Freeport-McMoRan Cooper & Gold, Inc. 1615 Poydras Street, New Orleans, LA 70112

December 8, 1995

Ms. Lori Udall,
Washington Director,
International Rivers Network,
1025 Vermont Avenue N.W., #300,
Washington, D.C. 20005

Dear Ms. Udall:

Your letter of November 28, 1995, raises a number of issues regarding environmental, social and governmental aspects of our Irian Jaya (West Papua) operation.

We regard our operation as a model of development that protects the environment, respects the rights of the local indigenous people, and seeks to provide a better life for our employees and their community.

We strongly believe that some of the conclusions in your letter reflect erroneous information and misunderstanding. Accordingly, we welcome the opportunity to clarify the record, to provide you with the fullest and most accurate information about our operations, to summarize some of the many activities we have undertaken to promote sustainable development in Irian Jaya (West Papua), and to respond to your recommendations. All of our operations and activities in Indonesia are fully permitted and in compliance with all applicable laws.

As you know, our project is currently undergoing environmental and social audits by two internationally respected consulting firms. The result of these audits will be made available to the public.

We know of no other company that has undertaken voluntary environmental and social audits in such a cooperative and open fashion. The terms of reference (scope of work) was developed under the guidance and direction of BAPEDAL (Indonesian Environmental Protection Agency). We then issued a request for proposals from 14 different international audit companies operating in Indonesia. The proposals were reviewed using evaluation criteria developed by Freeport, BAPEDAL, and the Department of Mines and Energy (DOME).

Dames & Moore received the highest evaluation score and was then awarded the environmental audit while Labat Anderson was selected for the social audit. As you know, Dames & Moore previously conducted an environmental assessment of our operations on behalf of OPIC in 1989-90. A press briefing was held on Tuesday, September 5, 1995, to introduce representatives of both audit companies including former Australian Minister of the Environment Ros Kelly who will head up the Dames & Moore audit team. The results of the environmental and social audit reports should help you better understand the challenges we face and our active and substantial efforts to protect the environment, respect the rights of the indigenous people and promote sustainable development in Irian Jaya (West Papua).

In addition, we have carefully reviewed all feasible tailings management options. Results of a study by four internationally recognized consulting firms are available in public documents known as the Environmental Evaluation Study (SEL), Management Plan (RKL) and Monitoring Plan (RPL). These studies made clear that the Tailings & River Management Plan (TRMP) is the best tailings management alternative.

Freeport has spend over 25 million dollars implementing TRMP in 1995. As part of the approval of the RKL and RPL, Freeport made the commitment to continue to evaluate tailing operations and to consider new technologies and other viable alternatives. At this time, TRMP is clearly the best alternative. Freeport is considering additional expansion of the mine and mill production, and the evaluation of tailings management alternatives is an integral part of the planning process.

Freeport has built a modern state-of-the-science environmental laboratory in Timika and operates a comprehensive monitoring program. The monitoring program was designed by independent consultants who review the results and recommend adjustments wherever and whenever necessary. Freeport has issued quarterly reports with data from the lab and an annual report was recently provided DOME and BAPEDAL. Samples are split with other laboratories and a report on quality control comparisons was recently given to DOME and BAPEDAL.

In an ongoing program, numerous government inspectors have visited the site and have taken samples to other independent labs for spot checks with excellent cross check results. Freeport has also invited a number of university graduate students and professors to work in the laboratory side-by-side with our staff on practical environmental research projects. We are also working cooperatively with BAPEDAL's Environmental Management Center (EMC). Finally, the Dames and Moore environmental audit scope of work requires a full review of the laboratory and monitoring operations. Those results will be available to the public in a few months.

Addressing the needs of the indigenous local people is one of our top priorities, and we are constantly working to strengthen our relations with them. We are in regular contact with representatives of the local people and are constantly exploring ways to appropriately address their concerns on a range of issues. In the area of land rights, you will be pleased to know that Irian Jaya (West Papua)'s provincial governor recently concluded a study of this issue, an English transcript and summary of which is attached. (rsb: not included here) You will note that the governor's report confirms that Freeport has met all legal requirements with regard to land rights of the local people while pointing to the need for more local government activity and responsibility. In the last year two new organizations have been initiated specifically to enhance these efforts by providing guidance, direction, and coordination on the complex social and cultural issues our operations face in Irian Jaya (West Papua). First, the Social Cultural Advisory Council (SCAC) has been formed with four Indonesians, including two from Irian Jaya (West Papua). The group includes Barnabas Suebu, former governor of Irian Jaya (West Papua); Dr. August Kafiar, Rector of the University of Cenderawasih in Jayapura; Professor Dr. Bundhisantoso, a University of Indonesia professor of anthropology who advises for BAPEDAL; and the Chairman is Dr. Otto Soemarwoto, professor emeritus of the University of Padjadjaran, a leading authority on human ecology and the environment in Indonesia. The Council's mission statement says this group will provide guidance and direction to Freeport senior management on all social and cultural issues. In their efforts to gain a full understanding of the issues and make sound recommendations, they have met with many government officials, local leaders and people, and our employees and consultants, including Brother Theo van den Broek, head of the Catholic Diocese Office of Jayapura, who said the real challenge for the local people is adapting to change. "I think a lot of the local people feel not capable to cope with it, to accept change..," Brother Theo said. Also, a local coordinating committee is being formed by the regional and local government to help coordinate social, cultural, and development issues in our project area. Local people, church leaders, and responsible NGOs are also welcome on this committee which was an outcome of efforts by Freeport during the RKL and RPL process.

