| Environmental Obligations | Environmental ObligationsWe are subject to various federal, state, local and foreign environmental laws and regulations that govern emissions of air pollutants, discharges of water pollutants, and the manufacture, storage, handling and disposal of hazardous substances, hazardous wastes and other toxic materials and remediation of contaminated sites. We are also subject to liabilities arising under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”) and similar state laws that impose responsibility on persons who arranged for the disposal of hazardous substances, and on current and previous owners and operators of a facility for the clean-up of hazardous substances released from the facility into the environment. We are also subject to liabilities under the Resource Conservation and Recovery Act (“RCRA”) and analogous state laws that require owners and operators of facilities that have treated, stored or disposed of hazardous waste pursuant to a RCRA permit to follow certain waste management practices and to clean up releases of hazardous substances into the environment associated with past or present practices. In addition, when deemed appropriate, we enter certain sites with potential liability into voluntary remediation compliance programs, which are also subject to guidelines that require owners and operators, current and previous, to clean up releases of hazardous substances into the environment associated with past or present practices. Environmental liabilities consist of obligations relating to waste handling and the remediation and/or study of sites at which we are alleged to have released or disposed of hazardous substances. These sites include current operations, previously operated sites, and sites associated with discontinued operations. We have provided reserves for potential environmental obligations that we consider probable and for which a reasonable estimate of the obligation can be made. Accordingly, total reserves of $595.8 million and $529.4 million, respectively, before recoveries, existed at December 31, 2019 and 2018. The estimated reasonably possible environmental loss contingencies, net of expected recoveries, exceed amounts accrued by approximately $150 million at December 31, 2019. This reasonably possible estimate is based upon information available as of the date of the filing but the actual future losses may be higher given the uncertainties regarding the status of laws, regulations, enforcement policies, the impact of potentially responsible parties, technology and information related to individual sites. Additionally, although potential environmental remediation expenditures in excess of the reserves and estimated loss contingencies could be significant, the impact on our future consolidated financial results is not subject to reasonable estimation due to numerous uncertainties concerning the nature and scope of possible contamination at many sites, identification of remediation alternatives under constantly changing requirements, selection of new and diverse clean-up technologies to meet compliance standards, the timing of potential expenditures and the allocation of costs among Potentially Responsible Parties ("PRPs") as well as other third parties. The liabilities arising from potential environmental obligations that have not been reserved for at this time may be material to any one quarter's or year's results of operations in the future. However, we believe any liability arising from such potential environmental obligations is not likely to have a material adverse effect on our liquidity or financial condition as it may be satisfied over many years. The table below is a roll forward of our total environmental reserves, continuing and discontinued, from December 31, 2016 to December 31, 2019. (in Millions) Operating and Discontinued Sites Total Total environmental reserves, net of recoveries at December 31, 2016 $ 360.4 2017 Provision 105.6 Spending, net of recoveries (63.3) Acquisitions (1) 2.6 Foreign currency translation adjustments 6.5 Net Change $ 51.4 Total environmental reserves, net of recoveries at December 31, 2017 $ 411.8 2018 Provision 178.2 Spending, net of recoveries (65.7) Foreign currency translation adjustments (2.8) Net Change $ 109.7 Total environmental reserves, net of recoveries at December 31, 2018 $ 521.5 2019 Provision 138.8 Spending, net of recoveries (73.8) Foreign currency translation adjustments and other adjustments (0.7) Net Change $ 64.3 Total environmental reserves, net of recoveries at December 31, 2019 $ 585.8 ______________ (1) Amount relates to environmental obligations at certain sites of the acquired DuPont Crop Protection Business. To ensure we are held responsible only for our equitable share of site remediation costs, we have initiated, and will continue to initiate, legal proceedings for contributions from other PRPs. At December 31, 2019 and 2018, we have recorded recoveries representing probable realization of claims against U.S. government agencies, insurance carriers and other third parties. Recoveries are