| Contingencies and Commitments | S. Contingencies and Commitments Contingencies Environmental Matters Alcoa Corporation participates in environmental assessments and cleanups at several locations. These include currently or previously owned or operated facilities and adjoining properties, and waste sites, including Superfund (Comprehensive Environmental Response, Compensation and Liability Act (CERCLA)) sites. Alcoa Corporation’s environmental remediation reserve balance reflects the most probable costs to remediate identified environmental conditions for which costs can be reasonably estimated. The following table details the changes in the carrying value of recorded environmental remediation reserves:
Balance at December 31, 2020 $ 322
Liabilities incurred 21
Cash payments ( 23 )
Reversals of previously recorded liabilities ( 17 )
Foreign currency translation and other 6
Balance at December 31, 2021 309
Liabilities incurred 32
Cash payments ( 26 )
Reversals of previously recorded liabilities ( 30 )
Foreign currency translation and other ( 1 )
Balance at December 31, 2022 284
Liabilities incurred 39
Cash payments ( 55 )
Reversals of previously recorded liabilities ( 1 )
Foreign currency translation and other 1
Balance at December 31, 2023 $ 268 At December 31, 2023 and 2022 , the current portion of the remediation reserve balance was $ 66 and $ 58 , respectively. In 2023, the Company incurred liabilities of $ 39 primarily related to $ 14 for the closure of the previously curtailed Intalco smelter and $ 13 for an increase in estimated costs associated with ongoing remediation work at the previously closed Longview (Washington) site which were recorded in Restructuring and other charges, net on the Statement of Consolidated Operations, and $ 12 for an increase in estimated costs associated with ongoing remediation work at various other sites which was recorded in Cost of goods sold on the accompanying Statement of Consolidated Operations. Payments related to remediation expenses applied against the reserve were $ 55 in 2023. These amounts include mandated expenditures as well as those not required by any regulatory authority or third party. Further, the Company reversed reserves of $ 1 during 2023 due to the determination that certain remaining site remediation is no longer required. In 2022, the Company incurred liabilities of $ 32 primarily related to $ 14 for the closure of the previously curtailed magnesium smelter in Addy (Washington), $ 6 for estimates for environmental remediation at the Point Henry site, $ 4 for a new phase of work at the former East St. Louis site and $ 9 for environmental activities at various sites. These charges are recorded in Cost of goods sold and Restructuring and other charges, net (see Note D) on the accompanying Statement of Consolidated Operations. Payments related to remediation expenses applied against the reserve were $ 26 in 2022. These amounts include mandated expenditures as well as those not required by any regulatory authority or third party. Further, the Company reversed reserves of $ 30 during 2022, primarily related to changes in estimates for site remediation at Massena East of $ 18 and Suralco of $ 5 , and completion of remediation at a previously closed site in Brazil of $ 6 . In 2021, the Company incurred liabilities of $ 21 primarily related to remediation design considerations at the Longview site in Washington, closure of the Wenatchee aluminum smelter in Washington, environmental activities at the Point Comfort site in Texas, closure of the anode plant at the Lake Charles site in Louisiana, and wetlands mitigation at the Longview site in Washington, as well as other increases for ongoing monitoring and maintenance at various sites. These charges are primarily recorded in Cost of goods sold and Restructuring and other charges, net on the accompanying Statement of Consolidated Operations. Payments in 2021 include mandated expenditures as well as those not required by any regulatory authority or third-party. Further, the Company reversed reserves of $ 17 related to: • $ 7 due to the determination that previously estimated site remediation is not required at the previously closed Tennessee site; • $ 5 due to lower costs for waste treatment at a previously closed Suriname site; and, • $ 5 due to lower costs for site remediation related to a previously closed site in Brazil. The estimated timing of cash outflows from the environmental remediation reserve at December 31, 2023 was as follows:
2024 $ 66
2025 – 2028 112
Thereafter 90
