FCX, §1A diff (2015 → 2016)

Item 1A. Risk Factors. This report contains "forward-looking statements" within the meaning of United States (U.S.) federal securities laws. Forward-looking statements are all statements other than statements of historical facts, such as projections or expectations relating to ore grades and milling rates; production and sales volumes; unit net cash costs; cash production costs per barrel of oil equivalent (BOE); operating cash flows; capital expenditures; debt reduction initiatives; exploration efforts and results; development and production activities and costs; liquidity; tax rates; the impact of copper, gold, molybdenum, cobalt, crude oil and natural gas price changes; the impact of deferred intercompany profits on earnings; reserve estimates; future dividend payments; and share purchases and sales. We undertake no obligation to update any forward-looking statements. We caution readers that forward-looking statements are not guarantees of future performance and our actual results may differ materially from those anticipated, projected or assumed in the forward-looking statements. Important factors that can cause our actual results to differ materially from those anticipated in the forward-looking statements include the following: Financial risks Declines in the market prices of copper, gold and oil have adversely affected our earnings, cash flows and asset values and, if sustained or intensified, may adversely affect our ability to repay debt. Fluctuations in the market prices of copper, gold and oil have caused and may continue to cause significant volatility in our financial performance and in the trading prices of our debt and common stock. Our financial results vary with fluctuations in the market prices of the commodities we produce, primarily copper, gold and oil, and to a lesser extent molybdenum, silver, cobalt and natural gas. As described below, during 2015 and in early 2016, copper and oil prices declined significantly. If low prices persist or decline further, they may continue to have a material adverse effect on our financial results, the value of our assets and/or our ability to repay our debt and meet our other fixed obligations; and may continue to depress the trading prices of our common stock and of our publicly traded debt securities. In response to lower commodities prices, we have announced revised operating plans that incorporate significant reductions in capital spending, production curtailments at certain North and South America mines and actions to reduce operating, exploration and administrative costs, which may not achieve all the results we anticipate. If market prices for our primary commodities continue to decline or persist at low levels, we may have to further revise our operating plans, including curtailing production further, reducing operating costs and capital expenditures and discontinuing certain exploration and development programs. We may be unable to decrease our costs in an amount sufficient to offset reductions in revenues, in which case we may incur additional losses, and those losses may be material. We are also pursuing asset sales and joint venture arrangements to raise proceeds for debt reduction. We may be unable to receive favorable terms for asset sales or joint venture arrangements in the current market environment, which may prevent us from achieving our desired debt reduction levels. Fluctuations in commodities prices are caused by varied and complex factors beyond our control, including global supply and demand balances and inventory levels; global economic and political conditions; international regulatory, trade and tax policies; commodities investment activity and speculation; the price and availability of substitute products; and changes in technology. In particular, copper prices may be affected by demand from China, which has become the largest consumer of refined copper in the world, and by changes in demand for industrial, commercial and residential products containing copper. Copper prices have declined significantly during 2015, with London Metal Exchange (LME) spot copper prices averaging $3.11 per pound in 2014 and $2.49 per pound in 2015. On December 31, 2015, the LME spot copper price was $2.13 per pound. Copper prices weakened further in early 2016 with the LME spot copper price ranging from $1.96 per pound to $2.13 per pound from January 1, 2016, to February 19, 2016. The decline in prices during 2015 resulted in non-cash charges for copper and molybdenum inventory adjustments ($338 million) and long-lived mining asset impairments ($37 million), as more fully discussed in Notes 4 and 5. Copper prices at or below the December 31, 2015, level could result in additional inventory adjustments and impairment charges for our long-lived mining assets. Other events that could result in impairment of our long-lived mining assets include, but are not limited to, decreases in estimated proven and probable mineral reserves and any event that might otherwise have a material adverse effect on mine production costs. Factors affecting gold prices may include the relative strength of the U.S. dollar to other currencies, inflation and interest rate expectations, purchases and sales of gold by governments and central banks, demand from China and India, two of the world’s largest consumers of gold, and global demand for jewelry containing gold. The London PM gold price averaged $1,160 per ounce in 2015 and $1,266 per ounce in 2014, and was $1,062 per ounce on December 31, 2015. Crude oil prices have been and could be affected in the future by continued development of shale reserves through hydraulic fracturing, actions of the Organization of the Petroleum Exporting Countries and other major oil producing nations, political and weather conditions in oil producing regions, transportation and refinery capacity, the amount of foreign imports of oil into the U.S., and the impact of legislation adopted in December 2015 lifting 40-year old restrictions on exporting U.S. oil. Oil prices have declined significantly since mid-2014, with Brent crude oil prices averaging $99.45 per barrel in 2014 and $53.64 per barrel in 2015. On December 31, 2015, the Brent crude oil price was $37.28. In early 2016, oil prices weakened further to multi-year lows in response to excess global supplies and relatively weak economic conditions with Brent crude oil prices ranging from $27.88 per barrel to $37.22 per barrel from January 1, 2016, to February 19, 2016. As further discussed in Note 1 and in Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A), lower oil prices, and to a lesser extent natural gas prices, were a significant contributing factor to the non-cash impairment charges totaling $13.1 billion for the year 2015 and $3.7 billion for the year 2014 to write-down the carrying value of our proved oil and gas properties. As further described in Note 1, under full cost accounting rules, a "ceiling test" is conducted each quarter to review the carrying value of proved oil and gas properties for impairment. The U.S. Securities and Exchange Commission (SEC) requires that the twelve-month average of the first-day-of-the-month historical reference prices be used to determine the ceiling test limitation. Using West Texas Intermediate (WTI) as the reference oil price, the average price was $50.28 per barrel at December 31, 2015, compared with $94.99 per barrel at December 31, 2014. If the twelve-month historical average price remains below the December 31, 2015, twelve-month average of $50.28 per barrel, the ceiling test limitation will decrease potentially resulting in additional ceiling test impairments of our oil and gas properties. The WTI spot oil price was $29.64 per barrel at February 19, 2016. In addition to declines in the trailing twelve-month average oil and natural gas prices, other factors that could result in future impairment of our oil and gas properties, include costs transferred from unevaluated properties to the full cost pool without corresponding proved oil and natural gas reserve additions, negative reserve revisions and the future incurrence of exploration, development and production costs. At December 31, 2015, carrying costs for unevaluated properties were $4.8 billion. These costs will be transferred into the full cost pool as the properties are evaluated and proved reserves are established or if impairment is determined. If these activities do not result in additions to discounted future net cash flows from proved oil and natural gas reserves at least equal to the related costs transferred (net of related tax effects), ceiling test impairments may occur. During 2015, we transferred $6.4 billion of costs associated with unevaluated properties to the full cost pool mostly reflecting impairment of the carrying values of unevaluated properties. Our debt and other financial commitments may limit our financial and operating flexibility. At December 31, 2015, our total consolidated debt was $20.4 billion (see Note 8) and our total consolidated cash was $224 million. We also have various other financial commitments, including for reclamation