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Contingencies and Commitments (Unaudited) | 3 Months Ended
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Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | CONTINGENCIES AND COMMITMENTS Litigation During first-quarter 2018, there were no significant updates to previously reported legal proceedings included in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2017, other than the matter below. On April 1, 2016, a purported class action titled David Garcia v. Freeport-McMoRan Oil & Gas LLC was filed in the Superior Court of the State of California for the County of Santa Barbara (Case No. 16CV01305) against FM O&G LLC, an indirect wholly owned subsidiary of FCX. A former FM O&G LLC employee filed the case, which alleges violations of various California employment laws and seeks relief for past wages, overtime, penalties, interest and attorney’s fees. The primary issue underlying the claims is whether compensation must be paid to non-exempt shift workers on platforms located offshore California on the outer-continental shelf for sleep time and other non-working time. In June 2016, FM O&G LLC removed the case to the U.S. District Court for the Central District of California, Santa Barbara (the District Court). In September 2016, the court dismissed the complaint on the grounds that all four FM O&G LLC platforms potentially involved are located in federal waters, that federal law, not state law, applies, and that federal law does not require an employer to compensate for non-work time. In October 2016, the plaintiff appealed the dismissal to the U.S. Court of Appeals for the Ninth Circuit. In June 2017, the Ninth Circuit stayed the Garcia case pending its decision in another case involving essentially the same legal issues, titled Newton v. Parker Drilling Management Services, Ltd. In February 2018, a three-judge panel of the Ninth Circuit ruled in favor of the plaintiffs in the Newton case. Because that decision conflicts with longstanding precedent in the Fifth Circuit and could set a precedent that will result in a reversal of the dismissal in the Garcia case, FM O&G LLC and others filed amicus briefs in April 2018 in support of Parker Drilling’s petition for an en banc rehearing in the Newton case. The Ninth Circuit denied that request on April 27, 2018, but modified its original opinion noting that the question of whether the Ninth Circuit’s holding should be applied retrospectively is reserved for the District Court’s consideration on remand. The amount of the exposure in Garcia is uncertain because FM O&G LLC has potential defenses to the claims even if state law would be applied; however, absent success on those defenses, FCX estimates that the exposure could be in the range of approximately $50 million to $80 million if California wage and hour law is applied retroactively to FM O&G LLC’s operations offshore California. FCX has not established a reserve for this contingency because it believes that its legal position is correct and does not believe a loss is probable. FCX intends to vigorously defend this matter. Tax and Other Matters Cerro Verde Royalty Dispute and Other Peru Tax Matters During first-quarter 2018, there were no significant changes to the Cerro Verde royalty dispute and other Peru tax matters included in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2017. Indonesia Tax Matters The following information includes a discussion of updates to previously reported Indonesia tax matters included in Note 12 of FCX’s annual report on Form 10-K for the year ended December 31, 2017. PT-FI received assessments from the local regional tax authority in Papua, Indonesia, for additional taxes and penalties related to surface water taxes for the period from January 2011 through March 2018. PT-FI has filed or will file appeals of these assessments with the Indonesia Tax Court. During first-quarter 2018, the Indonesia Tax Court ruled partially in favor of PT-FI with respect to assessments for the period January 2016 through April 2016 by reducing these assessments to $13 million, including penalties (based on the exchange rate at March 31, 2018), or an approximate 40 percent reduction. Hearings in the Indonesia Tax Court are currently underway related to assessments for the period from May 2016 through April 2017. During 2017, PT-FI filed petitions to the Indonesia Supreme Court with respect to assessments for the period from January 2011 through December 2015. In April 2018, the Indonesia Supreme Court posted on its website summaries of favorable decisions relating to surface water tax assessments for the period January 2011 through July 2015. PT-FI began receiving the official written decisions on April 18, 2018. The Supreme Court ruling concluded that PT-FI and the Indonesian government are bound by PT-FI’s Contract of Work (COW), which is lex specialis, and prevails as the law for the parties to the COW that should be carried out in good faith. The Supreme Court decisions for the period January 2011 through July 2015 reduce the total remaining exposure for the period