ENVIRONMENTAL MATTERS AND ASSET RETIREMENT OBLIGATIONS

Certain Eastman manufacturing sites generate hazardous and nonhazardous wastes, the treatment, storage, transportation, and disposal of which are regulated by various governmental agencies. In connection with the cleanup of various hazardous waste sites, the Company, along with many other entities, has been designated a potentially responsible party ("PRP") by the U.S. Environmental Protection Agency under the Comprehensive Environmental Response, Compensation and Liability Act, which potentially subjects PRPs to joint and several liability for such cleanup costs. In addition, the Company will be required to incur costs for environmental remediation and closure and post-closure under the federal Resource Conservation and Recovery Act. Reserves for environmental contingencies have been established in accordance with Eastman's policies described in Note 1, "Significant Accounting Policies". The Company's total reserve for environmental contingencies was $336 million and $345 million at December 31, 2015 and 2014, respectively. At December 31, 2015 and 2014, this reserve included $8 million and $10 million, respectively, related to sites previously closed and impaired by Eastman and sites that have been divested by Eastman but for which the Company retains the environmental liability related to these sites.

The Company's total environmental reserve for environmental contingencies, including remediation costs and asset retirement obligations, is reflected in the Consolidated Statements of Financial Position as follows:



	December 31,
(Dollars in millions)	2015		2014
Environmental contingent liabilities, current	$	35	$	35
Environmental contingent liabilities, long-term	301		310
Total	$	336	$	345

Remediation

Estimated future environmental expenditures for remediation costs ranged from the undiscounted minimum or best estimate of $308 million to the maximum of $516 million and from the minimum or best estimate of $324 million to the maximum of $548 million at December 31, 2015 and 2014, respectively. The maximum estimated future costs are considered to be reasonably possible and include the amounts accrued at both December 31, 2015 and 2014.

Costs of certain remediation projects included in the environmental reserve are subject to a cost-sharing arrangement with Monsanto Company ("Monsanto") under the provisions of the Amended and Restated Settlement Agreement effective February 28, 2008 (the "Effective Date"), into which Solutia entered with Monsanto upon its emergence from bankruptcy (the "Monsanto Settlement Agreement"). Under the provisions of the Monsanto Settlement Agreement, the Company shares responsibility with Monsanto for remediation at certain locations outside of the boundaries of plant sites in Anniston, Alabama and Sauget, Illinois (the "Shared Sites"). The Company is responsible for the funding of environmental liabilities at the Shared Sites up to a total of $325 million from the Effective Date. If remediation costs for the Shared Sites exceed this amount, such costs will thereafter be shared equally between the Company and Monsanto. Including payments by Solutia prior to its acquisition by Eastman, $71 million had been paid for costs at the Shared Sites as of December 31, 2015. As of December 31, 2015, an additional $205 million has been accrued for estimated future remediation costs at the Shared Sites, over a period of thirty years.

Reserves for environmental remediation that management believes to be probable and estimable are recognized as current and long-term liabilities in the Consolidated Statements of Financial Position. The amounts charged to pre-tax earnings for environmental remediation and related charges are included in cost of sales and other (income) charges, net, and are summarized below:



(Dollars in millions)	Environmental Remediation Liabilities
Balance at December 31, 2014	$	324
Changes in estimates recorded to earnings and other	12
Cash reductions	(28		)
Balance at December 31, 2015	$	308

Closure/Post-Closure

An asset retirement obligation is an obligation for the retirement of a tangible long-lived asset that is incurred upon the acquisition, construction, development, or normal operation of that long-lived asset. The Company recognizes asset retirement obligations in the period in which they are incurred if a reasonable estimate of fair value can be made. The asset retirement obligations are discounted to expected present value and subsequently adjusted for changes in fair value. The associated estimated asset retirement costs are capitalized as part of the carrying value of the long-lived assets and depreciated over their useful life. Environmental asset retirement obligations consist of primarily closure and post-closure costs. For facilities that have environmental asset retirement obligations, the best estimate accrued to date over the facilities' estimated useful lives for these asset retirement obligation costs were $28 million and $21 million at December 31, 2015 and 2014, respectively.

Other

Environmental costs are capitalized if they extend the life of the related property, increase its capacity, and/or mitigate or prevent future contamination. The cost of operating and maintaining environmental control facilities is charged to expense as incurred. The amounts charged to earnings related to environmental protection and improvement were $290 million, $319 million, and $285 million in 2015, 2014, and 2013, respectively. These amounts were primarily for operating costs associated with environmental protection equipment and facilities, but also included $61 million and $79 million in expenditures for engineering and construction in 2015 and 2014, respectively.

The Company also has contractual obligations that include asset retirement obligations not associated with environmental liabilities. Eastman's non-environmental asset retirement obligations are primarily associated with the future closure of leased manufacturing assets at Pace, Florida and Oulu, Finland acquired from Taminco. These accrued non-environmental asset retirement obligations were $46 million and $44 million as of December 31, 2015 and December 31, 2014, respectively.