recorded as either an offset to the “Environmental liabilities, continuing and discontinued” or as “Other assets including long-term receivables, net” on the consolidated balance sheets. The table below is a roll forward of our total recorded recoveries from December 31, 2017 to December 31, 2019: (in Millions) December 31, 2017 Increase (Decrease) in Recoveries Cash Received December 31, 2018 Increase (Decrease) in Recoveries Cash Received Other December 31, 2019 Environmental liabilities, continuing and discontinued $ 13.9 $ (5.5) $ (0.5) $ 7.9 $ 2.6 $ (0.5) $ — $ 10.0 Other assets (1) 32.3 2.6 (4.4) 30.5 0.3 (3.8) 0.3 27.3 Total $ 46.2 $ (2.9) $ (4.9) $ 38.4 $ 2.9 $ (4.3) $ 0.3 $ 37.3 ______________ (1) The amounts are included within “Prepaid and other current assets" and "Other assets including long-term receivables, net" on the consolidated balance sheets. See Note 22 for more details. The table below provides detail of current and long-term environmental reserves, continuing and discontinued. December 31, (in Millions) 2019 2018 Environmental reserves, current, net of recoveries (1) $ 115.3 $ 63.0 Environmental reserves, long-term continuing and discontinued, net of recoveries (2) 470.5 458.5 Total environmental reserves, net of recoveries $ 585.8 $ 521.5 ______________ (1) These amounts are included within “Accrued and other liabilities” on the consolidated balance sheets. (2) These amounts are included in "Environmental liabilities, continuing and discontinued" on the consolidated balance sheets. Our net environmental provisions relate to costs for the continued remediation of both operating sites and for certain discontinued manufacturing operations from previous years. The net provisions are comprised as follows: Year Ended December 31, (in Millions) 2019 2018 2017 Continuing operations (1) $ 108.7 $ 21.7 $ 16.2 Discontinued operations (2) 29.8 153.9 76.1 Net environmental provision $ 138.5 $ 175.6 $ 92.3 ______________ (1) Recorded as a component of “Restructuring and other charges (income)” on our consolidated statements of income. See Note 9. Environmental obligations for continuing operations primarily represent obligations at shut down or abandoned facilities within businesses that do not meet the criteria for presentation as discontinued operations. (2) Recorded as a component of “Discontinued operations, net of income taxes" on our consolidated statements of income (loss). See Note 11. On our consolidated balance sheets, the net environmental provisions affect assets and liabilities as follows: Year Ended December 31, (in Millions) 2019 2018 2017 Environmental reserves (1) $ 138.8 $ 178.2 $ 105.6 Other assets (2) (0.3) (2.6) (13.3) Net environmental provision $ 138.5 $ 175.6 $ 92.3 ______________ (1) See above roll forward of our total environmental reserves as presented on our consolidated balance sheets. (2) Represents certain environmental recoveries. See Note 22 for details of "Other assets including long-term receivables, net" as presented on our consolidated balance sheets. Significant Environmental Sites Pocatello From 1949 until 2001, we operated the world's largest elemental phosphorus plant in Power County, Idaho, just outside the city of Pocatello. Since the plant's closure, FMC has worked with the EPA, the State of Idaho, and the Shoshone-Bannock Tribes ("Tribes") to develop a proposed cleanup plan for the property. In September 2012, the EPA issued an Interim Record of Decision ("IROD") that is environmentally protective and that ensures the health and safety of both workers and the general public. Since the plant's closure, we have successfully decommissioned our Pocatello plant, completed closure of the RCRA ponds and formally requested that the EPA acknowledge completion of work under a June 1999 RCRA Consent Decree. Future remediation costs include completion of the IROD that addresses groundwater contamination and existing waste disposal areas on the Pocatello plant portion of the Eastern Michaud Flats Superfund Site. In June 2013, the EPA issued a Unilateral Administrative Order to us under which we will implement the IROD remedy. Our current reserves factor in the estimated costs associated with implementing the IROD. In addition to implementing the IROD, we continue to conduct work pursuant to CERCLA unilateral administrative orders to address air emissions from beneath the cap of several of the closed RCRA ponds. Actions also involve impacts of the Tribal Litigation discussed below. The amount of the reserve for this site, which includes the Pocatello Tribal Litigation described below, was $107.5 million and $33.1 million at December 31, 2019 and 2018, respectively. Pocatello Tribal Litigation For a number of years, we engaged in disputes with the Tribes concerning their attempts to regulate our activities on the reservation. On March 6, 2006, a U.S. District Court Judge found that the Tribes were a third-party beneficiary of a 1998 RCRA Consent Decree and ordered us to apply for any applicable Tribal permits relating to the nearly-complete RCRA Consent Decree work. The third-party