Freeport-McMoran: Corporate Rap Sheet
by Philip Mattera
Phoenix-based Freeport-McMoRan operates one of the most controversial mining operations in the world in the West Papua region of Indonesia. The vast gold and copper open pit, which is said to be one of the planet's biggest waste generators, has made Freeport a lightning rod for criticism over its environmental, human rights, labor rights and workplace safety practices.
The company, with annual revenue of more than $20 billion, is the largest U.S. corporation focused on mining, thanks in large part to its acquisition of Phelps Dodge in 2007. Along with Indonesia, it has mining operations in Arizona, Peru and the Democratic Republic of Congo. It also has oil & gas operations in California, Wyoming, Texas, Louisiana and the Gulf of Mexico.
Starting with Sulfur
Freeport got its start in the unglamorous business of producing sulfur. In 1912 the company was created to exploit a sulfur find on the gulf coast of Texas using a new method devised by Herman Frasch. Founded by a syndicate that included an executive of New York's National City Bank, a forerunner of Citibank, Freeport overcame a patent challenge by Frasch's own company. In the 1930s Freeport moved into manganese, making use of deposits in Cuba, and in the 1940s produced large quantities of nickel for the U.S. war effort.
In the postwar period Freeport diversified into potash and then oil and gas. By the mid-1960s it had mineral exploration and production operations in Australia and other parts of the Pacific region. The latter included Indonesia, where Freeport launched a huge copper and gold mining project at its Grasberg Prospect in the area now called West Papua.
What had been known as Freeport Sulphur Company changed its name to Freeport Minerals in 1971. A decade later, Freeport merged with McMoRan Oil & Gas, an aggressive petroleum explorer, to form Freeport-McMoRan. In 2007 it paid some $25 billion to acquire Phelps Dodge and become the world's largest publicly traded copper producer. In 2012 it expanded into the energy sector with the purchase of Plains Exploration and Production. In 2014 Freeport agreed to sell it 80 percent stake in the Candelaria copper mine in Chile.
Freeport in Indonesia
Freeport moved into Indonesia in 1967, only two years after Suharto's military coup in which hundreds of thousands of opponents were killed. The company developed close ties with the regime and was able to structure its operations in a way that was unusually profitable. Benefits promised to local indigenous people never fully materialized, and the mining operation caused extensive downstream pollution in three rivers.
Until the mid-1990s these issues were not widely reported, but then Freeport's practices started to attract more attention. In April 1995 the Australian Council for Overseas Aid issued a report describing the oppressive conditions faced by the Amungme people living near the mine. It also described a series of protests against Freeport that were met with a harsh response from the Indonesian military. A follow-up press release by the Council accused the army of killing unarmed civilians. An article in The Nation in the summer of 1995 provided additional details, including an allegation that Freeport was helping to pay the costs of the military force.
In November 1995, despite reported lobbying efforts on the part of Freeport director Henry Kissinger, the Clinton Administration took the unprecedented step of cancelling the company's $100 million in insurance coverage through the Overseas Private Investment Corporation because of the damage its mining operation was doing to the tropical rain forest and rivers (the human rights issue was not mentioned). The company responded with an aggressive public relations campaign in which it attacked its critics both in Indonesia and abroad. The company also negotiated a restoration of its OPIC insurance in exchange for a promise to create a trust fund to finance environmental initiatives at the Grasberg site. Within a few months, however, Freeport decided to give up its OPIC coverage and proceeded to increase its output, which meant higher levels of tailings and pollution.
The criticism of Freeport continued. It faced protests by students and faculty members at Loyola University in New Orleans (where the company's headquarters were located at the time) who called attention both to the situation in Indonesia and to hazardous waste dumping into the Mississippi River by Freeport's local phosphate processing plant. Another hotbed of protest was the University of Texas, the alma mater of Freeport's chairman and CEO James (Jim Bob) Moffett and the recipient of substantial grants from the company and from Moffett personally, who had a building named after him in return.
Despite the controversy, Freeport continued mining at the Grasberg site, and in 1997 it joined with the Canadian exploration company Bre-X to exploit what was touted as one of the richest gold strikes in history in the Indonesian portion of Borneo. That discovery, however, turned out to be a giant fraud.
After its ally Suharto resigned amid corruption charges in 1998, Freeport had to take a less combative position. The company brought in Gabrielle McDonald, the first African-American woman to serve as a U.S. District Court judge, as its special counsel on human rights and vowed to share more of the wealth from Grasberg with the people of West Papua. A 2000 article in Business Week expressed skepticism that Freeport's public relations effort would succeed: "the quarrels between the tribes and Freeport are likely to go on. The wounds run too deep to heal soon."
Freeport also found itself at the center of controversy over worker safety, as sometimes did Rio Tinto, which held a 40 percent stake in Grasberg. In October 2003 eight employees were killed in a massive landslide at Grasberg that an initial government investigation concluded was probably the result of management negligence. A month later, two miners died after being exposed to sulfur fumes. A few weeks later, the government reversed itself, attributing the landslide to a "natural occurrence" and allowing the company to resume normal operations.