Misunderstandings and miscommunications are among our biggest challenges and these two groups will help us resolve the very issues your NGO-dominated panel would purport to address. We believe that the current approach will be far more effective than the panel you have suggested, which we believe would be regarded in Indonesia as a usurpation of provincial and national government authority and responsibility. We also believe an NGO-dominated panel would be unacceptable to the government officials who are responsible for addressing these very issues.

Before Freeport's arrival in this are about 400 indigenous people lived in our project area and there was no infrastructure whatsoever. Many thousands of people have since moved into the area. Freeport was responsible for creating all of the supporting infrastructure, including the seaport, the airport, the roads, power plants, hospitals, clinics, schools, and other facilities enhancing the quality of life of the people of this region.

Freeport now has a sustainable development department that coordinates all our community development, public health, malaria control, business development, education, and foundation programs. Our investment in these programs exceeded 16 million dollars in 1995. These programs are producing significant benefits for the local communities around our operation, including a decline in infant mortality and an increase in life expectancy. We will make them even stronger with the advice from the SCAC, the local coordinating committee, and reasonable NGO groups.

In Irian Jaya (West Papua), the military serves the role that the police would serve in a more developed area. The 17,000 people who are employees of Freeport and its contractors working in our area and the 40,000 - 50,000 people who now live nearby in Timika and its environs are entitled to police protection. It is important to recognize that the inhabitants of Irian Jaya have a right to protection from the small group of rebels (OPM) who move about the thousands of square miles of forests in Irian Jaya (West Papua) and periodically terrorize people in one area or another. You will note from the attached press clipping from Antara (rsb: not included here), dated November 22, that the most recent OPM activity appears to be near the Papua-New Guinea border, hundreds of miles from Timika.

Beginning in 1994, OPM rebels moved into the forests near Timika and began to threaten both the local people and the other residents in this area. Local villagers were terrorized. In November 1994, one of our Irianese employees, Gordon Rumaropen, was murdered by sniper fire and vehicles were fired upon along the single 70-mile road through the mountains and forests which links our operations. This murder was the only such event in our almost 30 years of activities in this area.

Your characterization of the human rights violations as retaliation to protests by the local Amungme people against Freeport operations and expansion is simply untrue. We deplore the human rights violations identified by Catholic Church Bishop Munninghoff of Jayapura and Komnas HAM, Indonesia's National Commission on Human Rights. As you know, the government has announced that the individuals in the military believed to be responsible for the violations will be prosecuted. We strongly support these efforts to eliminate human rights abuses.

As you know, some have irresponsibly tried to link Freeport employees to these tragedies. It should be understood that Bishop Munninghoff's report and the Komnas HAM make clear that Freeport was not involved in these human rights violations. As Bishop Munninghoff noted in a recent written statement: "My report is not about Freeport and does not contain accusations about Freeport." The Bishop also has flatly stated that "Freeport is not at all involved in these violations of human rights." Therefore, any attempt to associate Freeport with these deplorable incidents is reckless or dishonest.

Accordingly, we are outraged and offended by attempts to link these human rights violations to the discussion of environmental issues. We will not allow these abuses to be cynically and falsely used for leverage by self-appointed NGOs.

We also reject efforts to use OPIC's unfounded, politically-motivated attempt to cancel political risk insurance as leverage to achieve other ends. As you well know, OPIC's action followed intense political pressure and lobbying from several NGOs. We are contesting OPIC's attempted cancellation in arbitration proceedings on grounds that its action cannot be justified either legally or factually.

And, we reject by the implicit assumptions underlying your proposals -- that unnamed Indonesian NGOs by right have a veto power over the sovereign government of Indonesia, that Freeport is incapable of developing or implementing sound policies, and that even the independent environmental and social audits now being performed by two of the world's top consulting firms cannot be trusted.

You say you based your recommendations on conversations with unnamed Indonesian NGOs and you are seeking to confer upon these organizations extraordinary power over Indonesian laws. Yet, curiously, the Emmy Hafild-led WALHI, is not a signatory to your letter, which clearly seeks to implement her agenda. In addition, she has publicly taken credit for lobbying OPIC and the World Bank insurance arm, MIGA, to withdraw our political risk insurance. WALHI, the most vocal Indonesian NGO, has insisted that it has veto power over Indonesian governmental actions regarding the environment and social programs. It has sued the government and lost in court. Freeport has no authority to reverse the courts and establish the "shadow government" both you and Ms. Hafild appear to seek.

As we noted at the outset, Freeport is determined to promote environmental stewardship, corporate responsibility, and respect for human rights. Freeport is dedicated to improving the lives of the local indigenous people in the area of our operations and equally dedicated to protecting the environment. We remain open to recommendations and constructive criticism from knowledgeable and responsible parties interested in meeting these challenges.

Freeport stands ready to work with those who share these goals and are willing to proceed in a responsible fashion. But we will not and cannot give carte blanche to any self-appointed group or groups, nor can we stand silent in the face of unfounded accusations, assaults on our reputation, or mischaracterizations of our work in Irian Jaya (West Papua).

Sincerely,
(signature)
Thomas J. Egan

CC: James R. Moffett (rsb: and 11 others)

The foregoing was typed by Robert S. Boyer (rsb) from a copy received from Lori Udall.