and environmental obligations, take-or-pay contracts and leases. Our level of indebtedness and other financial commitments could have important consequences to our business, including the following: • Limiting our flexibility in planning for, or reacting to, changes in the industries in which we operate; • Increasing our vulnerability to general adverse economic and industry conditions; • Limiting our ability to fund future working capital and capital expenditures, to engage in future development activities, or to otherwise realize the value of our assets and opportunities fully because of the need to dedicate a substantial portion of our cash flows from operations to payments on our debt; • Requiring us to sell assets to reduce debt; or • Placing us at a competitive disadvantage compared to our competitors that have less debt and/or fewer financial commitments. On February 26, 2016, we reached agreement with our bank group to amend our revolving credit facility and term loan. The changes pursuant to the revolving credit facility and the term loan included modifications of the maximum leverage ratio and minimum interest expense coverage ratio to provide us with additional flexibility, and the commitment under our revolving credit facility has been reduced by $500 million from $4.0 billion to $3.5 billion. A springing collateral and guarantee trigger was added to the revolving credit facility and term loan. Under this provision, if we have not entered into definitive agreements for asset sales totaling $3.0 billion in aggregate by June 30, 2016, that are reasonably expected to close by December 31, 2016, we will be required to secure the revolving credit facility and term loan with a mutually acceptable collateral and guarantee package. If such asset sales totaling $3.0 billion in aggregate have not occurred by December 31, 2016, then the springing collateral and guarantee trigger will go into effect. Refer to Notes 8 and 18 for further information about the revolving credit facility and term loan. Any failure to comply with the financial and other covenants in our debt agreements may result in an event of default that would allow the creditors to accelerate the related debt, which in turn may trigger cross-acceleration or cross-default provisions in other debt agreements. Our cash flow would not be sufficient to fully repay borrowings under our debt instruments that are accelerated upon an event of default. Since August 2015 and through January 5, 2016, we sold 210 million shares of our common stock at an average price of $9.47 per share under at-the-market equity programs that generated approximately $2 billion in gross proceeds. We may seek to raise additional equity capital to fund operations, reduce debt or improve our financial position, which may have a negative impact to our stock price. For additional information, see Note 10. As of February 24, 2016, our senior unsecured debt was rated "BB" with a negative outlook by Standard & Poor’s (S&P), "BBB-" with a negative outlook by Fitch Ratings (Fitch), and "B1" with a negative outlook by Moody’s Investors Service (Moody's). There is no assurance that our credit ratings will not be downgraded in the future. For more information, refer to the risk factor below relating to mine closure and reclamation regulations and plugging and abandonment obligations related to our oil and gas operations. Our strategic review of the oil and gas business and evaluation of other transactions may not result in increased stockholder value. Our Board of Directors (the Board) is undertaking a strategic review of alternatives for our oil and gas business. We and our advisors are actively engaged with interested parties in a process to evaluate opportunities that include asset sales and joint venture arrangements that would generate cash proceeds for debt repayment. We are also evaluating transactions involving certain of our mining assets. These initiatives may not result in transactions or other events that will lead to debt reduction or an increase in stockholder value. Mine closure and reclamation regulations impose substantial costs on our operations, and include requirements that we provide financial assurance supporting those obligations. We also have plugging and abandonment obligations related to our oil and gas properties, and are required to provide bonds or other forms of financial assurance in connection with those operations. Changes in or the failure to comply with these requirements could have a material adverse effect on us. We are required by U.S. federal and state laws and regulations to provide financial assurance sufficient to allow a third party to implement approved closure and reclamation plans for our mining properties if we are unable to do so. The U.S. Environmental Protection Agency (EPA) and state agencies may also require financial assurance for investigation and remediation actions that are required under settlements of enforcement actions under the Comprehensive Environmental Response, Compensation and Liability Act of 1980 (CERCLA) or equivalent state regulations. Refer to Note 12 for additional information regarding our financial assurance obligations. With respect to our mining operations, most of our financial assurance obligations are imposed by state laws that vary significantly by jurisdiction. Currently there are no financial assurance requirements for active mining operations under CERCLA, but in August 2014, several environmental organizations initiated litigation against the EPA to require it to set a schedule for adopting financial assurance regulations under CERCLA governing the hard rock mining industry. The EPA and the environmental organizations reached a joint agreement and submitted it to the U.S. Court of Appeals for the District of Columbia Circuit for approval. Notwithstanding industry objections, the court approved the agreement on January 29, 2016, thereby requiring the EPA to propose financial assurance regulations for the hard rock mining industry by December 1, 2016, and to provide notice of its final action by December 1, 2017. The Court also ruled that the EPA has no obligation to promulgate rules at all and has until the end of 2016 to decide whether or not to proceed. It is uncertain how the new requirements, if promulgated, will affect the amount and form of our existing and future financial assurance obligations or the extent to which they will supplement or replace state requirements. Any new regulations may, however, be financially material and adverse. We are also subject to financial assurance requirements in connection with our oil and gas operations under both state and federal laws. For example, permits, bonding and insurance are required to drill, operate, and plug and abandon wells. Financial responsibility requirements are also required under the Oil Pollution Act of 1990 to cover containment and cleanup costs resulting from an oil spill. In order to cover the various obligations of lessees operating in federal waters, such as the cost to plug and abandon wells and decommission and remove platforms and pipelines at the end of production, the BOEM generally requires that lessees demonstrate financial strength and reliability according to regulatory standards sufficient to obtain a waiver from the requirement to post supplemental bonds, or post such bonds or other acceptable assurances that those obligations will be satisfied. Although we are currently exempt from the requirement to post security under the current rules, we may be required to post security under these rules if the BOEM determines we are no longer eligible for the exemption, which could have a material adverse effect on our financial condition and liquidity. In August 2014, the BOEM issued an Advanced Notice of Proposed Rulemaking in which the agency indicated that it was considering changing the financial assurance requirements, and it currently plans to publish a revised notice in 2016. Among other things, the Notice states that the BOEM intends to revise its supplemental bonding procedures to eliminate waivers from the requirement to post security. Substantial changes to BOEM’s financial assurance requirements, including a requirement to post significant amounts of security in the form of bonds or similar assurance, could have a material adverse effect on our financial condition and liquidity. The cost for bonds or assurances can be substantial, and there is no assurance that they can be obtained in all cases. Our failure to provide financial assurance, or failure to do the same by our co-lessees, could result in BOEM or the Bureau of Safety and Environmental Enforcement (BSEE) suspending or terminating operations on affected leases, which could materially and adversely affect our financial condition and results of operations. As of December 31, 2015, our financial assurance obligations associated with closure, reclamation and remediation of mining sites, and plugging and abandonment obligations in our oil and gas operations totaled approximately $2.6 billion, and a substantial portion of these obligations were satisfied by FCX and FM O&G guarantees and financial capability demonstrations. As a result of the downgrade of the credit ratings of our debt below investment grade by S&P's and Moody’s, we may be required to provide additional or alternative forms of financial assurance, such as letters of credit, surety bonds or collateral. These other forms of assurance would be costly to provide and, depending on our financial condition and market conditions, may be difficult or impossible to obtain. Failure to provide the required financial assurance could result in the closure of the affected mines or suspension of the affected oil and gas operations. Refer to Notes 1 and 12, for further discussion of our environmental and asset retirement obligations. International risks Our international operations are subject to political, social and geographic risks of doing business in countries outside the U.S. We are a U.S.