Freeport-McMoRan 2013 Annual Report Download - page 113

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2013 ANNUAL REPORT | 111
Indonesian Reclamation and Closure Programs. The ultimate
amount of reclamation and closure costs to be incurred at PT-FI’s
operations will be determined based on applicable laws and
regulations and PT-FI’s assessment of appropriate remedial activities
in the circumstances, after consultation with governmental
authorities, affected local residents and other affected parties and
cannot currently be projected with precision. Some reclamation
costs will be incurred during mining activities, while most closure
costs and the remaining reclamation costs will be incurred at the
end of mining activities, which are currently estimated to continue
for nearly 30 years. At December 31, 2013, PT-FI had accrued
reclamation and closure costs of $249 million.
In 1996, PT-FI began contributing to a cash fund ($18 million
balance at December 31, 2013, which is included in other assets)
designed to accumulate at least $100 million (including interest)
by the end of its Indonesia mining activities. PT-FI plans to use
this fund, including accrued interest, to pay mine closure and
reclamation costs. Any costs in excess of the $100 million fund
would be funded by operational cash flow or other sources.
In December 2009, PT-FI submitted its revised mine closure
plan to the Department of Energy and Mineral Resources for
review and has addressed comments received during the course
of this review process. In December 2010, the President of
Indonesia issued a regulation regarding mine reclamation and
closure, which requires a company to provide a mine closure
guarantee in the form of a time deposit placed in a state-owned
bank in Indonesia. In accordance with its Contract of Work, PT-FI
is working with the Department of Energy and Mineral Resources
to review these requirements, including discussion of other
options for the mine closure guarantee.
Oil and Gas Properties. Substantially all of FM O&G’s oil and
gas leases require that, upon termination of economic production,
the working interest owners plug and abandon non-producing
wellbores, remove equipment and facilities from leased acreage
and restore land in accordance with applicable local, state and
federal laws. FM O&G operating areas include the GOM, offshore
and onshore California, the Gulf Coast and the Rocky Mountain
area. FM O&G AROs cover more than 6,600 wells and more than
200 platforms and other structures. At December 31, 2013,
FM O&G had accrued $1.1 billion associated with its AROs.
Litigation. FCX is involved in numerous legal proceedings that
arise in the ordinary course of business or are associated with
environmental issues arising from legacy operations conducted
over the years by FMC and its affiliates as discussed in this note
under “Environmental.” FCX is also involved periodically in other
reviews, investigations and proceedings by government agencies,
some of which may result in adverse judgments, settlements,
fines, penalties, injunctions or other relief. Management does not
believe, based on currently available information, that the
outcome of any legal proceeding reported below will have a
material adverse effect on FCX’s financial condition, although
individual outcomes could be material to FCX’s operating results
requirements following cessation of operations and an estimate
of the cost to implement the closure strategy. An APP may specify
closure requirements, which may include post-closure monitoring
and maintenance. A more detailed closure plan must be
submitted within 90 days after a permitted entity notifies ADEQ of
its intent to cease operations. A permit applicant must
demonstrate its financial ability to meet the closure costs
estimated in the APP.
Portions of Arizona mining facilities that operated after January 1,
1986, also are subject to the Arizona Mined Land Reclamation Act
(AMLRA). AMLRA requires reclamation to achieve stability and
safety consistent with post-mining land use objectives specified
in a reclamation plan. Reclamation plans must be approved by
the State Mine Inspector and must include an estimate of the cost
to perform the reclamation measures specified in the plan.
FCX will continue to evaluate options for future reclamation and
closure activities at its operating and non-operating sites, which
are likely to result in adjustments to FCX’s ARO liabilities. At
December 31, 2013, FCX had accrued reclamation and closure
costs of $237 million for its Arizona operations.
Colorado Reclamation Programs. FCX’s Colorado operations are
regulated by the Colorado Mined Land Reclamation Act
(Reclamation Act) and regulations promulgated thereunder.
Under the Reclamation Act, mines are required to obtain approval
of reclamation plans describing the reclamation of lands affected
by mining operations to be performed during mining or upon
cessation of mining operations. As of December 31, 2013, FCX had
accrued reclamation and closure costs of $50 million for its
Colorado operations.
Chilean Reclamation and Closure Programs. In July 2011, the
Chilean senate passed legislation regulating mine closure, which
establishes new requirements for closure plans and became
effective in November 2012. FCX’s Chilean operations are required
to update closure plans and provide financial assurance for these
obligations. FCX cannot predict at this time the cost of these
closure plans or the levels or forms of financial assurance that
may be required. Revised closure plans for the Chilean mine sites
are due in November 2014. At December 31, 2013, FCX had
accrued reclamation and closure costs of $69 million for its
Chilean operations.
Peruvian Reclamation and Closure Programs. Cerro Verde is
subject to regulation under the Mine Closure Law administered by
the Peruvian Ministry of Energy and Mines. Under the closure
regulations, mines must submit a closure plan that includes the
reclamation methods, closure cost estimates, methods of control
and verification, closure and post-closure plans and financial
assurance. The updated closure plan for the Cerro Verde mine
expansion was submitted to the Peruvian regulatory authorities in
November 2013. At December 31, 2013, Cerro Verde had accrued
reclamation and closure costs of $79 million.