Environmental Obligations

We have reserves for potential environmental obligations, which management consider probable and for which a reasonable estimate of the obligation could be made. Accordingly, we have reserves of $219.1 million and $236.5 million, excluding recoveries, at June 30, 2013 and December 31, 2012, respectively.

The estimated reasonably possible environmental loss contingencies, net of expected recoveries, exceed amounts accrued by approximately $160 million at June 30, 2013. 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. Potential environmental obligations that have not been reserved may be material to any one quarter's or year's results of operations in the future. However, we believe any such 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, 2012 to June 30, 2013:



(in Millions)	Operating and Discontinued Sites Total
Total environmental reserves, net of recoveries at December 31, 2012	$	216.0

Provision	10.3
Spending, net of recoveries	(27.9		)
Net change	(17.6		)
Total environmental reserves, net of recoveries at June 30, 2013	$	198.4
Environmental reserves, current, net of recoveries (1)	24.4
Environmental reserves, long-term continuing and discontinued, net of recoveries (2)	174.0
Total environmental reserves, net of recoveries at June 30, 2013	$	198.4

____________________


(1)	“Current” includes only those reserves related to continuing operations. These amounts are included within "Accrued and other liabilities" on the condensed consolidated balance sheets.


(2)	These amounts are included in “Environmental liabilities, continuing and discontinued” on the condensed consolidated balance sheets.

At June 30, 2013 and December 31, 2012, 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” in the condensed consolidated balance sheets. The table below is a roll forward of our total recorded recoveries from December 31, 2012 to June 30, 2013:



(in Millions)	12/31/2012		Increase in Recoveries		Cash Received			6/30/2013
Environmental liabilities, continuing and discontinued	$	20.5	$	0.9	$	(0.7	)	$	20.7
Other assets	51.6		1.8		(7.8		)	45.6
Total	$	72.1	2.7		$	(8.5	)	$	66.3

Our net environmental provisions relate to costs for the continued cleanup of both operating sites and for certain discontinued manufacturing operations from previous years. The net provisions are comprised as follows:



	Three Months Ended June 30				Six Months Ended June 30
(in Millions)	2013		2012		2013		2012
Continuing operations (1)	$	1.0	$	1.5	$	2.0	$	2.5
Discontinued operations (2)	3.2		7.9		6.5		12.0
Net environmental provision	$	4.2	$	9.4	$	8.5	$	14.5

____________________

(1) Recorded as a component of “Restructuring and other charges (income)” on our condensed consolidated statements of income. See Note 7.

(2) Recorded as a component of “Discontinued operations, net of income taxes" on our consolidated statements of income. See Note 10.

On our condensed consolidated balance sheets, the net environmental provisions are recorded to the following balance sheet captions:



	Three Months Ended June 30					Six Months Ended June 30
(in Millions)	2013			2012		2013			2012
Environmental reserves (1)	$	5.0		$	9.4	$	10.3		$	14.5
Other assets (2)	(0.8		)	—		(1.8		)	—
Net environmental provision	$	4.2		$	9.4	$	8.5		$	14.5

____________________

(1) See above roll forward of our total environmental reserves as presented on our condensed consolidated balance sheets.

(2) Represents certain environmental recoveries.

A more complete description of our environmental contingencies and the nature of our potential obligations are included in Notes 1 and 10 to our 2012 consolidated financial statements in our 2012 Form 10-K. The following represents significant updates that occurred in 2013 to these contingencies.

Pocatello

During the second quarter of 2013, the Tribal Appellate Court with respect to the appeal regarding our Pocatello site has scheduled an evidentiary hearing for the fourth quarter of 2013 on certain jurisdictional issues. The Tribes have filed additional litigation to recover the permit fees for the years since 2007, but that litigation has been stayed pending the outcome of the appeal in the Tribal Court of Appeals. A more complete description of our environmental contingencies, the Pocatello legal matter and the nature of our potential obligations are included in Notes 1 and 10 to our 2012 consolidated financial statements in our 2012 Form 10-K.

Middleport

During the quarter ended June 30, 2013 we received from the United States Environmental Protection Agency and New York State Department of Environmental Conservation, collectively the “Agencies”, the Final Statement of Basis (FSOB). This FSOB is consistent with the Preliminary Statement of Basis (PSOB) previously received from Agencies in June 2012. The FSOB includes the same Corrective Action Management Alternative (“CMA”) as the PSOB. We continue to believe that the CMA is overly conservative and not supported under New York State law. In order to negotiate with the Agencies with respect to the CMA, we entered into a tolling agreement with the Agencies. The tolling agreement serves as a “standstill” agreement to the FSOB so that time spent negotiating with the Agencies does not go against the statute of limitations under the FSOB.

The amount of the reserve for this site is $41.0 million at June 30, 2013 and $42.4 million at December 31, 2012. Our reserve continues to include the estimated liability for clean-up to reflect the costs associated with our recommended CMA. Our estimated reasonably possible environmental loss contingencies exposure reflects the additional cost of the CMA proposed in the FSOB. A more complete description of our environmental contingencies pertaining to our Middleport environmental site, is included in Note 10 to our 2012 consolidated financial statements in our 2012 Form 10-K.