Total $ 268 Reserve balances at December 31, 2023 and 2022 , associated with significant sites with active remediation underway or for future remediation were $ 211 and $ 234 , respectively. In management’s judgment, the Company’s reserves are sufficient to satisfy the provisions of the respective action plans. Upon changes in facts or circumstances, a change to the reserve may be required. The Company’s significant sites include: Suriname —The reserve associated with the 2017 closure of the Suralco refinery and bauxite mine is for treatment and disposal of refinery waste and soil remediation. The work began in 2017 and is expected to be completed at the end of 2025. Hurricane Creek, Arkansas —The reserve associated with the 1990 closure of two mining areas and refineries near Hurricane Creek, Arkansas is for ongoing monitoring and maintenance for water quality surrounding the mine areas and residue disposal areas. Massena, New York —The reserve associated with the 2015 closure of the Massena East smelter by the Company’s subsidiary, Reynolds Metals Company, is for subsurface soil remediation to be performed after demolition of the structures. Remediation work commenced in 2021 and will take four to eight years to complete. Point Comfort, Texas —The reserve associated with the 2019 closure of the Point Comfort alumina refinery is for disposal of industrial wastes contained at the site, subsurface remediation, and post-closure monitoring and maintenance. The final remediation plan is currently being developed, which may result in a change to the existing reserve. Sherwin, Texas —In connection with the 2018 settlement of a dispute related to the previously-owned Sherwin alumina refinery, the Company’s subsidiary, Copano Enterprises LLC, accepted responsibility for the final closure of four bauxite residue waste disposal areas (known as the Copano facility). Work commenced on the first residue disposal area in 2018 and is expected to take up to an additional four years to complete, depending on the nature of its potential re-use. Other than ongoing maintenance and repair activities, work on the next three areas has not commenced but is expected to be completed by 2048, depending on its potential re-use. Longview, Washington — In connection with a 2018 Consent Decree and Cleanup Action Plan with the State of Washington Department of Ecology, the Company’s subsidiary, Northwest Alloys as landowner, accepted certain responsibilities for future remediation of contaminated soil and sediments at the site located near Longview, Washington. In December 2020, the lessee of the land, who was a partner in the remediation of the site, filed for bankruptcy and exited the site in January 2021. The full site remediation project design, long-term and post-closure monitoring and maintenance at the site was approved in March 2023. In the third quarter of 2023, changes in scope and cost increases for remediation resulted in an increase to the reserve. The project is planned to be completed in the next two years. Addy, Washington —The reserve associated with the 2022 closure of the Addy magnesium smelter facility is for site-wide remediation and investigation and post-closure monitoring and maintenance. Remediation work is not expected to begin until 2026 and will take three to five years to complete. The final remediation plan is currently being developed, which may result in a change to the existing reserve. Ferndale, Washington —The reserve associated with the 2023 closure of the Intalco aluminum smelter in Ferndale, Washington is for below grade site remediation and five years of post-closure maintenance and monitoring. The final remediation plan is under review. Other Sites —The Company is in the process of decommissioning various other plants and remediating sites in several countries for potential redevelopment or to return the land to a natural state. In aggregate, there are remediation projects at 32 other sites that are planned or underway. These activities will be completed at various times in the future with the latest expected to be in 2026, after which ongoing monitoring and other activities may be required. At December 31, 2023 and 2022 , the reserve balance associated with these activities was $ 57 and $ 50 , respectively. Tax Brazil (AWAB) — In March 2013, AWAB was notified by the Brazilian Federal Revenue Office (RFB) that approximately $ 110 (R$ 220 ) of value added tax credits previously claimed were being disallowed and a penalty of 50 % was assessed. Of this amount, AWAB received $ 41 (R$ 82 ) in cash in May 2012. The value added tax credits were claimed by AWAB for both fixed assets and export sales related to the Juruti bauxite mine and Alumar refinery expansion for tax years 2009 through 2011. The RFB has disallowed credits they allege belong to the consortium in which AWAB owns an interest and should not have been claimed by AWAB. Credits have also been disallowed as a result of challenges to apportionment methods used, questions about the use of the credits, and an alleged lack of documented proof. AWAB presented defense of its claim to the RFB on April 8, 2013. In February 2022, the RFB notified AWAB that it had