-based natural resources company with substantial mining assets located outside of the U.S. We conduct international mining operations in Indonesia, Peru, Chile and the Democratic Republic of Congo (DRC). Accordingly, in addition to the usual risks associated with conducting business in countries outside the U.S., our business may be adversely affected by political, economic and social uncertainties in each of these countries. Risks of conducting business in countries outside of the U.S. include: • Renegotiation, cancellation or forced modification of existing contracts; • Expropriation or nationalization of property; • Changes in another country's laws, regulations and policies, including those relating to labor, taxation, royalties, divestment, imports, exports, trade regulations, currency and environmental matters, which because of rising "resource nationalism" in countries around the world, may impose increasingly onerous requirements on foreign operations and investment; • Political instability, bribery, extortion, corruption, civil strife, acts of war, guerrilla activities, insurrection and terrorism; • Changes in the aspirations and expectations of local communities in which we operate with respect to our contributions to employee health and safety, infrastructure and community development and other factors that may affect our social license to operate, all of which lead to increased costs; • Foreign exchange controls and movements in foreign currency exchange rates; and • The risk of having to submit to the jurisdiction of an international court or arbitration panel or having to enforce the judgment of an international court or arbitration panel against a sovereign nation within its own territory. Our insurance does not cover most losses caused by the above described risks. Accordingly, our exploration, development and production activities outside of the U.S. may be substantially affected by many unpredictable factors beyond our control, some of which could materially and adversely affect our results of operations and financial condition. Our international operations must comply with the U.S. Foreign Corrupt Practices Act and similar anti-corruption and anti-bribery laws of the other jurisdictions in which we operate. There has been a substantial increase in the global enforcement of these laws in recent years, and a steadily increasing focus on enforcement of those laws continues. Any violation of those laws could result in significant criminal or civil fines and penalties, litigation, and loss of operating licenses or permits, and may damage our reputation, which could have a material adverse effect on our business, results of operations and financial condition. We are involved in several significant tax proceedings and other tax disputes with the Indonesian and Peruvian tax authorities (refer to Note 12 for further discussion of these matters). Other risks specific to certain countries in which we operate are discussed in more detail below. Because our Grasberg mining operations in Indonesia is a significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties and security risks in Indonesia. Our mining operations in Indonesia are conducted by our subsidiary PT Freeport Indonesia (PT-FI) pursuant to a Contract of Work (COW) with the Indonesian government. Maintaining a good working relationship with the Indonesian government is important to us because of the significance of our Indonesia operations to our business, and because our mining operations there are among Indonesia's most significant business enterprises. Partially because of their significance to Indonesia's economy, the environmentally sensitive area in which they are located, and the number of people employed, our Indonesia operations have been the subject of political debates and of criticism in the Indonesian press, and have been the target of protests and occasional violence. For further discussion of the history of PT-FI's COW, refer to Note 13. The initial term of PT-FI's COW expires in 2021, but the COW explicitly provides that it can be extended for two 10-year periods subject to Indonesian government approval, which cannot be withheld or delayed unreasonably. PT-FI has been engaged in discussions with officials of the Indonesian government since 2012 regarding various provisions of its COW, including extending the term of the COW. Notwithstanding provisions in the COW prohibiting it from doing so, the Indonesian government has sought to modify existing mining contracts, including PT-FI’s COW, to address provisions contained in the mining law enacted in 2009, and mining regulations adopted thereunder, including matters with respect to the size of contract concessions, government revenues, domestic processing of minerals, divestment, provision of local goods and services, conversion from a COW to a licensing framework for extension periods, and a requirement that extensions may be applied for only within two years prior to a COW’s expiration. Regulations published in January 2014 imposed, among other things, a progressive export duty on copper concentrate and restricts concentrate exports after January 12, 2017. Despite PT-FI’s rights under its COW to export concentrate without the payment of duties, PT-FI was unable to obtain administrative approval for exports and operated at approximately half of its capacity from mid-January 2014 through July 2014. In July 2014, PT-FI entered into a Memorandum of Understanding (MOU) with the Indonesian government. Under the MOU, PT-FI provided a $115 million assurance bond to support its commitment for smelter development, agreed to increase royalty rates and agreed to pay export duties (which were set at 7.5 percent, declining to 5.0 percent when smelter development progress exceeds 7.5 percent and are eliminated when development progress exceeds 30 percent). The MOU also anticipated an amendment of the COW within six months to address other matters; however, no terms of the COW other than those relating to the smelter bond, increased royalties and export duties were changed. In January 2015, the MOU was extended to July 25, 2015, and it expired on that date. The increased royalty rates, export duties and smelter assurance bond remain in effect. PT-FI is required to apply for renewal of export permits at six-month intervals. On July 29, 2015, PT-FI's export permit was renewed through January 28, 2016. In connection with the renewal, export duties were reduced to 5.0 percent, as a result of smelter development progress. On February 9, 2016, PT-FI's export permit was renewed through August 8, 2016. PT-FI will continue to pay a 5.0 percent export duty on concentrate while it reviews its smelter progress with the Indonesian government. As of December 31, 2015, we owned 90.64 percent of PT-FI, and the remaining 9.36 percent was owned by the Indonesian government. Upon completion of an amended COW, which has not yet occurred, we and PT-FI have agreed to divest to the Indonesian national or local governments and/or Indonesian nationals up to a 30 percent interest (an additional 20.64 percent) in PT-FI at fair market value. PT-FI is engaged in active discussions with the Indonesian government regarding an amended COW. The revisions to the COW are expected to result in additional costs for our Indonesian operations. We cannot predict whether we will be successful in reaching a satisfactory agreement on the terms of our long-term mining rights. It has been difficult to get firm or final commitments from the Indonesian government. As a result, the outcome of these discussions remains uncertain. If we are unable to reach agreement with the government on our long-term rights, we may be required to reduce or defer investments in our underground development projects, which would materially and adversely affect future production and reserves. In addition, we cannot predict whether our applications for renewal of export permits, which are required at six-month intervals, will be granted on a timely basis or whether we will be permitted to export concentrate after August 8, 2016. Recent media reports have indicated that the Indonesia government is considering revisions to the 2009 Mining Law. It is unclear how any such changes would