Freeport-McMoRan 2010 Annual Report Download - page 94

FREEPORT-McMoRan COPPER & GOLD INC. 2010 Annual Report
92
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
uncertain and subject to change based on characterization information,
EPA remedy selection and related allocation determinations.
Historical Smelter Sites. FMC and its predecessors at various
times owned or operated copper and zinc smelters in several states,
including Arizona, Kansas, Oklahoma and Pennsylvania. For some
of these smelter sites, certain FCX subsidiaries have been advised
by EPA or state agencies that they may be liable for costs of
investigating and, if appropriate, remediating environmental
conditions associated with the smelters. At other sites, certain
FCX subsidiaries have entered into state voluntary remediation
programs to investigate and, if appropriate, remediate site conditions
associated with the smelters. The historical smelter sites are
in various stages of assessment and remediation. The two most
significant environmental obligations for historical smelter sites
relate to Blackwell, Oklahoma, and Bisbee, Arizona.
From 1916 to 1974, Blackwell Zinc Company, Inc. (BZC), an
indirect subsidiary of FCX, owned and operated a zinc smelter in
Blackwell, Oklahoma. In 1974, the smelter was demolished and the
property deeded to the Blackwell Industrial Authority. Pursuant to an
administrative order with the state of Oklahoma, BZC undertook
remedial actions in Blackwell in 1996 and 1997, including sampling
the nearby residential and commercial properties, and removing soils
on properties that were found to have metal concentrations above
state-established cleanup standards. From 1997 to 2003, BZC
investigated the nature and extent of groundwater contamination
potentially attributable to the former smelter and evaluated options
for remedying such contamination. In 2003, the state of Oklahoma
adopted a cleanup plan requiring the installation of a groundwater
extraction and treatment system and the closure of domestic
groundwater wells within the groundwater plume area. BZC has
completed the construction of a groundwater extraction and
treatment system, with system startup and initial discharge of treated
water occurring in October 2010.
In 2007, FCX, on behalf of BZC, commenced a voluntary community
outreach program by inviting property owners in and around
Blackwell to have their properties sampled for the presence of
smelter-related contaminants, and offering to remediate properties
whose soils were found to have metal concentrations above state-
established cleanup standards. With the exception of possible related
interior cleanup work, residential yard cleanups, which started in
October 2008, are essentially complete; although it is possible that
additional homeowners could request to participate in the sampling/
remediation program in the future. All of these soil sampling and
remediation activities are being coordinated with, and supervised by,
the state of Oklahoma.
On April 14, 2008, a purported class action was filed against FCX
and several of its direct and indirect subsidiaries, including BZC,
entitled Coffey, et al., v. Freeport-McMoRan Copper & Gold, Inc., et al.,
Kay County, Oklahoma District Court, Case No. CJ-2008-68. This
suit alleges that the operations of BZC’s zinc smelter in Blackwell,
Oklahoma, from 1918 to 1974 resulted in contamination of soils and
groundwater in Blackwell and the surrounding area. The complaint
seeks unspecified compensatory and punitive damages on behalf
of the putative class members, consisting of current and former
residents and property owners, for alleged diminution in property
values. Plaintiffs also requested an order compelling remediation
of allegedly contaminated properties and the establishment of
a monetary fund to pay for monitoring the present and future health
of the putative class members. On February 2, 2010, the court
granted FCX’s motion to dismiss the plaintiffs’ medical monitoring
claims, and the court denied plaintiffs’ request for reconsideration
at a hearing on May 6, 2010.
On December 7, 2009, 18 individuals filed a related suit (Brown et
al. v. Freeport-McMoRan Copper & Gold Inc., et al., Kay County,
Oklahoma District Court, Case No. CJ-2009-213), alleging personal
injuries resulting from exposure to lead and seeking compensatory
and punitive damages. In March 2010, the case was removed to the
U.S. District Court for the Western District of Oklahoma in Oklahoma
City (CIV-10-295-HE). On July 23, 2010, the federal district
court denied plaintiffs’ request to remand the suit to state court.
FCX intends to defend both of these matters vigorously and no
estimates can be made for ranges of losses that are reasonably
possible with respect to these two cases.
On October 15, 2009, the City of Blackwell and the Blackwell
Municipal Authority filed an action in District Court of Kay County,
Oklahoma, against FCX and several of its direct and indirect
subsidiaries, including BZC, entitled City of Blackwell et al. v.
Freeport-McMoRan Copper & Gold, Inc, et al., Kay County, Oklahoma
District Court, Case No. CJ-2009-15B. The suit alleged that the
operations of BZC’s zinc smelter resulted in contamination of the
soils and groundwater in the City of Blackwell. The plaintiffs alleged
nuisance, trespass, negligence and unjust enrichment and claimed
unspecified actual, equitable (for unjust enrichment) and punitive
damages. In February 2010, FCX reached a partial settlement with
the City of Blackwell and the Blackwell Municipal Authority by
paying $54 million (included in accounts payable and accrued liabilities
at December 31, 2009) to settle all of the claims except for future
damages relating to the potential failure of FCX’s groundwater
remediation system (which commenced startup in October 2010) to
prevent contamination from entering the City of Blackwell’s
wastewater treatment system.
From the 1880s until 1975, FMC and certain predecessor and
subsidiary entities operated a copper mine near Bisbee, Arizona.
A series of smelters operated in Bisbee from approximately 1879
through 1908. In 2000, FMC entered the Bisbee area into the
Arizona Voluntary Remediation Program (VRP) administered by ADEQ.
In 2008, FMC expanded the VRP project to include other communities
near Bisbee and commenced a voluntary community outreach
program inviting property owners to have soils at their properties
sampled for the presence of smelter and mine-related metals.