beneficiary ruling was later reversed by the Ninth Circuit Court of Appeals, but the permitting process continued in the tribal legal system. We applied for the tribal permits, but preserved objections to the Tribes' jurisdiction. In addition, in 1998, we entered into an agreement that required us to pay the Tribes $1.5 million per year for waste generated from operating our Pocatello plant and stored on site. We paid $1.5 million per year until December 2001 when the plant closed. In our view the agreement was terminated, as the plant was no longer generating waste. The Tribes claimed that the 1998 Agreement has no end date. On April 25, 2006, the Tribes' Land Use Policy Commission issued us a Special Use Permit for the “disposal and storage of waste” at the Pocatello plant and imposed a $1.5 million per annum permit fee. FMC challenged this fee at various levels of the Tribal Court system and in April 2014, the Shoshone-Bannock Tribal Appellate Court issued a Statement of Decision finding in favor of the Tribes’ jurisdiction over FMC and awarding costs on appeal to the Tribes. The Tribal Appellate Court conducted further post-trial proceedings and on May 6, 2014 issued Finding and Conclusions and a Final Judgment consistent with its earlier Statement of Decision. FMC challenged the Final Judgment in the United States District Court for the District of Idaho. On September 28, 2017, the District Court issued a decision finding that the Tribal Court has jurisdiction over FMC to require FMC to pay the $1.5 million per year fee to the Tribes. In 2017, we appealed to the United States Court of Appeals for the Ninth Circuit and oral arguments were held on May 17, 2019. On November 15, 2019, the Ninth Circuit affirmed the District Court's decision that the Tribal Court has jurisdiction over FMC to require FMC to pay the $1.5 million per year fee to the Tribes. As a result of the unfavorable court decision issued on November 15, 2019, we increased our reserves by $72.8 million, which represents both the historical and discounted present value of future annual use permit fees as well as the associated legal costs incurred to date. The increase in reserve was transferred from the previously estimated reasonably possible loss related to this matter. Following the Ninth Circuit's denial of our petition for rehearing en banc, we filed a motion to stay the mandate with the Ninth Circuit. On February 4, 2020, the Ninth Circuit granted our motion to stay the mandate. Because this stay was granted, payment of the judgment, if necessary, will not take place until final disposition by the United States Supreme Court. During 2020, we intend to petition the Supreme Court to consider an appeal of the Ninth Circuit's decision. In calculating the net present value of future annual permit fees, we used a discount rate of 2.25%, which represents the appropriate risk-free rate. We believe that the application of this rate produces a result which approximates the amount that would hypothetically satisfy our liability in an arms-length transaction. Current estimates for expenditures for each of the five succeeding fiscal years are $29.5 million in 2020 and $1.5 million in annual fees payable each year thereafter. The expected aggregate undiscounted amount related to this matter is $103.0 million of which $72.8 million, on a discounted basis, has been recognized in environmental liabilities on the statements of financial position. Middleport Our Middleport, NY facility is currently an Agricultural Solutions formulation and packaging plant that formerly manufactured arsenic-based and other products. As a result of past manufacturing operations and waste disposal practices at this facility, releases of hazardous substances have occurred at the site that have affected soil, sediment, surface water and groundwater at the facility's property and also in adjacent off-site areas. The impact of our discontinued operations was the subject of an Administrative Order on Consent (“1991 AOC”) entered into with the EPA and New York State Department of Environmental Conservation (“NYSDEC”, and collectively with EPA, the “Agencies”) in 1991, which was replaced by a New Order on Consent and Administrative Settlement with the NYSDEC, effective June 6, 2019 ("2019 Order). Like the 1991 AOC, the 2019 Order requires us to (1) define the nature and extent of contamination caused by our historical plant operations, (2) take interim corrective measures and (3) evaluate Corrective Measure Alternatives (“CMA”) for discrete contaminated areas, known as “operable units” of which there are 11. We have defined the nature and extent of the contamination in certain areas, have constructed an engineered cover, taken certain closure actions regarding RCRA regulated surface water impoundments and are collecting and treating both surface water runoff and ground water. To date, we have evaluated and proposed CMAs for six of the 11 identified operable units. Middleport Litigation All pending litigation with respect to the Middleport site was settled and/or dismissed in 2019. The 2019 Order