impact our current negotiations with the Indonesian government related to the extension and amendment of the COW, smelter development, export permits and other significant issues. Indonesia has long faced separatist movements and civil and religious strife in a number of provinces. Several separatist groups have sought increased political independence for the province of Papua, where our Grasberg minerals district is located. In Papua, there have been sporadic attacks on civilians by separatists and sporadic but highly publicized conflicts between separatists and the Indonesian military. In addition, illegal miners have periodically clashed with police who have attempted for years to move them away from our facilities. Social, economic and political instability in Papua could materially and adversely affect us if it results in damage to our property or interruption of our Indonesia operations. In 2009, a series of shooting incidents occurred within the PT-FI project area, including along the road leading to our mining and milling operations. The shooting incidents have continued on a sporadic basis with the last incident occurring on January 1, 2015. During this time, there were 20 fatalities and 59 injuries to our employees, contractor employees, government security personnel and civilians. To date, no one person or group has claimed responsibility for the shootings. The safety of our workforce is a critical concern, and PT-FI continues to work with the Indonesian government to address security issues. The investigation of these incidents is ongoing. We also continue to limit the use of the road leading to our mining and milling operations to secured convoys. We cannot predict whether additional incidents will occur that could disrupt or suspend our Indonesian operations. If other disruptive incidents occur, they could adversely affect our results of operations and financial condition in ways that we cannot predict at this time. For further discussion of labor disruptions at PT-FI, refer to the operational risk factor "Labor unrest and activism could disrupt our operations and may adversely affect our business, financial condition, results of operations and prospects." We will not mine all of our ore reserves in Indonesia before the initial term of our COW expires. The initial term of PT-FI's COW expires in 2021, but can be extended for two 10-year periods subject to Indonesian government approval, which pursuant to the COW cannot be withheld or delayed unreasonably. Our proven and probable ore reserves in Indonesia reflect estimates of minerals that can be recovered through the end of 2041, and our current mine plan and planned operations are based on the assumption that we will receive the two 10-year extensions. As a result, we will not mine all of these ore reserves during the initial term of the current COW. Prior to the end of 2021, we expect to mine 21 percent of aggregate proven and probable recoverable ore at December 31, 2015, representing 27 percent of PT-FI's share of recoverable copper reserves and 38 percent of its share of recoverable gold reserves. There can be no assurance that the Indonesian government will approve our COW extensions. For further discussion, refer to the above risk factor "Because our Grasberg minerals district is a significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties and security risks in Indonesia." PT-FI's COW may be subject to termination if we do not comply with our contractual obligations, and if a dispute arises, we may have to submit to the jurisdiction of an international arbitration panel. PT-FI's COW was entered into under Indonesia's 1967 Foreign Capital Investment Law, which provides guarantees of remittance rights and protection against nationalization. The COW may be subject to termination by the Indonesian government if we do not satisfy our contractual obligations, which include the payment of royalties and taxes to the government and the satisfaction of certain mining, environmental, safety and health requirements. Recently adopted Indonesian laws and regulations conflict with the mining rights established under the COW. Although the COW grants to PT-FI the unencumbered right to operate in accordance with the COW, government agencies have sought and may continue to seek to impose additional restrictions on PT-FI that could affect exploration and operating requirements. For further discussion, refer to the above risk factor "Because our Grasberg minerals district is a significant operating asset, our business may continue to be adversely affected by political, economic and social uncertainties and security risks in Indonesia." At times, certain government officials and others in Indonesia have questioned the validity of contracts entered into by the Indonesian government prior to May 1998 (i.e., during the Suharto regime, which lasted over 30 years), including PT-FI's COW, which was signed in December 1991. We cannot provide assurance that the validity of, or our compliance with, the COW will not be challenged for political or other reasons. PT-FI's COW requires that disputes with the Indonesian government be submitted to international arbitration. Accordingly, if a dispute arises under the COW, we face the risk of having to submit to the jurisdiction of an international arbitration panel, and if we prevail in such a dispute, we will face the additional risk of having to enforce the judgment of an international arbitration panel against Indonesia within its own territory. Additionally, our operations may be materially and adversely affected while resolution of a dispute is pending, and such a dispute could be pending for years. The Tenke Fungurume (Tenke) minerals district is located in the Southeast region of the DRC, and may be adversely affected by security risks and political, economic and social instability in the DRC. Since gaining independence in 1960, the DRC has undergone outbreaks of violence, changes in national leadership and financial crises. The DRC held its first democratic elections in 2006. President Joseph Kabila, elected in 2006 and currently serving his second five-year term, is not eligible under the DRC constitution for reelection. The next presidential election is scheduled to be held in November 2016 but recent reports indicate that the government may delay the elections, which could lead to additional unrest. These factors heighten the risk of abrupt changes in the national policy toward foreign investors, which in turn could result in unilateral modification of concessions or contracts, increased taxation, denial of permits or permit renewals or expropriation of assets. As part of a review of all mining contracts by the Ministry of Mines (the Ministry) in the DRC, in February 2008, we received notification that the Ministry wished to renegotiate several material provisions of Tenke Fungurume Mining S.A.'s (TFM) mining contracts. In October 2010, the DRC government concluded its review of TFM's existing mining contracts and confirmed that they were in good standing. In connection with the review, several amendments were made to TFM’s mining contracts and governing documents, and in March 2012, FCX's effective ownership in TFM was reduced from 57.75 percent to 56 percent. Political, economic, social and security risks in the DRC are generally outside of our control and could adversely affect our business. These risks include legal and regulatory uncertainties with limited effective recourse through the courts; exposure to an environment of governmental corruption and bribery; unwarranted attempts to increase taxes or make claims for fees and penalties by governmental officials, including retroactive claims; administrative disputes; security risks resulting from political instability; risks associated with illegal mining activity on Tenke's concession; and risk of loss because of civil strife, acts of war, guerrilla activities, insurrection and terrorism. In addition to ongoing conflict in the eastern region of the DRC, there have been acts of violence in the Southeast region of the DRC where the Tenke minerals district is located. The safety of our workforce at all of our operations is our highest priority, and TFM works cooperatively with government officials to address security issues; however, no assurance can be given that conflict or random acts of violence will not occur near or impact Tenke's operations. Accordingly, our Tenke operations and future development activities at the Tenke minerals district may be substantially affected by factors beyond our control, any of which could interrupt TFM’s operations or future development activities and have a material adverse effect on our results of operations and financial condition. Operational risks Our mining and oil and gas operations are subject to operational risks that could adversely affect our business. Our mines are very large in scale and, by their nature are subject to significant operational risks, some of which are outside of our control, and many of which are not covered fully, or in some cases even partially, by insurance. These operational risks, which could