To: Securities and Exchange Commission

From: Groundwater Awareness League, Inc.
P. O. Box 934
Green Valley, AZ 85622

 Date: Feb. 7, 2007

Subject: Proposed Acquisition of Phelps Dodge Corporation by Freeport-McMoRan Corporation

Complaint Two: Regarding erroneous statements about Freeport-McMoRan’s environmental record, including in a report filed on SEC’s EDGAR database

Freeport McMoRan’s (FM) website heralds the company’s good environmental record. However, all evidence indicates that the management simply ignores any environmental issues. FM has one large metal mining operation in Indonesia. Indonesia does have water quality standards and, according to reports from concerned scientists and citizens from that country, Freeport continues to ignore them. In 2005, an Environmental Assessment was performed by a private company on their Freeport-Rio Tinto Grasberg operation in West Papua, New Guinea, Indonesia. After receiving the report, mining managers answered every point on the report without demonstrating any intention to make any significant changes. On one point, they did commit to install 50 monitor wells—in the next year.

Monitor wells do nothing to clean up toxic metals. Monitor wells are one of the best delay tactics used by mining operations. We know that clearly here in Arizona. The sulfate plume that is polluting our local groundwater has been monitored since 1980, when it was first studied by an EPA Mines’ Task Force. Due to the change of ownership two times and general lack of concern, gaps of 2 to 3 years show up in data from monitor wells. Phelps Dodge is still studying the plume in 2007—some 24 years later. As of 2005, they have provided public supply wells outside the plume, but they have not started cleaning up the industrial waste.

Information from their website which is contrary to their well-documental environmental lapses detailed below:

Environmental Policy: General

Freeport-McMoRan Copper & Gold Inc. (FCX) believes that, as a responsible corporate citizen, it is the duty of the company and its operating affiliates to minimize the impact of their operations on the environment and, where feasible, to protect and enhance the quality of the environment in areas where they operate. FCX is also committed to providing a safe working environment for its employees and a healthy social/economic environment for the local people in its operational areas.

FCX is committed not only to compliance with federal, state, and local environmental statutes and regulations, but also to continuous improvement of its environmental performance at every operational site. Environmental audits will continue to be conducted to assess environmental compliance, management systems and practices. Goals and benchmarks will be established in each operating unit as a yardstick to measure environmental performance. FCX will also work with governmental agencies, the local population and responsible non-governmental organizations to enhance its environmental performance.

In a conference call in November to announce the acquisition of the Freeport-McMoRan—Phelps Dodge merger to some financial analysts, Richard Adkerson, the Chief Executive Officer of FM made assertions about both companies’ environmental excellence. He may not have known about the Phelps Dodge state and federal violations and superfund sites, but he surely did know about the flawed FM environmental record. Also, he must have known that, in 1995, an international insurance provider canceled the Indonesian operation’s $100 million political risk policy because the mine posed “unreasonable or major environmental, health or safety hazards.” However, he did go on to make clear that the “established tradition” was “shareholder value.” Clearly, The CEO of FM made erroneous statements in a phone conference on November 20, 2006, SEC File No: 001-00082.

November 20, 2006; 8:30 a.m. EST
Freeport-McMoRan (FM) and Phelps Dodge (PD) Conference Call
Present on the conference call were James R. Moffett, Chairman of FM, Richard Ackerson, Chief Executive Officer of FM, Steve Whistler, Chairman and CEO of Phelps Dodge, Tim Snider, President and Chief Operating Officer of Phelps Dodge, and Ramey Peru, Chief Financial Officer of Phelps Dodge.

RICHARD ADKERSON [CEO of FM]: ….. We are committed to our longstanding tradition of maximizing value for shareholders. This company has a strong management track record. The combined companies, each company has, in terms of safety and environmental excellence, world class open pit underground mining expertise and salvage capabilities and explorations and development, proven project management expertise. We’ve each brought in major projects in a very expeditious fashion in global leaders and mining and mining processing technology. Underlying this operating characteristics that we’re [sic] — want to preserve from both our organizations. We are going to carry forward our established tradition of working to create shareholder value. [Emphasis added]

FM’s disregard of environmental concerns has been covered regularly in such prestigious publications as The New York Times, Business Week and The Wall Street Journal. It is noteworthy that some of the sharpest criticism comes from the Alma Mater of the Chairman of the Board: University of Texas in Austin, Texas and the Austin Chronicle.