inspected the value added tax credits claimed for 2012 and disallowed $ 4 (R$ 19 ). In its decision, the RFB allowed credits of $ 14 (R$ 65 ) that were similar to those previously disallowed for 2009 through 2011. In July 2022, the RFB notified AWAB that it had inspected the value added tax credits claimed for 2013 and disallowed $ 13 (R$ 70 ). In its decision, the RFB allowed credits of $ 16 (R$ 84 ) that were similar to those previously disallowed for 2009 through 2011. The decisions on the 2012 and 2013 credits provide positive evidence to support management’s opinion that there is no basis for these credits to be disallowed. AWAB received the 2012 allowed credits with interest of $ 9 (R$ 44 ) in March 2022 and the 2013 allowed credits with interest of $ 6 (R$ 31 ) in August 2022. AWAB will continue to dispute the credits that were disallowed for 2012 and 2013. If AWAB is successful in this administrative process, the RFB would have no further recourse. If unsuccessful in this process, AWAB has the option to litigate at a judicial level. Separately from AWAB’s administrative appeal, in June 2015, a new tax law was enacted repealing the provisions in the tax code that were the basis for the RFB assessing a 50 % penalty in this matter. As such, the estimated range of reasonably possible loss for these matters is $ 0 to $ 49 (R$ 239 ). It is management’s opinion that the allegations have no basis; however, at this time, the Company is unable to reasonably predict an outcome for this matter. Australia (AofA) — In December 2019, AofA received a statement of audit position (SOAP) from the Australian Taxation Office (ATO) related to the pricing of certain historic third-party alumina sales. The SOAP proposed adjustments that would result in additional income tax payable by AofA. During 2020, the SOAP was the subject of an independent review process within the ATO. At the conclusion of this process, the ATO determined to continue with the proposed adjustments and issued Notices of Assessment (the Notices) that were received by AofA on July 7, 2020. The Notices asserted claims for income tax payable by AofA of approximately $ 145 (A$ 214 ). The Notices also included claims for compounded interest on the tax amount totaling approximately $ 481 (A$ 707 ). On September 17, 2020, the ATO issued a position paper with its preliminary view on the imposition of administrative penalties related to the tax assessment issued to AofA. This paper proposed penalties of approximately $ 87 (A$ 128 ). AofA disagreed with the Notices and with the ATO’s proposed position on penalties. During 2020, AofA lodged formal objections to the Notices, provided a submission on the ATO’s imposition of interest and submitted a response to the ATO’s position paper on penalties. After the ATO completes its review of AofA’s response to the penalties position paper, the ATO could issue a penalty assessment. To date, AofA has not received a response to its submission on the ATO’s imposition of interest or its response to the ATO’s position paper on penalties. Through February 1, 2022, AofA did not receive a response from the ATO on AofA’s formal objections to the Notices and, on that date, AofA submitted statutory notices to the ATO requiring the ATO to make decisions on AofA’s objections within a 60-day period. On April 1, 2022, the ATO issued its decision disallowing the Company’s objections related to the income tax assessment, while the position on penalties and interest remains outstanding. On April 29, 2022, AofA filed proceedings in the Australian Administrative Appeals Tribunal (AAT) against the ATO to contest the Notices, a process which could last several years. The AAT held the first directions hearing on July 25, 2022 ordering AofA to file its evidence and related materials by November 4, 2022, ATO to file its materials by April 14, 2023 and AofA to file reply materials by May 26, 2023. AofA filed its evidence and related materials on November 4, 2022. The ATO did not file its materials by April 14, 2023. At a directions hearing on May 17, 2023, the ATO was granted an extension to file its materials by August 18, 2023. At a directions hearing on September 26, 2023, the ATO was granted an additional extension to file its materials by November 3, 2023. The ATO filed its materials on November 13, 2023. At a directions hearing on November 22, 2023, AofA was ordered to file any reply materials by March 15, 2024. The substantive hearing is scheduled for June 2024. The Company maintains that the sales subject to the ATO’s review, which were ultimately sold to Aluminium Bahrain B.S.C., were the result of arm’s length transactions by AofA over two decades and were made at arm’s length prices consistent with the prices paid by other third-party alumina customers. In accordance with the ATO’s dispute resolution practices, AofA paid 50 % of