materially and adversely affect our business, operating results and cash flow, include earthquakes, rainstorms, floods, and other natural disasters; equipment failures; accidents; wall failures and rock slides in our open-pit mines, and structural collapses of our underground mines or tailings impoundments; and lower than expected ore grades or recovery rates. The waste rock (including overburden) and tailings produced in our mining operations represent our largest volume of waste. Managing the volume of waste rock and tailings presents significant environmental, safety and engineering challenges and risks. We maintain large leach pads and tailings impoundments containing viscous material, which are effectively large dams that must be engineered, constructed and monitored to assure structural stability and avoid leakages or structural collapse. Our tailings impoundments in arid areas must have effective programs to suppress fugitive dust emissions, and we must effectively monitor and treat acid rock drainage at all of our operations. In Indonesia, we use a river transport system for tailings management, which presents other risks, as discussed elsewhere in these risk factors. The failure of tailings and other impoundments at any of our mining operations could cause severe property and environmental damage and loss of life, and we apply significant financial resources and both internal and external technical resources to the effective, safe management of all those facilities. The importance of careful design, management and monitoring of large impoundments was emphasized recently by large scale tailings dam failures at unaffiliated mines, which caused extensive property and environmental damage and resulted in the loss of life. Our oil and gas operations are also subject to operating hazards, including well blowouts, cratering, explosions, fires, uncontrollable flows of oil, gas or well fluids and pipeline ruptures, as well as natural disasters such as earthquakes, mudslides and hurricanes. Our operations in California, including transportation of oil by pipelines within the city and county of Los Angeles, are especially susceptible to damage from earthquakes and involve increased risks of personal injury, property damage and marketing interruptions because of the population density of southern California. Our operations in the Gulf of Mexico (GOM) and Gulf Coast region are particularly susceptible to interruption and damage from hurricanes. Any of these operating hazards could cause personal injuries, fatalities, oil spills, discharge of hazardous substances into the air, soil, water and groundwater and other property or environmental damage, lost production and revenue, remediation and clean-up costs and liability for damages, all of which could adversely affect our financial condition and results of operations and may not be fully covered by our insurance. Labor unrest and activism could disrupt our operations and may adversely affect our business, financial condition, results of operations and prospects. As of December 31, 2015, 48 percent of our global labor force was covered by collective bargaining agreements and 4 percent of our global labor force was covered by agreements that expired in 2015 and are currently being negotiated or will expire during 2016, including the agreement covering employees at our El Abra mine in Chile. None of the employees of our oil and gas operations are represented by a union or covered by a collective labor agreement. Labor agreements are negotiated on a periodic basis, and may not be renewed on reasonably satisfactory terms to us or at all. If we do not successfully negotiate new collective bargaining agreements with our union workers, we may incur prolonged strikes and other work stoppages at our mining operations, which could adversely affect our financial condition and results of operations. Additionally, if we enter into a new labor agreement with any union that significantly increases our labor costs relative to our competitors, our ability to compete may be materially and adversely affected. Refer to Items 1. and 2., "Business and Properties," for additional information regarding labor matters, and expiration dates of such agreements. We could also experience labor disruptions such as work stoppages, work slowdowns, union organizing campaigns, strikes, or lockouts which could adversely affect our operations. For example, our PT-FI operations were affected by work stoppages in 2011 and during first-quarter 2012. In October 2014, a large percentage of Grasberg open-pit operators did not report to their scheduled shifts, notwithstanding approval of resumption of operations by Indonesian authorities upon completion of their investigation of a fatal haul truck accident that occurred near the Grasberg open pit. Significant reductions in productivity or protracted work stoppages at one or more of our operations could significantly reduce our production and sales volumes, which could adversely affect our business, financial condition and results of operations. Our mining operations depend on the availability of secure water supplies. Our mining operations require physical availability and secure legal rights to significant quantities of water for mining and ore processing activities, and related support facilities. Most of our North and South America mining operations are in areas where competition for water supplies is significant. Continuous production at our mines is dependent on many factors, including our ability to maintain our water rights and claims, and the continuing physical availability of the water supplies. In Arizona, where our operations use both surface and ground water, we are a participant in two active general stream adjudications in which the Arizona courts have been attempting, for over 40 years, to quantify and prioritize surface water claims for two of the state's largest river systems, which primarily affect our Morenci, Safford, Sierrita and Miami mines. The adjudications are addressing the state law claims of thousands of competing users, including us, as well as significant federal water claims that are potentially adverse to the state law claims of both surface water and groundwater users. Groundwater is treated differently from surface water under Arizona law, which historically allowed land owners to pump unlimited quantities of subsurface water, subject only to the requirement of putting it to "reasonable use." However, court decisions in one of the adjudications have concluded that underground water is often hydrologically connected to surface water so that it actually is surface water and is therefore subject to the Arizona doctrine of prior appropriation, as a result of which it would be subject to the adjudication and potentially unavailable to groundwater pumpers in the absence of valid surface water claims, which historic groundwater pumpers typically do not have. Any re-characterization of groundwater as surface water could affect the ability of consumers, farmers, ranchers, municipalities, and industrial users like us to continue to access water supplies that have been relied on for decades. Because we are a user of both groundwater and surface water in Arizona, we are an active participant in the adjudication proceedings. Water for our Cerro Verde operation in Peru comes from renewable sources through a series of storage reservoirs on the Rio Chili watershed that collects water primarily from seasonal precipitation. As a result of occasional drought conditions, temporary supply shortages are possible that could affect our Cerro Verde operations. In January 2016, the Peruvian government declared a temporary state of emergency with respect to the water supply in the Rio Chili Basin because of drought conditions. As a result, the Cerro Verde water rights from the Rio Chili were temporarily decreased by 18 percent beginning in February 2016. The Peruvian government will continue to evaluate supply availability in the subsequent months dependent on monthly precipitation. Water for our El Abra mining operation in Chile comes from the continued pumping of groundwater from the Salar de Ascotán aquifer. In 2010, El Abra obtained regulatory approval, for the continued pumping of groundwater from the Salar de Ascotán aquifer for its sulfide processing plant, which began operations in 2011. The agreement to pump from this aquifer is subject to continued monitoring of the aquifer level to ensure that environmentally sensitive areas are not impacted by our pumping. If impact occurs, we would have to reduce pumping to restore water levels which could affect production from El Abra. Although we typically have sufficient water for our Indonesian operations, lower rainfall resulting from El Niño weather conditions in the second half of 2015 has impacted operations and may continue to impact operations in 2016. Although each of our mining operations currently has access to sufficient water supplies to support current operational demands, as discussed above some supplies are subject to adjudication proceedings, the outcome of which we cannot predict, and