May 3, 2006
Indonesian Forum for Environment Report
By Torry Kuswardono. Mining and Energy Campaigner

The Freeport mine has already disposed of one billion tons of tailings into the Aghawagon-Otomona-Ajkwa river system, despite riverine disposal of mine tailings being expressly prohibited under the Indonesian Water Quality Management and Water Pollution Control Regulations 2001. Regarding this riverine disposal, Freeport-Rio Tinto falsely claims that “The quality of water flowing through the [tailings deposition] system conforms to both Indonesian regulations and international standards regarding potentially harmful metals”, when in fact, it does not, based on its own monitoring data submitted to the government.

December 27, 2005
Below a Mountain of Wealth, a River of Waste


The closest most people will ever get to remote Papua, or the operations of Freeport-McMoRan, is a computer tour using Google Earth to swoop down over the rain forests and glacier-capped mountains where the American company mines the world's largest gold reserve.

With a few taps on a keyboard, satellite images quickly reveal the deepening spiral that Freeport has bored out of its Grasberg mine as it pursues a virtually bottomless store of gold hidden inside. They also show a spreading soot-colored bruise of almost a billion tons of mine waste that the New Orleans-based company has dumped directly into a jungle river of what had been one of the world's last untouched landscapes. [See Map: Attachment One]

Sept 23, 2005
Freeport at Grasberg: ‘Devastated the river system
Austin Chronicle by Robert Bryce

 UT's Jim Bob Moffett and Freeport-McMoRan ride a new wave of allegations of business as usual: exploitation, cronyism, and environmental devastation. . . .

What are the ongoing environmental conditions at the Grasberg mine? Are the mining tailings releasing heavy metals? If so, how bad is the problem?

These questions cannot be answered with certainty, because there are no published reports of any independent monitoring of Freeport's mine and its environmental effects. But there is an historical record that sheds some light on the likely current conditions. In 1999, The Austin Chronicle won a Freedom of Information Act lawsuit against the Overseas Private Investment Corporation, thus forcing the agency to release a report it commissioned on Freeport's Grasberg mine back in 1994.

The Chronicle forced OPIC to release the 1995 report – produced by a Salt Lake City-based company called EnviroSearch International – that convinced OPIC to cancel the $100 million political risk insurance policy it held on Freeport-McMoRan's Grasberg mine.

EnviroSearch was the last known independent auditor ever to be allowed onto the Grasberg site.

. . . .EnviroSearch wrote, " Freeport represented to us that the impact of the tailings on the river system would be 'difficult to separate from processes that occur naturally.' Freeport's own data, obtained through our monitoring, site visit and other independent sources of information strongly contradicts this representation. In fact, the project has devastated the river system, through excessive discharge and deposition of tailings."

April, 2004
Indonesian Human Rights Abuses in West Papua: Application of the Law of Genocide to the
History of Indonesian Control, A paper prepared for the Indonesia Human Rights Network, by the Allard K. Lowenstein International Human Rights Clinic, Yale Law School

Since Indonesia gained control of West Papua, the West Papuan people have suffered persistent and horrible abuses at the hands of the government. The Indonesian military and security forces have engaged in widespread violence and extrajudicial killings in West Papua. They have subjected Papuan men and women to acts of torture, disappearance, rape, and sexual violence, thus causing serious bodily and mental harm. Systematic resource exploitation, the destruction of Papuan resources and crops, compulsory (and often uncompensated) labor, transmigration schemes, and forced relocation have caused pervasive environmental harm to the region, undermined traditional subsistence practices, and led to widespread disease, malnutrition, and death among West Papuans. Such acts, taken as a whole, appear to constitute the imposition of conditions of life calculated to bring about the destruction of the West Papuans. Many of these acts, individually and collectively, clearly constitute crimes against humanity under international law. Further, the West Papuans, objectively, and in the eyes of their Indonesian persecutors, appear to constitute a group as defined by Article II of the Genocide Convention.

In the final analysis, whether the sum of acts committed by the Indonesians against the West Papuans rises to the level of genocide turns largely on the question of whether these acts were committed with the requisite mens rea or intent to destroy the West Papuan group......

July 31, 2000
Freeport McMoRan—A Pit of Trouble
Business Week by Michael Shari

….. The shifting climate is threatening Freeport's $4 billion investment in West Papua, formerly Irian Jaya. Freeport has 15 years left in its contract to recover gold from its mammoth Grasberg mine. But it stands accused by tribal leaders and Western activists of polluting the environment, of not sharing enough wealth with the indigenous people, and of abetting the Indonesian military's suppression of a campaign for Papuan independence. Foreign investors are watching to see how Freeport will fare as it negotiates its future in Indonesia. '' Freeport is definitely considered a bellwether for foreign investment prospects,'' says James Castle, president of the American Chamber of Commerce in Indonesia.