supplanted the need for a separate Hazardous Waste Management Permit (“Part 373 permit"), and as a result, the administrative action challenging the Part 373 Permit was dismissed. In connection with the settlement, FMC also dismissed its claims against the EPA that were pending appeal before the United States Court of Appeals for the Second Circuit. The terms of the 2019 Order are materially consistent with our established reserve for Middleport as of December 31, 2018 as a result of the 2019 Order. Middleport Reserves In the fourth quarter of 2018, we increased the reserve by $106.3 million, which included our best estimate for remediation costs for OUs 2,4 and 5 in line with the drafted settlement terms between FMC and NYSDEC. Of the $106.3 million reserve increase, $60.6 million related to our best estimate for remediation costs associated with the operable unit that comprises the southern portion of the tributary (“OU 6”) plus the impact of inflation. The $60.6 million increase was in addition to a previously established reserve of $29.1 million related to this operable unit. The remaining $45.7 million reserve increase related to costs associated with the implementation and completion of NYSDEC’s selected remedy for OUs 2,4, and 5. Prior to settlement discussions, our reserve balance for OUs 2,4, and 5 of $31.1 million included the estimated liability for clean-up to reflect the costs associated with our recommended CMAs. Our total reserve for all of Middleport is $159.4 million and $180.8 million at December 31, 2019 and 2018, respectively. FMC is in various stages of evaluating the remaining operable units. The Middleport settlement resulted in $22.2 million of cash outflows in 2019 and will result in cash outflows of approximately $20 million to $30 million per year for years 2020 - 2021 due to front loading of reimbursement in installments of past costs, and thereafter an amount not to exceed an average of $10 million per year until the remediation is complete. Other Potentially Responsible Party (“PRP”) Sites We have been named a PRP at 30 sites on the federal government’s National Priorities List (“NPL”), at which our potential liability has not yet been settled. We have received notice from the EPA or other regulatory agencies that we may be a PRP, or PRP equivalent, at other sites, including 48 sites at which we have determined that it is probable that we have an environmental liability for which we have recorded an estimate of our potential liability in the consolidated financial statements. In cooperation with appropriate government agencies, we are currently participating in, or have participated in, a Remedial Investigation/Feasibility Study (“RI/FS”), or equivalent, at most of the identified sites, with the status of each investigation varying from site to site. At certain sites, a RI/FS has only recently begun, providing limited information, if any, relating to cost estimates, timing, or the involvement of other PRPs; whereas, at other sites, the studies are complete, remedial action plans have been chosen, or a ROD has been issued. One site where FMC is listed as a PRP is the Portland Harbor Superfund Site (“Portland Harbor”), that includes the river and sediments of a 12 mile section of the lower reach of the Willamette River in Portland, Oregon that runs through an industrialized area. Portland Harbor is listed on the NPL. FMC formerly owned and operated a manufacturing site adjacent to this section of the river and has since sold its interest in this business. Currently, FMC and approximately 70 other parties are involved in a non-judicial allocation process to determine each party’s respective share of the cleanup costs. FMC and several other parties have been sued by the Confederated Bands and Tribes of the Yakama Nation for reimbursement of cleanup costs and the costs of performing a natural damage assessment. Based on the information known to date, we are unable to develop a reasonable estimate of our potential exposure of loss at this time. We intend to defend this matter. On January 6, 2017, EPA issued its Record of Decision (“ROD”) for the Portland Harbor Superfund Site. On December 30, 2019, FMC and EPA entered into an Administrative Settlement Agreement and Order on Consent to perform a remedial design for the area at and around FMC's former operations. The cost of developing a work plan for this remedial design is included in our reserves. Based on the current information available in the ROD as well as the large number of responsible parties for the Superfund Site, we are unable to develop a reasonable estimate of our potential exposure for Portland Harbor at this time. We have no reason to believe that the ultimate resolution of our potential obligations at Portland Harbor will have a material adverse effect on our consolidated financial position, liquidity or results of operations. However, adverse results in the outcome of the EPA allocation could have a material adverse effect on our consolidated financial position, results of operations in any one reporting period, or liquidity. |