In 2005 Global Witness published a report that elaborated on the accusations that Freeport was making direct payments to members of the Indonesian military, especially a general named Mahidin Simbolon. In an investigative report published on December 27, 2005, the New York Times said it had obtained evidence that Freeport had made payments totaling $20 million to members of the Indonesian military in the period from 1998 to 2004. (A 2011 estimate by Indonesia Corruption Watch put company payments to the national police at $79 million over the previous decade.)
Reports such as these raised concerns among some of Freeport's institutional investors. The New York City Comptroller, who oversees the city's public pension funds, charged that the company might have violated the Foreign Corrupt Practices Act. Federal prosecutors reportedly investigated the issue but declined to file charges.
Back in Indonesia, protests escalated. In March 2006 the military responded to anti-
Freeport student demonstrations by instituting what amounted to martial law in the city of Jayapura. That same month, the Indonesian government released the results of an investigation by independent experts concluding that the company was dumping nearly 700,000 tons of waste a day into waterways.
In June 2006 the Norwegian Ministry of Finance cited Freeport's environmental record in Indonesia as the reason for excluding the company from its investment portfolio.
In 2007 workers at the Grasberg mine staged sit-down strikes to demand changes in management practices along with improved wages and benefits. More strikes occurred in 2011.
In 2013 more than two dozen workers were killed in a tunnel collapse at Grasberg, prompting the company to suspend operations for several weeks. Indonesia's National Commission on Human Rights charged that the company could have prevented the conditions that caused the accident.
In 2014 the Indonesian government barred Freeport from exporting its output for about six months in a dispute over a new export tax the company refused to pay. Freeport held firm on the tax but agreed to pay higher royalties to the government.
U.S. Environmental Issues
In 1990 Freeport, acting as a developer, angered residents of Austin, Texas with a proposal to build a large mixed-use project by the city's beloved Barton Springs. A long-running legal battle ensued, and Freeport withdrew from the project.
In 1994 a huge sinkhole emerged at a phosphate plant in Polk County, Florida operated by IMC-Agrico, then a joint venture of IMC Global and a Freeport affiliate. As a result, millions of cubic feet of toxic waste was spilled into an aquifer used for drinking water.
In 2009 Freeport was fined $105,000 by the Arizona Department of Environmental Quality for air-pollution violations in Pima County. Two years later, the department fined the company $150,000 for releasing 168,000 gallons of sulfuric acid and heavy metals from a pipeline into a tributary of the San Francisco River.
In 2010 Freeport consented to pay $54 million to the city of Blackwell, Oklahoma to settle a class action lawsuit arguing that the company should be held responsible for the cleanup of large quantities of toxic waste at a site that had been a zinc smelter for decades. The smelter had been owned by a subsidiary of Phelps Dodge, which Freeport acquired in 2007.
In 2012 the U.S. Justice Department announced that Freeport would pay $6.8 million to settle federal and state charges relating to the release of toxic wastes into waterways at the company's Morenci copper mine in southeastern Arizona. The complaint charged that the polluted water caused the death of migratory birds.
U.S. Labor Relations
When Freeport acquired Phelps Dodge it acquired a company that had been involved in one of the most contentious labor disputes of modern U.S. history. In the early 1980s, Phelps Dodge management, facing a slump in copper prices, decided to challenge the wage rates of its unionized workers in Arizona. The miners, mostly Mexican-Americans and members of the United Steelworkers, resisted the assault and went on strike in 1983. Management took a hard line, quickly bringing in permanent replacements and refusing to make any significant compromises. After the dispute continued two years -- during which strikers were subject to surveillance by state security agents -- the unions were decertified and the company prevailed.
U.S. Worker Safety and Health
Freeport has faced controversies involving safety conditions for its U.S. workers as well as those in Indonesia. In 2007 Arizona miners and their families living in trailers provided by the company complained about high levels of formaldehyde -- a suspected carcinogen and known irritant . The company brushed aside the complaints and told the workers they were free to move if they did not like the chemical exposure.
Freeport was fined $77,000 by the U.S. Mine Safety and Health Administration in connection with the death of a worker at its Morenci operation in Arizona in 2008.
Other Information Sources
Violation Tracker summary page
Watchdog Groups and Campaigns
UTWatch (University of Texas student group; no longer active but archive is still available)
WALHI (Indonesian Forum for the Environment)
Key Books and Reports
Copper Crucible: How the Arizona Miners' Strike of 1983 Recast Labor-Management Relations in America by Jonathan D. Rosenblum (ILR Press, 1995).
Golden Rules: Making the Case for Responsible Mining (Earthworks, February 2007).
Holding the Line: Women in the Great Arizona Mine Strike of 1983 by Barbara Kingsolver (ILR Press, 1996).
Paying for Protection: The Freeport Mine and the Indonesian Security Forces (Global Witness, July 2005).
Risky Business: The Grasberg Gold Mine (Project Underground, 1998).
Trouble at Freeport (Australian Council for Overseas Aid, April 1995).
West Papua: The Obliteration of a People (TAPOL, 1988).
West Papua Information Kit (Australia West Papua Association, 1995).
"Written in Stone," an investigative package on Freeport in the Austin Chronicle, September 23, 2005.
Last updated October 13, 2014
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