the availability of additional supplies that may be required for potential future expansions is uncertain. The loss of a water right or currently available water supply could force us to curtail operations or force premature closures, thereby increasing and/or accelerating costs or foregoing profitable operations. In addition to the usual risks encountered in the mining industry, our Indonesia and Africa mining operations involve additional risks because they are located in very remote areas and, in Indonesia, unusually difficult terrain. The Grasberg minerals district is located in steep mountainous terrain in a remote area of Indonesia. These conditions have required us to overcome special engineering difficulties and develop extensive infrastructure facilities. In addition, the area receives considerable rainfall, which has led to periodic floods and mudslides. The mine site is also in an active seismic area and has experienced earth tremors from time to time. Our insurance may not sufficiently cover an unexpected natural or operating disaster. Underground mining operations can be particularly dangerous, and in May 2013, a tragic accident, which resulted in 28 fatalities and 10 injuries, occurred at PT-FI when the rock structure above the underground ceiling of a training facility collapsed. PT-FI temporarily suspended mining and processing activities at the Grasberg complex to conduct inspections and resumed open-pit mining and concentrating activities on June 24, 2013, and underground operations on July 9, 2013. No assurance can be given that similar events will not occur in the future. The Tenke minerals district is located in a remote area of the DRC and is subject to challenges, such as severely limited infrastructure, including road, bridge and rail access that is in disrepair and receives minimal maintenance; limited and unreliable energy supply from antiquated equipment and from power distribution corridors that are not maintained; difficulties in attracting and retaining experienced personnel; security risks; and limited health care in an area plagued by disease and other potential endemic health issues, including malaria, cholera and HIV. Additionally, because of limited rail access, we currently truck a significant portion of the production from the Tenke minerals district approximately 1,900 miles to ports in South Africa. The Tenke minerals district and its future development may be substantially affected by factors beyond our control, which could adversely affect its contribution to our operating results and increase the cost of future development. We must continually replace reserves depleted by production, but our exploration activities may not result in additional discoveries. Our existing mineral and oil and natural gas reserves will be depleted over time by production from our operations. Because our profits are derived from our mining and oil and gas operations, our ability to replenish our reserves is essential to our long-term success. Our exploration projects involve many risks, require substantial expenditures and may not result in the discovery of additional deposits or reservoirs that can be produced profitably. We may not be able to discover, enhance, develop or acquire reserves in sufficient quantities to maintain or grow our current reserve levels, which could negatively affect our business and prospects. Development projects are inherently risky and may require more capital than anticipated, which could adversely affect our business. Consolidated capital expenditures are expected to approximate $3.4 billion for 2016, including $1.9 billion from the mining business (reflecting $1.4 billion for major projects primarily for underground development activities at Grasberg and remaining costs for the Cerro Verde expansion and $0.5 billion for sustaining capital) and $1.5 billion for oil and gas operations. There are many risks and uncertainties inherent in all development projects. The economic feasibility of development projects is based on many factors, including the accuracy of estimated reserves, estimated capital and operating costs, and estimated future prices of the relevant commodity. The capital expenditures and time required to develop new mines, wells, or other projects are considerable, and changes in costs or construction or drilling schedules can adversely affect project economics. New development projects have no operating history upon which to base estimates of future cash flow. The actual costs, production rates and economic returns of our development projects may differ materially from our estimates, which may have a material adverse impact on our business and results of operations. Operations in the Deepwater GOM present greater operating risks than operations in the shallower waters or onshore. In addition, our shallow water and onshore operations that target ultra-deep prospects involve greater risks and costs than conventional GOM Shelf and onshore Gulf Coast prospects. The Deepwater GOM presents significant challenges because of risks associated with geological complexity, water depth and higher drilling and development costs. For example, in April 2010, the Deepwater Horizon, an unaffiliated offshore drilling rig located in the Deepwater GOM, sank following an explosion and fire, resulting in fatalities and the discharge of substantial amounts of oil into the GOM until mid-July 2010 when the flow of oil was finally stopped. The U.S. Department of Interior imposed a moratorium on deepwater drilling from May through October 2010 and also issued a series of rules and notices to lessees and operators imposing new and more stringent regulatory safety and performance requirements and permitting procedures for new wells to be drilled in the Deepwater GOM, all of which significantly and adversely disrupted oil and gas exploration activities in the GOM and resulted in increased costs. The Deepwater GOM also lacks the infrastructure present in shallower waters, which can result in significant delays in obtaining or maintaining production. As a result, deepwater operations may require significant time between a discovery and marketability, thereby increasing the financial risk of these operations. Our operations are subject to extensive regulations, some of which require permits and other approvals. These regulations increase our costs and in some circumstances may delay or suspend our operations. Our operations are subject to extensive and complex laws and regulations that are subject to change and to changing interpretation by governmental agencies and other bodies vested with broad supervisory authority. As a natural resource company, compliance with environmental legal requirements is an integral and costly part of our business. For additional information, see "Environmental risks." We are also subject to extensive regulation of worker health and safety, including the requirements of the U.S. Occupational Safety and Health Act and similar laws of other jurisdictions. In the U.S., the operation of our mines is subject to regulation by the U.S. Mine Safety and Health Administration (MSHA) under the Federal Mine Safety and Health Act of 1977. MSHA inspects our mines on a regular basis and issues citations and orders when it believes a violation has occurred. If such inspections result in an alleged violation, we may be subject to fines and penalties and, in instances of alleged significant violations, our mining operations could be subject to temporary or extended closures. Our oil and gas operations are subject to extensive laws and regulations that require, among other things, permits for the drilling and operation of wells and bonding and insurance to drill, operate and plug and abandon wells, and that regulate the safety of our pipelines. Our U.S. offshore operations in federal waters are subject to broad regulation by the BOEM/BSEE, which among other things must issue permits in connection with our exploration, drilling, development and production plans. Under certain circumstances BOEM/BSEE may impose penalties and may suspend or terminate any of our operations on federal leases. Many other governmental bodies regulate our operations, and our failure to comply with these legal requirements can result in substantial penalties. In addition, new laws and regulations or changes to existing laws and regulations and new interpretations of existing laws and regulations by courts or regulatory authorities occur regularly, but are difficult to predict. Any such variations could have a material adverse effect on our business and prospects. Our business may be adversely affected by information technology disruptions. Cybersecurity incidents are increasing in frequency, evolving in nature and include, but are not limited to, installation of malicious software, unauthorized access to data and other electronic security breaches that could lead to disruptions in systems, unauthorized release of confidential or otherwise protected information and the corruption of data. We have experienced cybersecurity incidents in the past and may experience them in the future. We believe we have