| Contingencies and Commitments | O. 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, 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
Liabilities incurred 13
Cash payments ( 30 )
Reversals of previously recorded liabilities ( 11 )
Balance at September 30, 2024 $ 240 At September 30, 2024 and December 31, 2023 , the current portion of the environmental remediation reserve balance was $ 58 and $ 66 , respectively. During the third quarter and nine-month period of 2024, the Company incurred liabilities of $ 12 and $ 13 , respectively, primarily related to ongoing remediation work at both operating and previously closed sites. The Company incurred liabilities of $ 8 (both periods), which were recorded in Cost of goods sold and $ 4 and $ 5 in the third quarter and nine-month period of 2024, respectively, which were recorded in Restructuring and other charges, net on the accompanying Statement of Consolidated Operations. Payments related to remediation expenses applied against the reserve were $ 14 and $ 30 in the third quarter and nine-month period of 2024, respectively. These amounts include mandated expenditures as well as those not required by any regulatory authority or third party. Further, the Company recorded a reversal of a reserve of $ 11 (both periods) due to the determination that certain site remediation at the previously closed Point Comfort refinery is no longer required, which was recorded in Restructuring and other charges, net on the Statement of Consolidated Operations. During the third quarter and nine-month period of 2023 , the Company incurred liabilities of $ 20 and $ 38 , respectively. The Company incurred liabilities of $ 14 (nine-month period only) primarily related to the closure of the previously curtailed Intalco aluminum smelter and $ 13 (both periods) for 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. The Company incurred liabilities of $ 7 (both periods) and $ 4 (nine-month period only) for ongoing remediation work at various other sites, which were recorded in Cost of goods sold on the accompanying Statement of Consolidated Operations. Payments related to remediation expenses applied against the reserve were $ 19 and $ 42 in the third quarter and nine-month period of 2023 , respectively. These amounts include mandated expenditures as well as those not required by any regulatory authority or third party. Further, the Company recorded a reversal of a reserve of $ 1 during the nine-month period of 2023 due to the determination that certain remaining site remediation is no longer required. The estimated timing of cash outflows from the environmental remediation reserve at September 30, 2024 was as follows:
2024 (excluding the nine months ended September 30, 2024) $ 30
2025 – 2029 110
Thereafter 100
Total $ 240 Reserve balances at September 30, 2024 and December 31, 2023 , associated with significant sites with active remediation underway or for future remediation were $ 182 and $ 211 , 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 2029. 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. While it was determined that certain site remediation was no longer required in the third quarter of 2024, the final remediation plan is currently being developed and 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 be completed no later than May 2028. 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, including 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 by the end of 2026. 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. In May 2022, the Company received a Notice of Violation (NOV) from the U.S. Environmental Protection Agency (the EPA). The NOV alleges violations under the Clean Air Act at the Company’s Intalco smelter from when the smelter was operational. The EPA referred the matter to the U.S. Department of Justice, Environment and Natural Resources Division (the DOJ) in May 2022. The DOJ and the Company agreed to a stipulated settlement, which was filed with the United States District Court for the Western District of Washington at Seattle on July 18, 2024, requiring the Company to pay a civil fine of $ 5 . An accrual for this matter was included within Other current liabilities on the Consolidated Balance Sheet as of September 30, 2024. On October 15, 2024, the Court approved the stipulated settlement of $ 5 , and payment has been remitted by the Company. 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 rem ediation projects at 32 other sites that are planned or underway. These activities will be completed at various times in the next three to five years, after which ongoing monitoring and other activities may be required. At September 30, 2024 and December 31, 2023 , the reserve balance associated with these activities was $ 58 and $ 57 , respectively. Tax Brazil (AWAB) —Under Brazilian law, taxpayers who generate non-cumulative federal value added tax credits related to exempt exports may either request a refund in cash (monetization) or offset them against other federal taxes owed. In 2012, AWAB requested monetization of $ 136 (R$ 273 ) from the Brazilian Federal Revenue Office (RFB) and received $ 68 (R$ 136 ) that year. In March 2013, AWAB was notified by the RFB that approxi mately $ 110 (R$ 220 ) of value added tax credits previously claimed were being disallowed and a penalty of 50 % was assessed. $ 41 (R$ 82 ) of the cash received in 2012 related to the disallowed amount. 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$ 66 ). In its decision, the RFB allowed credits of $ 10 (R$ 53 ) that were similar to those previously disallowed for 2009 through 2011. 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. 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 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 $ 56 (R$ 305 ). 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 $ 147 (A$ 214 ). The Notices also included claims for compounded interest on the tax amount totaling approximately $ 488 (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 $ 88 (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. 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. AofA filed its reply materials on March 15, 2024. The substantive hearing was completed in June 2024, and AofA is awaiting the AAT’s decision. 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; at September 30, 2024 the related balance was $ 74 (A$ 107 ). Interest on the unpaid tax continues to accrue during the dispute, which, along with the initial interest assessment, is deductible against taxable income by AofA. Beginning in the third quarter of 2020, AofA applied this deduction and total reductions in cash tax payments of $ 222 (A$ 322 ) and $ 199 (A$ 293 ) are reflected within Other noncurrent liabilities and deferred credits as a noncurrent accrued tax liability at September 30, 2024 and December 31, 2023, respectively. If AofA is ultimately successful, the interest would be taxable as income in the year the dispute is resolved, and accrued cash taxes would be paid to the ATO ($ 222 (A$ 322 ) accrued as of September 30, 2024). 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. Legal Proceedings St. Croix Proceedings —Prior to 2012, Alcoa Inc., the Company’s former parent company, was served with two multi-plaintiff actions alleging personal injury or property damage from Hurricane Georges or winds blowing material from the Company’s former St. Croix alumina facility. These actions were subsequently consolidated into the Red Dust Claims docket in 2017. In March 2022, the Superior Court of the Virgin Islands issued an amended case management order dividing complaints filed in the Red Dust docket into groups of 50 complaints, designated Groups A through I. The parties selected 10 complaints from Group A to proceed to trial as the Group A lead cases. In May 2024, the Court issued an amended case management order with regard to the Group A lead cases scheduling trials to begin in November 2024. The Court further ordered the parties to participate in mediation on or before August 31, 2024. After completing its case analysis in the second quarter of 2024, the Company recorded a reserve for its estimate of probable loss and a related receivable for insurance proceeds with no material impact to the results of operations. Alcoa participated in the court-ordered mediation in August 2024 and reached a settlement agreement to resolve the matter in its entirety, which resulted in no further impact to Alcoa’s results of operations. The settlement agreement is conditioned upon obtaining signed release agreements or dismissals from every plaintiff, which is expected to be completed in early 2025. 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, governance, 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. Contingencies In December 2023, AofA committed to provide a bank guarantee in connection with the approval of the Company’s five-year mine plans that were referred to the Western Australia Environmental Protection Agency (WA EPA), which demonstrates Alcoa’s confidence that its operations will not impair drinking water supplies. On September 30, 2024 and October 1, 2024, AofA delivered bank guarantees totaling $ 69 (A$ 100 ). After March 27, 2025, Alcoa may, with the Western Australian government’s consent, replace the bank guarantee with a parent company guarantee or a surety bond. The requirement to provide financial assurance will expire upon the completion of the WA EPA’s assessment of the Company’s five-year mine plans. |
