ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS |
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| Environmental Remediation Obligations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS |
NOTE 11 - ENVIRONMENTAL AND MINE CLOSURE OBLIGATIONS
We had environmental and mine closure liabilities of $234.0 million and $170.8 million at December 31, 2015 and 2014, respectively. Payments in 2015 and 2014 were $2.6 million and $3.1 million, respectively. The following is a summary of the obligations as of December 31, 2015 and 2014:
Environmental
Our mining and exploration activities are subject to various laws and regulations governing the protection of the environment. We conduct our operations to protect the public health and environment and believe our operations are in compliance with applicable laws and regulations in all material respects. Our environmental liabilities of $3.6 million and $5.5 million at December 31, 2015 and 2014, respectively, including obligations for known environmental remediation exposures at various active and closed mining operations and other sites, have been recognized based on the estimated cost of investigation and remediation at each site. If the cost only can be estimated as a range of possible amounts with no specific amount being more likely, the minimum of the range is accrued. Future expenditures are not discounted unless the amount and timing of the cash disbursements readily are known. Potential insurance recoveries have not been reflected. Additional environmental obligations could be incurred, the extent of which cannot be assessed.
The Rio Tinto Mine Site
The Rio Tinto Mine Site is a historic underground copper mine located near Mountain City, Nevada, where tailings were placed in Mill Creek; a tributary to the Owyhee River. Site investigation and remediation work is being conducted in accordance with a Consent Order dated September 14, 2001 between the Nevada DEP and the RTWG composed of the Company, Atlantic Richfield Company, Teck Cominco American Incorporated and E. I. duPont de Nemours and Company. The Consent Order provides for technical review by the Rio Tinto Trustees. In recognition of the potential for an NRD claim, the parties actively pursued a global settlement that included the EPA and encompass both the remedial action and the NRD issues.
The Nevada DEP published a Record of Decision for the Rio Tinto Mine, which was signed on February 14, 2012 by the Nevada DEP and the EPA. On September 27, 2012, the agencies subsequently issued a proposed Consent Decree, which was lodged with the U.S. District Court for the District of Nevada and subsequently finalized on May 20, 2013. Under the terms of the Consent Decree, the RTWG has agreed to pay over $29.0 million in cleanup costs and natural resource damages to the site and surrounding area. The Company's share of the total settlement cost, which includes remedial action, insurance and other oversight costs was $12.2 million. As of December 31, 2015, we have no remaining required payments related to the Consent Decree compared to as of December 31, 2014, when we had $2.5 million in the Statements of Consolidated Financial Position related to this issue.
Mine Closure
Our mine closure obligations of $230.4 million and $165.3 million at December 31, 2015 and 2014, respectively, include our five consolidated U.S. operating iron ore mines, our Asia Pacific operating iron ore mine and a closed operation formerly operating as LTVSMC.
Management periodically performs an assessment of the obligation to determine the adequacy of the liability in relation to the closure activities still required at the LTVSMC site. The LTVSMC closure liability was $24.1 million and $22.9 million at December 31, 2015 and 2014, respectively. MPCA is presently working on an NPDES permit reissuance for this facility that could modify the closure liability, but the scale of that change will not be understood until the permit has been drafted and issued.
The accrued closure obligation for our active mining operations provides for contractual and legal obligations associated with the eventual closure of the mining operations. We performed a detailed assessment of our asset retirement obligations related to our active mining locations most recently in 2014 in accordance with our accounting policy, which requires us to perform an in-depth evaluation of the liability every three years in addition to routine annual assessments.
For the assessments performed, we determined the obligations based on detailed estimates adjusted for factors that a market participant would consider (i.e., inflation, overhead and profit) and then discounted the obligation using the current credit-adjusted risk-free interest rate based on the corresponding life of mine. The estimate also incorporates incremental increases in the closure cost estimates and changes in estimates of mine lives. The closure date for each location was determined based on the exhaustion date of the remaining iron ore reserves. The accretion of the liability and amortization of the related asset is recognized over the estimated mine lives for each location.
The following represents a roll forward of our asset retirement obligation liability related to our active mining locations for the years ended December 31, 2015 and 2014:
The revisions in estimated cash flows recorded during the year ended December 31, 2015 relate primarily to revisions in the timing of the estimated cash flows and the technology associated with required storm water management systems expected to be implemented subsequent to the indefinite idling of one of our U.S. Iron Ore mines.
For the year ended December 31, 2014, the revisions in estimated cash flows recorded during the year primarily included a downward revision of estimated asset retirement costs for one of our U.S. Iron Ore mines associated with required storm water management systems. The mine life was extended during 2014, effectively converting certain asset retirement costs to capital costs over the remaining life-of-mine.
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