implemented appropriate measures to mitigate potential risks. However, given the unpredictability of the timing, nature and scope of information technology disruptions, we could be subject to manipulation or improper use of our systems and networks or financial losses from remedial actions, any of which could have a material adverse effect on our financial condition and results of operations. Environmental risks Our operations are subject to complex, evolving and increasingly stringent environmental laws and regulations. Compliance with environmental regulatory requirements involves significant costs and may constrain existing operations or expansion opportunities. Our operations, both in the U.S. and internationally, are subject to extensive environmental laws and regulations governing the generation, storage, treatment, transportation and disposal of hazardous substances; solid waste disposal; air emissions; wastewater discharges; remediation, restoration and reclamation of environmental contamination, including oil spill cleanup; mine closures and reclamation; well plug and abandonment requirements; protection of endangered and protected species and designation of critical habitats; and other related matters. In addition, we must obtain regulatory permits and approvals to start, continue and expand operations. Our Miami, Arizona smelter processes 44 percent of the aggregate copper concentrate produced by our North America copper mines. EPA regulations require us to invest in new pollution control equipment to reduce sulfur dioxide (SO2) to meet both regional haze requirements and to allow the state of Arizona to demonstrate compliance with EPA's SO2 ambient air quality standards. The deadline for the smelter to install the SO2 pollution control equipment to comply with the regional haze rules is January 1, 2018. The Arizona rules for complying with the national ambient air quality standards are still being developed by state regulators and are subject to EPA approval, and it is not clear when they will become effective, but it is possible that they will be effective prior to January 1, 2018. We expect capital expenditures for this project (to meet both regulatory requirements) to total approximately $250 million, and we expect those expenditures to be made through 2018. If these expenditures are delayed or deferred for technical, financial or any other reasons, we may be forced to curtail production at the Miami smelter, which would require us to export concentrate rather than process it ourselves and to purchase sulphuric acid that would otherwise be generated during the smelting process, which would result in increased production costs. Laws such as CERCLA and similar state laws may expose us to joint and several liability for environmental damages caused by previous owners or operators of properties we acquired or are currently operating or at sites where we sent materials for processing, recycling or disposal. As discussed in more detail in the next risk factor, we have substantial obligations for environmental remediation on mining properties previously owned or operated by Freeport Minerals Corporation (FMC) and certain of its affiliates. Some of our onshore California oil and gas fields have been in operation for more than 100 years, and legal requirements may require substantial expenditures to remediate the properties or to otherwise comply with these requirements. Noncompliance with these laws and regulations could result in material penalties or other liabilities. In addition, compliance with these laws may from time to time result in delays in or changes to our development or expansion plans. Compliance with these laws and regulations imposes substantial costs, which we expect will continue to increase over time because of increased regulatory oversight, adoption of increasingly stringent environmental standards, as well as other factors. New or revised environmental regulatory requirements are frequently proposed, many of which result in substantially increased costs for our business, including those regarding financial assurance in the financial risk factor above. In addition, in 2015, the EPA promulgated rules that could reclassify certain mineral processing materials as "hazardous waste" under the Federal Resource Conservation and Recovery Act and subject the industry to significant new and costly waste management requirements. These rules are currently being challenged by multiple parties in court; however, if the legal challenges are unsuccessful, the reclassification of certain mineral processing materials as “hazardous waste’” could materially increase costs at our U.S. copper and molybdenum processing facilities. The EPA also recently adopted rules that bring remote “tributaries” into the regulatory definition of “waters of the United States” that are protected by the Clean Water Act, thereby imposing significant additional restrictions on waterway discharges and land uses, and is in many ways aggressively attempting to expand its regulatory authority over air quality, water quality and solid wastes, among other things. Regulations are also being considered at various governmental levels to increase federal financial responsibility requirements both for mine closure and reclamation and for oil and gas decommissioning, and to increase regulation of or prohibit hydraulic fracturing. Adoption of these or similar new environmental regulations or more stringent application of existing regulations may materially increase our costs, threaten certain operating activities and constrain our expansion opportunities. In February 2016, the Department of the Interior's Fish & Wildlife Service (FWS) adopted final rules that broaden the regulatory definitions of "critical habitat" and "destruction or adverse modification," both of which are integral to the FWS's implementation of the Endangered Species Act, which protects federally-listed endangered and threatened species. The new rules increase FWS's discretion to limit uses of land and water courses that may become suitable habitat for listed species in the future, or that are occasionally used by protected species. The new rules may limit the ability of landowners, including us, to obtain federal permits or authorizations needed for expansion of our operations, and may also affect our ability to obtain, retain or deliver water to some operations. During 2015, we incurred environmental capital expenditures and other environmental costs (including our joint venture partners' shares) to comply with applicable environmental laws and regulations that affect our operations of $421 million, compared with $405 million in 2014 and $595 million in 2013. For 2016, we expect to incur approximately $495 million of aggregate environmental capital expenditures and other environmental costs. The timing and amounts of estimated payments could change as a result of changes in regulatory requirements, changes in scope and costs of reclamation and plug and abandonment activities, the settlement of environmental matters and the rate at which actual spending occurs on continuing matters. We incur significant costs for remediating environmental conditions on mining properties that have not been operated in many years. FMC and its subsidiaries, and many of their affiliates and predecessor companies have been involved in exploration, mining, milling, smelting and manufacturing in the U.S. for more than a century. Activities that occurred in the late 19th century and the 20th century prior to the advent of modern environmental laws were not subject to environmental regulation and were conducted before American industrial companies fully understood the long-term effects of their operations on the surrounding environment. With the passage of CERCLA in 1980, companies like FMC became legally responsible for remediating hazardous substances released into the environment from properties owned or operated by them as well as properties where they arranged for disposal of such substances, irrespective of when the release to the environment occurred or who caused it. That liability is often asserted on a joint and several basis with other prior and subsequent owners, operators and arrangers, meaning that each owner or operator of the property is, and each arranger may be, held fully responsible for the remediation, although in many cases some or all of the other responsible parties no longer exist, do not have the financial ability to respond or cannot be found. As a result, because of our acquisition of FMC in 2007, many of the subsidiary companies we now own are potentially responsible for a wide variety of environmental remediation projects throughout the U.S., and we expect to spend substantial sums annually for many years to address those remediation issues. We are also subject to claims where the release of hazardous substances is alleged to have damaged natural resources. At December 31, 2015, we had more than 100 active remediation projects (including damaged natural resource claims) in 26 U.S. states. In addition, FMC and certain affiliates and predecessor companies were