Freeport-McMoRan 2013 Annual Report Download - page 111

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
2013 ANNUAL REPORT | 109
Historical Smelter Sites. FMC and its predecessors at various
times owned or operated copper and zinc smelters in states
including Arizona, Kansas, New Jersey, 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. FCX has been in the past and may again in the future
be subject to litigation brought by private parties, regulators
and local governmental authorities related to these historical
smelter sites.
Uranium Mining Sites. During a period between 1940 and the
early 1970s, certain FMC predecessor entities and/or subsidiaries
were involved in uranium exploration and mining in the western
U.S., primarily on federal and tribal lands in the Four Corners
region of the southwest. Similar exploration and mining activities
by other companies have also caused environmental impacts
warranting remediation, and EPA and local authorities are
currently evaluating the need for significant cleanup activities in
the region. To date, FMC has undertaken remediation at a limited
number of sites associated with these predecessor entities.
Initiatives to gather additional information about sites in the
region are ongoing.
Other. In December 2013, a lawsuit was filed against FCX’s
subsidiary that operates the Candelaria mine in Chile by the
neighboring municipality of Tierra Amarilla (Municipality of Tierra
Amarilla v. Compania Contractual Minera Candelaria, Second
Environmental Court, Santiago, Chile, filed December 12, 2013).
The complaint, which as of February 21, 2014, had not been
served, was filed in a recently established environmental court
and alleges extensive environmental harm, including alleged
contamination of soils, air, surface water and groundwater, and
depletion of water supplies, in addition to allegations regarding
climate damage, traffic, dust, noise and nuisance associated with
blastings. The complaint seeks broad relief that if granted could
require FCX to cease some or all of its operations at Candelaria
and nearby facilities and restore the environment to its original
condition. Because of the early stage of the proceedings, FCX is
currently unable to estimate the possible loss or range of loss,
if any, that could result from this matter.
FCX believes that there may be potential claims for recovery
from third parties, including the U.S. government and other PRPs.
These potential recoveries are not recognized unless realization is
considered probable.
At December 31, 2013, the most significant environmental
obligations were associated with the Pinal Creek site in Arizona;
the Newtown Creek site in New York City; historical smelter sites
principally located in Arizona, Kansas, New Jersey, Oklahoma
and Pennsylvania; and uranium mining sites in the western
U.S. The recorded environmental obligations for these sites
totaled $1.0 billion at December 31, 2013. A discussion of these
sites follows.
Pinal Creek. The Pinal Creek site was listed under the Arizona
Department of Environmental Quality’s (ADEQ) Water Quality
Assurance Revolving Fund program in 1989 for contamination in
the shallow alluvial aquifers within the Pinal Creek drainage near
Miami, Arizona. Since that time, environmental remediation was
performed by members of the Pinal Creek Group (PCG), consisting
of FMC Miami, Inc. (Miami), a wholly owned subsidiary of FMC,
and two other companies. Pursuant to a 2010 settlement
agreement, Miami agreed to take full responsibility for future
groundwater remediation at the Pinal Creek site, with limited
exceptions. Remediation work continues at this time and is
expected to continue for many years in the future.
Newtown Creek. From the 1930s until 1964, Phelps Dodge
Refining Corporation (PDRC), a subsidiary of FMC, operated a
smelter, and from the 1930s until 1984, it operated a refinery on
the banks of Newtown Creek (the creek), which is a 3.5-mile-long
waterway that forms part of the boundary between Brooklyn
and Queens in New York City. Heavy industrialization along the
banks of the creek and discharges from the City of New York’s
sewer system over more than a century resulted in significant
environmental contamination of the waterway. In 2010, EPA
notified PDRC and five others that EPA considers them to be PRPs
under CERCLA. The notified parties began working with EPA to
identify other PRPs, and EPA proposed that the notified parties
perform a Remedial Investigation/Feasibility Study (RI/FS) at their
expense and reimburse EPA for its oversight costs. EPA is not
expected to propose a remedy until after a RI/FS is completed.
Additionally, in 2010, EPA designated the creek as a Superfund
site, and in 2011, PDRC and five other parties entered an
Administrative Order on Consent (AOC) to perform a RI/FS to
assess the nature and extent of environmental contamination in
the creek and identify potential remedial options. The parties’
RI/FS work under the AOC and their identification of other PRPs
are ongoing and expected to take several years to complete. The
actual costs of fulfilling this remedial obligation and the allocation
of costs among PRPs are uncertain and subject to change based
on the results of the RI/FS, the remediation remedy ultimately
selected by EPA and related allocation determinations. Depending
on the overall cost and the portion allocated to PDRC, that share
could be material to FCX.