from August 2015 through March 2018 to $161 million, including $81 million in penalties. As of March 31, 2018, no charges have been recorded for any assessments because PT-FI believes its COW exempts it from these payments. As of May 4, 2018, PT-FI has not paid and does not intend to pay these assessments. Indonesia Mining Contract. The following is the latest information related to PT-FI’s COW (refer to Note 13 of FCX’s annual report on Form 10-K for the year ended December 31, 2017, for further discussion). In August 2017, FCX and the Indonesian government reached an understanding on a framework that would replace the COW while providing PT-FI with long-term mining rights. This framework includes (i) conversion from the COW to a special license (IUPK) providing PT-FI with long-term mining rights through 2041; (ii) Indonesian government certainty of fiscal and legal terms during the term of the IUPK; (iii) PT-FI commitment to construct a new smelter in Indonesia within five years of reaching a definitive agreement; and (iv) divestment of 51 percent of the project area interests to Indonesian participants at fair market value, structured so that FCX retains control over operations and governance of PT-FI. Execution of a definitive agreement will require approval by the Board and PT-FI’s joint venture partner, Rio Tinto, as well as the modification or revocation of current regulations and the implementation of new regulations by the Indonesian government. FCX cannot currently predict whether there will be any material accounting and tax impacts associated with the divestment. In late 2017, the Indonesian government (including the regional government of Papua Province and Mimika Regency) and PT Indonesia Asahan Aluminium (Inalum), a state-owned enterprise, which leads the Indonesian government’s consortium of investors, formed a special purpose company to acquire Grasberg project area interests. Inalum is wholly owned by the Indonesian government and currently holds 9.36 percent of PT-FI’s outstanding common stock. FCX continues to engage with Inalum and Rio Tinto on potential arrangements that would result in the Inalum consortium acquiring interests that would meet the Indonesian government’s 51 percent ownership objective in a manner satisfactory to all parties, and in a structure that would provide for continuity of FCX’s management of PT-FI’s operations and governance of the business. The parties continue to negotiate documentation on a comprehensive agreement for PT-FI’s extended operations and to reach agreement on timing, process and governance matters relating to the divestment. The parties have a mutual objective of completing negotiations and the required documentation as soon as possible. In October 2017, Indonesia’s Ministry of Environment and Forestry (the Ministry) notified PT-FI of administrative sanctions related to certain activities the Ministry indicated are not reflected in PT-FI’s environmental permit. The Ministry also notified PT-FI that certain operational activities were inconsistent with factors set forth in PT-FI’s environmental permitting studies and that additional monitoring and improvements need to be undertaken related to air quality, water drainage, treatment and handling of certain wastes, and tailings management. PT-FI has been engaged in a process to update its permits through submissions and dialogue with the Ministry that began in late 2014, and PT-FI believes that it has submitted the required documentation to update such permits. In April 2018, the Ministry issued decrees imposing unattainable environmental standards related to PT-FI’s controlled riverine tailings management system. The decrees include a six-month transition period and conflict with PT-FI’s approved environmental management programs and existing environmental permits. PT-FI is engaged in discussions with the Ministry regarding these actions, which PT-FI believes are contrary to the Indonesian government’s obligations under PT-FI’s COW. Resolution of these matters is a requirement for concluding a comprehensive agreement for PT-FI’s extended operations. In December 2017, the Indonesian government extended PT-FI’s temporary IUPK to June 30, 2018, to enable normal operations to continue during the negotiation period. In February 2018, PT-FI’s export license was extended to February 15, 2019. On February 28, 2018, PT Smelting (PT-FI’s 25-percent-owned smelter and refinery in Indonesia) received an extension of its anode slimes export license through February 26, 2019. Until a definitive agreement is reached, PT-FI has reserved all rights under its COW, including dispute resolution procedures. FCX cannot predict whether PT-FI will be successful in reaching a satisfactory agreement on the terms of its long-term mining rights. If PT-FI is unable to reach a definitive agreement with the Indonesian government on its long-term mining rights, FCX intends to reduce or defer investments significantly in its underground development projects and will pursue dispute resolution procedures under the COW.

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