parties to agreements relating to the transfer of businesses or properties, which contained indemnification provisions relating to environmental matters, and which from time to time become the source of claims against us. At December 31, 2015, we had $1.2 billion recorded in our consolidated balance sheet for environmental obligations attributable to CERCLA or analogous state programs and for estimated future costs associated with environmental matters at closed facilities or closed portions of certain operating facilities. Our environmental obligation estimates are primarily based upon: • Our knowledge and beliefs about complex scientific and historical facts and circumstances that in many cases occurred many decades ago; • Our beliefs and assumptions regarding the nature, extent and duration of remediation activities that we will be required to undertake and the estimated costs of those remediation activities, which are subject to varying interpretations; and • Our beliefs regarding the requirements that are imposed on us by existing laws and regulations and, in some cases, the clarification of uncertain regulatory requirements that could materially affect our environmental obligation estimates. Significant adjustments to these estimates are likely to occur in the future as additional information becomes available. The actual environmental costs may exceed our current and future accruals for these costs, and any such changes could be material. In addition, remediation standards imposed by the EPA and state environmental agencies have generally become more stringent over time and may become even more stringent in the future. Imposition of more stringent remediation standards poses a risk that additional remediation work could be required at our active remediation sites and at sites that we have already remediated to the satisfaction of the responsible governmental agencies, and may increase the risk of toxic tort litigation. Refer to Note 12 for further discussion of our environmental obligations. Our Indonesia mining operations create difficult and costly environmental challenges, and future changes in environmental laws, or unanticipated environmental impacts from those operations, could require us to incur increased costs. Mining operations on the scale of our Indonesia operations involve significant environmental risks and challenges. Our primary challenge is to dispose of the large amount of crushed and ground rock material, called tailings, that results from the process by which we physically separate the copper-, gold- and silver-bearing materials from the ore that we mine. Our tailings management plan, which has been approved by the Indonesian government, uses the unnavigable river system in the highlands near our mine to transport the tailings to an engineered area in the lowlands where the tailings and natural sediments are managed in a deposition area. Lateral levees have been constructed to help contain the footprint of the tailings and to limit their impact in the lowlands. Another major environmental challenge is managing overburden, which is the rock that must be moved aside in the mining process to reach the ore. In the presence of air, water and naturally occurring bacteria, some overburden can generate acid rock drainage, or acidic water containing dissolved metals that, if not properly managed, can adversely affect the environment. In addition, overburden stockpiles are subject to erosion caused by the large amounts of rainfall, with the eroded stockpile material eventually being deposited in the lowlands tailings management area; this additional material, while predicted in our environmental studies, could influence the deposition of finer tailings material in the estuary. From time to time, certain Indonesian government officials have raised questions with respect to our tailings and overburden management plans, including a suggestion that we implement a pipeline system rather than the river transport system for tailings management and disposition. Because our Indonesia mining operations are remotely located in steep mountainous terrain and in an active seismic area, a pipeline system would be costly, difficult to construct and maintain, and more prone to catastrophic failure, and could therefore involve significant potentially adverse environmental issues. Based on our own studies and others conducted by third parties, we do not believe that a pipeline system is necessary or practical. Regulation of greenhouse gas emissions and climate change issues may increase our costs and adversely affect our operations. Many scientists believe that emissions from the combustion of carbon-based fuels contribute to greenhouse effects and, therefore, contribute to climate change. Carbon-based energy is a significant input in our operations, and our revenues include sales of oil, natural gas liquids and natural gas, and other carbon-based energy products. The potential physical impacts of climate change on our operations are highly uncertain, and would vary by operation based on particular geographic circumstances. As a result of the Paris Agreement reached during the 21st Conference of the Parties to the United Nations Framework Convention on Climate Change in 2015, a number of governments have pledged "Nationally Determined Contributions" to control and reduce greenhouse gas emissions. In the U.S., the EPA has finalized regulations governing greenhouse gas emissions from new, modified, and existing power plants. While these rules are being challenged in court, increased regulation of greenhouse gas emissions may increase our costs and may also affect the demand for the oil and gas we produce. Other risks Our holding company structure may impact our ability to service debt and our stockholders’ ability to receive dividends. We are a holding company with no material assets other than the capital stock of our subsidiaries. As a result, our ability to repay our indebtedness and pay dividends is dependent on the generation of cash flow by our subsidiaries and their ability to make such cash available to us, by dividend, loan, debt repayment or otherwise. Our subsidiaries do not have any obligation to make funds available to us to repay our indebtedness or pay dividends. Dividends from subsidiaries that are not wholly owned are shared with other equity owners. Cash at our international operations is also typically subject to foreign withholding taxes upon repatriation into the U.S. In addition, our subsidiaries may not be able to, or be permitted to, make distributions to us or repay loans to us, to enable us to repay our indebtedness or pay dividends. Each of our subsidiaries is a distinct legal entity and, under certain circumstances, legal restrictions, as well as the financial condition and operating requirements of our subsidiaries, may limit our ability to obtain cash from our subsidiaries. Certain of our subsidiaries are parties to credit agreements that restrict their ability to make distributions or loan repayments to us if such subsidiary is in default under such agreements, to repay any subordinated loan we may make to such subsidiary unless specified conditions are met, or to transfer substantially all of the assets of such subsidiary without the consent of the lenders. Our rights to participate in any distribution of our subsidiaries' assets upon their liquidation, reorganization or insolvency would generally be subject to the prior claims of the subsidiaries' creditors, including any trade creditors. Anti-takeover provisions in our charter documents and Delaware law may make an acquisition of us more difficult. Anti-takeover provisions in our charter documents and Delaware law may make an acquisition of us more difficult. These provisions: • Authorize the Board to issue preferred stock without stockholder approval and to designate the rights, preferences and privileges of each class; if issued, such preferred stock would increase the number of outstanding shares of our capital stock and could include terms that may deter an acquisition of us; • Establish advance notice requirements for nominations to the Board or for proposals that can be presented at stockholder meetings; • Limit who may call stockholder meetings; and • Require the approval of the holders of two thirds of our outstanding common stock to enter into certain business combination transactions, subject to certain exceptions, including if the consideration to be received by our common stockholders in the transaction is deemed to be a fair price. These provisions may discourage potential takeover attempts, discourage bids for our common stock at a premium over market price or adversely affect the market price of, and the voting and other rights of the holders of, our common stock. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors other than the candidates nominated by the Board. In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which may prohibit large stockholders from consummating a merger with, or acquisition of, us. These provisions may deter an acquisition of us that might otherwise be attractive to stockholders. Item 1B.