the assessed income tax amount exclusive of interest and any penalties, or approximately $ 74 (A$ 107 ), during the third quarter 2020, and the ATO is not expected to seek further payment prior to final resolution of the matter. If AofA is ultimately successful, any amounts paid to the ATO as part of the 50 % payment would be refunded. AofA funded the payment with cash on hand and recorded the payment within Other noncurrent assets as a noncurrent prepaid tax asset; the re lated December 31, 2023 balance is $ 73 (A$ 107 ). Further interest on the unpaid tax will continue to accrue during the dispute. The initial interest assessment and the additional interest accrued are deductible against taxable income by AofA but would be taxable as income in the year the dispute is resolved if AofA is ultimately successful. AofA applied this deduction beginning in the third quarter of 2020, reducing cash tax payments. At December 31, 2023 and December 31, 2022, total reductions in cash tax payments were $ 199 (A$ 293 ) and $ 174 (A$ 260 ), respectively, and are reflected within Other noncurrent liabilities and deferred credits as a noncurrent accrued tax liability. The Company continues to believe it is more likely than not that AofA’s tax position will be sustained and therefore is not recognizing any tax expense in relation to this matter. However, because the ultimate resolution of this matter is uncertain at this time, the Company cannot predict the potential loss or range of loss associated with the outcome, which may materially affect its results of operations and financial condition. References to any assessed U.S. dollar amounts presented in connection with this matter have been converted into U.S. dollars from Australian dollars based on the exchange rate in the respective period. AofA is part of the Company’s joint venture with Alumina Limited, an Australian public company listed on the Australian Securities Exchange. The Company and Alumina Limited own 60 % and 40 %, respectively, of the joint venture entities, including AofA. Other Spain — In July 2019, the Company completed the divestiture of the Avilés and La Coruña (Spain) aluminum facilities to PARTER Capital Group AG (PARTER) in a sale process endorsed by the Spanish government and supported by the workers’ representatives following a collective dismissal process. In connection with the divestiture, Alcoa committed to make financial contributions to the divested entities of up to $ 95 ; a total of $ 78 was paid through December 31, 2021. In early 2020, PARTER sold a majority stake in the facilities to an unrelated party. Alcoa had no knowledge of the subsequent transaction prior to its announcement and on August 28, 2020, Alcoa filed a lawsuit with the Court of First Instance in Madrid, Spain asserting that the sale was in breach of the sale agreement between Alcoa and PARTER. In June 2023, the Court of First Instance in Madrid issued a declaratory judgment in Alcoa’s favor ruling that the transaction between PARTER and the unrelated party was a breach of the sale agreement. There was no financial compensation to the Company as a result of this ruling. Related to this subsequent sale transaction, certain proceedings and investigations were initiated by or at the request of the employees of the facilities against their current employers, the new owners of the current employers, and Alcoa, alleging that certain agreements from the 2019 collective dismissal process remain in force and that, under such agreements, Alcoa remains liable for certain related employment benefits. During 2022, Alcoa reached a Global Settlement Agreement (GSA) with the workers of the divested Avilés and La Coruña facilities to settle various legal disputes related to the 2019 divestiture, and Alcoa recorded a charge of $ 79 in Restructuring and other charges, net to reflect its estimated liability for the GSA. In July 2023, the Supreme Court of Spain ratified the GSA. Upon completion of the remaining administrative and judicial approvals, the Company made cash payments of $ 76 to the former employees of the facilities in 2023 in accordance with the GSA. The remaining payments will be made in the early 2024 . General In addition to the matters discussed above, various other lawsuits, claims, and proceedings have been or may be instituted or asserted against Alcoa Corporation, including those pertaining to environmental, safety and health, commercial, tax, product liability, intellectual property infringement, employment, and employee and retiree benefit matters, and other actions and claims arising out of the normal course of business. While the amounts claimed in these other matters may be substantial, the ultimate liability is not readily determinable because of the considerable uncertainties that exist. Accordingly, it is possible that the Company’s liquidity or results of