Freeport-McMoRan 2013 Annual Report Download - page 110

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
108 | FREEPORT-McMoRan
substantial sums annually for many years to address those
remediation issues. Certain FCX subsidiaries have been advised
by the U.S. Environmental Protection Agency (EPA), the
Department of the Interior, the Department of Agriculture and
several state agencies that, under CERCLA or similar state laws
and regulations, they may be liable for costs of responding to
environmental conditions at a number of sites that have been or
are being investigated to determine whether releases of
hazardous substances have occurred and, if so, to develop and
implement remedial actions to address environmental concerns.
FCX is also subject to claims where the release of hazardous
substances is alleged to have damaged natural resources (NRD).
As of December 31, 2013, FCX had more than 100 active
remediation projects, including NRD claims, in 28 U.S. states.
A summary of changes in environmental obligations for the
years ended December 31 follows:
2013 2012 2011
Balance at beginning of year $ 1,222 $ 1,453 $ 1,422
Accretion expense
a
79 80 88
Additions 73 70 132
Reductions
b
(77) (182) (68)
Spending (130) (199) (121)
Balance at end of year 1,167 1,222 1,453
Less current portion (121) (186) (205)
Long-term portion $ 1,046 $ 1,036 $ 1,248
a. Represented accretion of the fair value of environmental obligations assumed in the 2007
acquisition of FMC, which were determined on a discounted cash flow basis.
b. Reductions primarily reflected revisions for changes in the anticipated scope and
timing of environmental remediation projects and the noncash adjustments of
environmental matters.
Estimated environmental cash payments (on an undiscounted and
unescalated basis) total $121 million in 2014, $151 million in 2015,
$116 million in 2016, $122 million in 2017, $110 million in 2018 and
$2.0 billion thereafter. The amount and timing of these estimated
payments will change as a result of changes in regulatory
requirements, changes in scope and timing of remediation
activities, the settlement of environmental matters and as actual
spending occurs.
In 2007, FCX recorded FMC’s environmental obligations at fair
value on the acquisition date in accordance with business
combination accounting guidance. Significant adjustments to
these obligations may occur in the future. New environmental
obligations will be recorded as described in Note 1 under
“Environmental Expenditures.” At December 31, 2013, FCX’s
environmental obligations totaled $1.2 billion, including $1.1 billion
recorded on a discounted basis for those obligations assumed in
the FMC acquisition at fair value. On an undiscounted and
unescalated basis, these obligations totaled $2.6 billion. FCX
estimates it is reasonably possible that these obligations could
range between $2.1 billion and $2.7 billion on an undiscounted
and unescalated basis.
Changes to the reserve for unrecognized tax benefits
associated with current year tax positions were primarily related
to uncertainties associated with FCX’s cost recovery methods and
deductibility of contributions. Changes in the reserve for
unrecognized tax benefits associated with prior year tax positions
were primarily related to uncertainties associated with cost
recovery methods, U.S. state filing combinations and benefits
received from stock-based compensation. Changes to the reserve
for unrecognized tax benefits associated with the lapse of statute
of limitations were primarily related to U.S. state filing
combinations and characterization of non-recurring income items.
There continues to be uncertainty related to the timing of
settlements with taxing authorities, but if additional settlements
are agreed upon during the year 2014, FCX could experience a
change in its reserve for unrecognized tax benefits.
FCX or its subsidiaries file income tax returns in the U.S. federal
jurisdiction and various state and foreign jurisdictions. The tax
years for FCX’s major tax jurisdictions that remain subject to
examination are as follows:
Jurisdiction Years Under Examination Additional Open Years
U.S. Federal 2007-2012 2013
Indonesia 2005-2008, 2011-2012 2009-2010, 2013
Peru 2009-2010 2011-2013
Chile 2011-2012 2013
Africa 2010-2012 2013
NOTE 12. CONTINGENCIES
Environmental. FCX subsidiaries are subject to various national,
state and local environmental laws and regulations that
govern emissions of air pollutants; discharges of water pollutants;
and generation, handling, storage and disposal of hazardous
substances, hazardous wastes and other toxic materials, including
remediation, restoration and reclamation of environmental
contamination. FCX subsidiaries that operate in the U.S. also are
subject to potential liabilities arising under CERCLA and similar
state laws that impose responsibility on current and previous
owners and operators of a facility for the remediation of hazardous
substances released from the facility into the environment,
including damages to natural resources, irrespective of when the
damage to the environment occurred or who caused it. This
remediation liability also extends to persons who arranged for the
disposal of hazardous substances or transported the hazardous
substances to a disposal site selected by the transporter. This
liability often is shared on a joint and several basis, meaning that
each responsible party is fully responsible for the remediation,
although in many cases some or all of the other historical owners
or operators no longer exist, do not have the financial ability to
respond or cannot be found. As a result, because of FCX’s
acquisition of FMC in 2007, many of the subsidiary companies FCX
now owns are responsible for a wide variety of environmental
remediation projects throughout the U.S., and FCX expects to spend