarding the environmental impact of the
Company’s operations and products; (ii) changes in environmental regulations, changes in permissible levels of specific
compounds in drinking water sources, or changes in enforcement theories and policies, including efforts to recover natural
resource damages; (iii) new and evolving analytical and remediation techniques; (iv) success in allocating liability to other
potentially responsible parties; and (v) the financial viability of other potentially responsible parties and third-party
indemnitors. For sites included in both “environmental remediation liabilities” and “other environmental liabilities,” at which
remediation activity is largely complete and remaining activity relates primarily to operation and maintenance of the remedy,
including required post-remediation monitoring, the Company believes the exposure to loss in excess of the amount accrued
would not be material to the Company’s consolidated results of operations or financial condition. However, for locations at
which remediation activity is largely ongoing, the Company cannot estimate a possible loss or range of loss in excess of the
associated established accruals for the reasons described above.
Compliance Matters
In November 2009, the Company contacted the Department of Justice (DOJ) and Securities and Exchange Commission
(SEC) to voluntarily disclose that the Company was conducting an internal investigation as a result of reports it received
about its subsidiary in Turkey, alleging bid rigging and bribery and other inappropriate conduct in connection with the supply
of certain reflective and other materials and related services to Turkish government entities. The Company also contacted
certain affected government agencies in Turkey. In September 2012, the Turkish Competition Authority issued its decision
finding that there was insufficient evidence obtained in the investigation to find that 3M Turkey or the other companies
investigated violated the Turkish competition law.