operations in a particular period could be materially affected by one or more of these other matters. However, based on facts currently available, management believes that the disposition of these other matters that are pending or asserted will not have a material adverse effect, individually or in the aggregate, on the financial position of the Company. Commitments Purchase Obligations. Alcoa Corporation is party to unconditional purchase obligations for energy that expire between 2040 and 2041 . Commitments related to these contracts total $ 56 in 2024, $ 59 in 2025, $ 61 in 2026, $ 63 in 2027, $ 65 in 2028, and $ 770 thereafter. Expenditures under these contracts totaled $ 53 in 2023 , $ 58 in 2022 , and $ 86 in 2021 . Additionally, the Company has entered into other purchase commitments for energy, raw materials, and other goods and services, which total $ 3,896 in 2024, $ 1,998 in 2025, $ 1,566 in 2026, $ 1,448 in 2027, $ 1,407 in 2028, and $ 8,757 thereafter. AofA has a gas supply agreement to power its three alumina refineries in Western Australia which began in July 2020 for a 12-year period. The terms of this agreement required AofA to make a prepayment of $ 500 prior to 2017. At December 31, 2023, prepayments of $ 37 and $ 283 were included in Prepaid expenses and other current assets and Other noncurrent assets (see Note U), respectively, on the accompanying Consolidated Balance Sheet. At December 31, 2022, prepayments of $ 37 and $ 311 were included in Prepaid expenses and other current assets and Other noncurrent assets (see Note U), respectively, on the accompanying Consolidated Balance Sheet. Guarantees of Third Parties. As of December 31, 2023 and 2022 , the Company had no outstanding potential future payments for guarantees issued on behalf of a third party. Bank Guarantees and Letters of Credit. Alcoa Corporation and its subsidiaries have outstanding bank guarantees and letters of credit related to, among others, energy contracts, environmental obligations, legal and tax matters, leasing obligations, workers compensation, and customs duties. The total amount committed under these instruments, which automatically renew or expire at various dates between 2024 and 2025 , was $ 294 (includes $ 86 issued under a standby letter of credit agreement —see below) at December 31, 2023 . Additionally, ParentCo has outstanding bank guarantees and letters of credit related to the Company of $ 13 at December 31, 2023 . In the event ParentCo would be required to perform under any of these instruments, ParentCo would be indemnified by Alcoa Corporation in accordance with the Separation and Distribution Agreement. Likewise, the Company has outstanding bank guarantees and letters of credit related to ParentCo of $ 8 at December 31, 2023. In the event Alcoa Corporation would be required to perform under any of these instruments, the Company would be indemnified by ParentCo in accordance with the Separation and Distribution Agreement. In December 2023, AofA committed to provide a bank guarantee for approximately $ 68 (A$ 100 ) which demonstrates Alcoa’s confidence that its operations will not impair drinking water supplies. In August 2017, Alcoa Corporation entered into a standby letter of credit agreement, which expires on June 27, 2024 (amended in August 2018, May 2019, May 2021, June 2022, and January 2024), with three financial institutions. The agreement provides for a $ 200 facility used by the Company for matters in the ordinary course of business. Alcoa Corporation’s obligations under this facility are secured in the same manner as obligations under the Company’s revolving credit facility. Additionally, this facility contains similar representations and warranties and affirmative, negative, and financial covenants as the Company’s Revolving Credit Facility (see Note M). As of December 31, 2023 , letters of credit aggregating $ 86 were issued under this facility. Surety Bonds. Alcoa Corporation has outstanding surety bonds primarily related to tax matters, contract performance, workers compensation, environmental-related matters, and customs duties. The total amount committed under these bonds, which automatically renew or expire at various dates between 2024 and 2028 , was $ 190 at December 31, 2023 . Additionally, ParentCo has outstanding surety bonds related to the Company of $ 8 at December 31, 2023 . In the event ParentCo would be required to perform under any of these instruments, ParentCo would be indemnified by Alcoa Corporation in accordance with the Separation and Distribution Agreement. Likewise, the Company has outstanding surety bonds related to ParentCo of $ 5 at December 31, 2023 . In the event Alcoa Corporation would be required to perform under any of these instruments, the Company would be indemnified by ParentCo in accordance with the Separation and Distribution Agreement. |
