Notes To Consolidated Financial Statements Environmental, Reclamation and Mine Closure.  million and the remaining $30.5 million was paid in January  2005. After considering its joint venture partner’s interest  in the proceeds, PT Freeport Indonesia’s joint venture share  of proceeds totaled $95.0 million. As a result of the settle- ment, FCX recorded on its income statement an $87.0 million  gain on insurance settlement for the business interruption  recovery and an $8.0 million gain to production costs for the  property loss recovery for a net gain of $48.8 million, after  taxes and minority interest sharing, in 2004. FCX has an environmental policy committing it not only to  compliance with federal, state and local environmental  statutes and regulations, but also to continuous improve- ment of its environmental performance at every operational  site. FCX believes that its operations are being conducted  pursuant to applicable permits and are in compliance in  all material respects with applicable environmental laws,  rules and regulations. FCX incurred aggregate environ- mental capital expenditures and other environmental costs,  including Rio Tinto’s share, totaling $65.1 million in 2004,  $72.1 million in 2003 and $62.6 million in 2002. The ultimate amount of reclamation and closure costs to  be incurred at PT Freeport Indonesia’s operations will be  determined based on applicable laws and regulations and  PT Freeport Indonesia’s assessment of appropriate remedial  activities in the circumstances, after consultation with  governmental authorities, affected local residents and other  affected parties and cannot currently be projected with  precision. Estimates of the ultimate reclamation and closure  costs PT Freeport Indonesia will incur in the future involve  complex issues requiring integrated assessments over a  period of many years and are subject to revision over time  as more complete studies are performed. Some reclamation  costs will be incurred during mining activities, while most  closure costs and the remaining reclamation costs will be  incurred at the end of mining activities, which are currently  estimated to continue for more than 35 years. Effective January 1, 2003, FCX adopted SFAS No. 143  (see Note 1). At December 31, 2004 and 2003, PT Freeport  Indonesia revised its reclamation and closure estimates  for (1) changes in the projected timing of certain reclama- tion costs, (2) changes in certain cost estimates and (3)  additional asset retirement obligations incurred during 2003.  At December 31, 2004, FCX estimated these aggregate  obligations to be approximately $149 million for PT Freeport  Indonesia and $18 million for Atlantic Copper, and estimated  PT Freeport Indonesia’s aggregate discounted asset retire- ment obligations to be $22.0 million and Atlantic Copper’s to  be $0.8 million. At December 31, 2003, FCX estimated these  aggregate obligations to be approximately $130 million for  PT Freeport Indonesia and $17 million for Atlantic Copper,  and estimated PT Freeport Indonesia’s aggregate discounted  asset retirement obligations to be $25.7 million and Atlantic  Copper’s to be $0.8 million. The changes reduced the related  asset balances and are not expected to have a material  impact on future net income. A rollforward of FCX’s consoli- dated discounted asset retirement obligations for 2004 and  2003 follows (in thousands): 2004  2003 Asset retirement obligation at beginning of year  $26,486  $28,485 Liabilities incurred  —  605 Liabilities settled  —   (1,222) Accretion expense  2,985  2,852 Revision for changes in estimates   (6,698)   (4,333) Foreign exchange loss  75  99 Asset retirement obligation at end of year  $22,848  $26,486 In 1996, PT Freeport Indonesia began contributing to  a cash fund ($6.0 million balance at December 31, 2004)  designed to accumulate at least $100 million (including  interest) by the end of its Indonesian mining activities.  PT Freeport Indonesia plans to use this fund, including  accrued interest, to pay the above-mentioned mine closure  and reclamation costs. Any costs in excess of the $100  million fund would be funded by operational cash flow or  other sources. Future changes in regulations could require  FCX to incur additional costs that would be charged against  future operations. Estimates involving environmental  matters are by their nature imprecise and can be expected  to be revised over time because of changes in government  regulations, operations, technology and inflation. Contract of Work.  FCX is entitled to mine in Indonesia  under the “Contract of Work” between PT Freeport Indonesia  and the Government of Indonesia. The original Contract of  Work was entered into in 1967 and was replaced with a new  Contract of Work in 1991. The initial term of the current  Contract of Work expires in 2021, but can be extended by  PT Freeport Indonesia for two 10-year periods, subject to  Indonesian government approval, which cannot be withheld  or delayed unreasonably. Given the importance of contracts  of work under the Indonesian legal system and PT Freeport  Indonesia’s over 35 years of working with the Indonesian  2004 ANNUAL REPORT  | 73