Freeport-McMoRan 2014 Annual Report Download - page 113

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
111
settlements are agreed upon during the year 2015, 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 Subject to Examination Additional Open Years
U.S. Federal 2007-2012 2013-2014
Indonesia 2006-2008, 2011-2012 2010, 2013-2014
Peru 2010 2011-2014
Chile 2012-2013 2014
DRC 2013 2012, 2014
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 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
various 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, 2014, FCX had more than 100 active
remediation projects, including NRD claims, in 27 U.S. states.
A summary of changes in environmental obligations for the
years ended December 31 follows:
2014 2013 2012
Balance at beginning of year $ 1,167 $ 1,222 $ 1,453
Accretion expense
a
77 79 80
Additions 16 73 70
Reductions
b
(6) (77) (182)
Spending (80) (130) (199)
Balance at end of year 1,174 1,167 1,222
Less current portion (105) (121) (186)
Long-term portion $ 1,069 $ 1,046 $ 1,036
a. Represents 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 reflect revisions for changes in the anticipated scope and timing of
projects and other noncash adjustments.
Estimated environmental cash payments (on an undiscounted and
unescalated basis) total $105 million in 2015, $151 million in 2016,
$120 million in 2017, $108 million in 2018, $79 million in 2019 and
$1.8 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, 2014, 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 $2.4 billion. FCX
estimates it is reasonably possible that these obligations could
range between $2.0 billion and $2.6 billion on an undiscounted
and unescalated basis.
At December 31, 2014, 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, 2014. FCX may also be subject
to litigation brought by private parties, regulators and local
governmental authorities related to these historical sites. A
discussion of these sites follows.