November 29, 1999
No. 98-30235 [Excerpt Section A-2.]

Beanal, a local Indonesian, came to Louisiana, the state where Freeport operates to file a complaint. He argues that Freeport through its mining activities engaged in environmental abuses that violated international law. In his Third Amended Complaint, Beanal alleges the following:

FREEPORT , in connection with its Grasberg operations, deposits approximately 100,000 tons of tailings per day in the Aghwagaon, Otomona and Akjwa Rivers. Said tailings have diverted the natural flow of the rivers and have rendered the natural waterways of the plaintiff unusable for traditional uses including bathing and drinking. Furthermore, upon information and belief, the heavy metal content of the tailings have and/or will affect the body tissue of the aquatic life in said rivers. Additionally, tailings have blocked the main flow of the Ajkwa River causing overflow of the tailings into lowland rain forest vegetation destroying the same. Third Amended Complaint ¶ 13.

FREEPORT in connection with its Grasberg operations has diverted the aforesaid rivers greatly increasing the likelihood of future flooding in Timika, the home of the plaintiff, TOM BEANAL. Id. ¶ 14. FREEPORT, in connection with its Grasberg mining operations has caused or will cause through the course of its operations 3 billion tons of "overburden" to be dumped into the upper Wanagon and Carstensz creating the likely risk of massive landslides directly injurious to the plaintiff. Furthermore, said "overburden" creates acid rock damage which has created acid streams and rendering the Lake Wanagon an "acid lake" extremely high in copper concentrations, . . . Id. ¶ 15.

However, Freeport argues that Beanal's allegations of environmental torts are not cognizable under the "law of nations" because Beanal fails to show that Freeport's mining activities violate any universally accepted environmental standards or norms. Furthermore, Freeport argues that it would be improper for a United States tribunal to evaluate another county's environmental practices and policies. The district court conducted a thorough survey of various international law principles, treaties, and declarations and concluded that Beanal failed to articulate environmental torts that were cognizable under international law.

The Freeport McMoRan Campaign

Students for Environmental Justice At Stanford University (SEAS)

Freeport McMoRan is an American multi-national corporation that has operated a gold and copper mine in the Irian Jaya region of Indonesia for nearly thirty years. The Freeport mine has been linked to widespread environmental devastation and the destruction of the homeland of the local Amunge people. The corporation has also been linked to the Suharto military dictatorship and has provided infrastructure support for the military in the region. Independent observers have linked Freeport to the violent repression of the indigenous people in the area.

In 1998, Stanford students discovered that one of our University Trustees, Ward Woods, also sat on the Board of Directors of Freeport Gold and Copper. In addition, it was discovered that Stanford itself was invested in Freeport to the tune of 200,000 shares. We decided to take action to force Mr. Woods to resign from either one Trusteeship or the other, and to again ask Stanford to invest responsibly and not lend capital to corporations with such poor environmental and human rights records.

December 1996
The Ten Worst Corporations of 1996
FREEPORT McMoRAN: Mining Menace

In 1967, in the early days of the Suharto dictatorship, Freeport McMoRan negotiated a contract with the Indonesian government that gave the multinational giant exclusive mining rights to the then recently discovered Erstberg copper deposit in Irian Jaya, the western half of the island of New Guinea in Indonesia. In 1988, Freeport discovered Grasberg, a huge copper and gold deposit. A 30-year contract giving the company unlimited rights to the island's copper and gold soon followed.

Today, the company operates a virtual colony in Irian Jaya, where it maintains exploration rights to about seven million acres and operates the world's largest gold mine and the world's third largest copper mine. The brutal Suharto regime controls about 9 percent of PT Freeport Indonesia, the country's largest taxpayer.
Indonesian environmental groups charge that Freeport has dumped mine tailings from its open-pit copper mine into rivers for 16 years and have warned of health problems that are being covered up by the Indonesian dictatorship.

September 1990
Freeport McMoRan: UT's support for a corporate bandit
UT WATCH compiled by Liz Henry ; pages 10-11; Volume 2, No. 1

According to a study by Citizen Action, a national Washington-based environmental watchdog group, in 1988 Freeport McMoRan ranked as the sixth largest producer of toxic waste in the U.S., and the number one water polluter in the country. In fact, Citizen Action reports that the two worst water polluting plants in the country both belong to Freeport's fertilizer subsidiary, Agrico Chemical Co. Most of Freeport's toxic water discharges are dumped into the Mississippi River - the water supply for New Orleans - from these two Louisiana fertilizer plants.


Attachment One: Google Earth map of Freeport Grasberg operations

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