14 .	COMMITMENTS AND CONTINGENCIES:

Portland Harbor Superfund

December

2000,

a section of the lower Willamette River known as the Portland Harbor Site was included on the National Priorities List at the request of the United States Environmental Protection Agency (the “EPA”). While the Company’s Portland, Oregon manufacturing facility does not border the Willamette River, an outfall from the facility’s stormwater system drains into a neighboring property’s privately owned stormwater system and slip. Since the listing of the site, the Company was notified by the EPA and the Oregon Department of Environmental Quality (“ODEQ”) of potential liability under the Comprehensive Environmental Response, Compensation and Liability Act (“CERCLA”). In

2008,

the Company was asked to file information disclosure reports with the EPA (CERCLA

104

(e) information request). A remedial investigation and feasibility study of the Portland Harbor Site has been directed by a group of

potentially responsible parties known as the Lower Willamette Group (the “LWG”) under agreement with the EPA. The remedial investigation (“RI”) report was finalized in

February

2016.

The feasibility study was finalized in

June

2016

by the EPA, and identified multiple remedial alternatives. The EPA issued the Record of Decision in

January

2017

selecting the remedy for cleanup at the Portland Harbor Site, which it believes will cost approximately

$1.05

billion and

years to complete. The Record of Decision did not determine who is responsible for the costs of cleanup or how the cleanup costs will be allocated among the potentially responsible parties.

2001,

groundwater containing elevated volatile organic compounds (“VOCs”) was identified in

one

localized area of leased property adjacent to the Portland facility furthest from the river. Assessment work was conducted in

2002

and

2003

to further characterize the groundwater. In

February

2005,

the Company entered into a Voluntary Agreement for Remedial Investigation and Source Control Measures (the “Voluntary Agreement”) with ODEQ. The Company performed RI work required under the Voluntary Agreement and in

2016

the EPA and ODEQ requested additional sampling to be conducted. The Company provided a Final Supplemental Groundwater Sampling Work Plan in the

third

quarter of

2016,

and in

September

2016

the ODEQ approved work to proceed. The Company initiated groundwater sampling in the fall of

2016,

which will continue through the

third

quarter of

2017,

and results thus far have been generally consistent with previous sampling and modeling work.

Concurrent with the activities of the EPA and ODEQ, the Portland Harbor Natural Resources Trustee Council (“Trustees”) sent some or all of the same parties, including the Company, a notice of intent to perform a Natural Resource Damage Assessment (“NRDA”) for the Portland Harbor Site to determine the nature and extent of natural resource damages under CERCLA Section

107.

The Trustees for the Portland Harbor Site consist of representatives from several Northwest Indian Tribes,

three

federal agencies and

one

state agency. The Trustees act independently of the EPA and ODEQ. The Trustees have encouraged potentially responsible parties to voluntarily participate in the funding of their injury assessments and several of those parties have agreed to do so. In

June

2014,

the Company agreed to participate in the injury assessment process, which included funding

$0.4

million of the assessment; of this amount,

$0.2

million was paid in

July

2014

and the remainder was paid in

January

2015.

The Company has not assumed any additional payment obligations or liabilities with the participation with the NRDA. In

January

2017,

the Confederated Tribes and Bands of the Yakama Nation, a Trustee until they withdrew from the council in

2009,

filed a complaint against the potentially responsible parties including the Company to recover costs related to their own injury assessment and compensation for natural resources damages.

The Company’s potential liability is a portion of the costs of the remedy the EPA will select for the entire Portland Harbor Superfund Site. The cost of that remedy is expected to be allocated among more than

100

potentially responsible parties. Because of the large number of responsible parties and the variability in the range of remediation alternatives, the Company is unable to estimate an amount or an amount within a range of costs for its obligation with respect to the Portland Harbor Site matters, and no further adjustment to the Consolidated Financial Statements has been recorded as of the date of this filing. The Company has insurance policies for defense costs, as well as indemnification policies it believes will provide reimbursement for any share of the remediation assessed. However, the Company can provide no assurance that those policies will cover all of the costs which the Company

may

incur.

December

2014,

a federal district court approved settlements between the Company and

two

of its insurance carriers. The Company released its interests in the related insurance policies, and received

$2.6

million in

January

2015

for reimbursement of past indemnification and defense costs incurred by the Company associated with the Portland Harbor Site, substantially all of which reduced Cost of sales in

2014.

Notwithstanding these settlements, the Company continues to have insurance coverage for indemnification and defense costs related to the Portland Harbor Site as described above.

Houston Environmental Issue

In connection with the Company’s sale of its OCTG business, a Limited Phase II Environmental Site Assessment was conducted at the Houston, Texas plant and completed in

March

2014,

which revealed the presence of VOCs in the groundwater and certain metals in the soil. In

June

2014,

the Company was accepted into the Texas Commission on Environmental Quality (“TCEQ”) Voluntary Cleanup Program (“VCP”) to address these issues and obtain a Certificate of Completion (“COC”) from TCEQ. The cost of any potential assessment and cleanup will not be covered by insurance. However, any costs incurred will be reimbursed by the purchaser of the OCTG business (see “Disposal of OCTG Business” in Note

“Summary of Significant Accounting Policies”) if the purchaser exercises its option to purchase the property under certain circumstances after the COC is obtained.

The proposed remediation approach includes a municipal setting designation ordinance, approved by the City of Houston City Council in

January

2017,

to prevent consumption of shallow groundwater from beneath the property, thereby eliminating the need for more costly remediation measures.

The Company has completed an initial assessment and continues to monitor groundwater. In

October

2016,

the TCEQ notified the Company that a neighboring facility has asbestos contamination in its soil. In a

December

2016

meeting with TCEQ, the Company was notified that it will need to assess asbestos contamination before the TCEQ will proceed with a COC. The Company expects to provide a sampling work plan in

first

quarter of

2017

and collect samples soon after the work plan is approved. The Company currently estimates that the future costs associated with the VCP will be between

$0.1

million and

$1.7

million. As of

December

31,

2016,

the Company has a

$0.2

million accrual for remediation costs based on the low-end estimate of future costs using a probability-weighted analysis of remediation approaches, and estimates that completion of the VCP process will occur between the

third

quarter of

2017

and the

third

quarter of

2019.

All Sites

The Company operates its facilities under numerous governmental permits and licenses relating to air emissions, stormwater runoff and other environmental matters. The Company’s operations are also governed by many other laws and regulations, including those relating to workplace safety and worker health, principally the Occupational Safety and Health Act and regulations there under which, among other requirements, establish noise and dust standards. The Company believes it is in material compliance with its permits and licenses and these laws and regulations, and the Company does not believe that future compliance with such laws and regulations will have a material adverse effect on its financial position, results of operations or cash flows.

Other Contingencies

and Legal Proceedings

From time to time, the Company is involved in litigation relating to claims arising out of its operations in the normal course of its business. The Company maintains insurance coverage against potential claims in amounts that are believed to be adequate. To the extent that insurance does not cover legal, defense and indemnification costs associated with a loss contingency, the Company records accruals when such losses are considered probable and reasonably estimable. As of

December

31,

2016,

the Company has recorded a

$1.8

million litigation accrual relating to a pending lawsuit. The Company believes that it is not presently a party to any other litigation, the outcome of which would have a material adverse effect on its business, financial condition, results of operations or cash flows.

Guarantees

The Company has entered into certain letters of credit that total

$2.0

million as of

December

31,

2016.

The letters of credit relate to workers’ compensation insurance.