Posted on May 7, 2014 by Donald Shandy
Anadarko Petroleum Corporation (“Anadarko”) and its Kerr-McGee unit, which Anadarko purchased in 2006, has entered into a settlement agreement with the United States, whereby Anadarko/Kerr-McGee agreed to pay $5.15 billion for a vast array of environmental clean-ups around the country. The settlement represents the largest environmental enforcement recovery on record by the Department of Justice.
The settlement stems from the bankruptcy of Tronox, a spinoff company created by Kerr-McGee for its chemical operations in 2006. When Tronox declared bankruptcy in 2009, the United States and co-plaintiff Anadarko Litigation Trust (a litigation trust created to pursue Tronox’s claims on behalf of its environmental and torts creditors) asserted fraudulent conveyance allegations against Anadarko and Kerr-McGee, along with certain of its affiliates. In December 2013, the U.S. Bankruptcy Court for the Southern District of New York found that the historic Kerr-McGee fraudulently conveyed assets to the “new” Kerr-McGee (a new corporate entity with the same name), leaving its legacy environmental liabilities behind in the old company (renamed Tronox and spun off as a separate company), with the intent to evade its debts —including liabilities for environmental clean-up at numerous sites across the country. The court stated that “there can be no dispute that Kerr–McGee acted to free substantially all its assets … from 85 years of environmental and tort liabilities.” In re Tronox Inc., 503 B.R. 239, 280 (Bankr. S.D.N.Y. 2013).
Under the terms of the settlement agreement, the litigation trust and Anadarko/Kerr-McGee mutually agree to release all claims against each other. Additionally, the United States government and Anadarko/Kerr-McGee have provided mutual covenants not to sue.
As a result of the settlement agreement, it is anticipated that the funds will be allocated to a number of clean-ups, which will include:
• $1.1 billion paid to a trust charged with cleaning up contaminated sites around the county, including the Kerr- McGee Superfund Site in Columbus, Mississippi
• $1.1 billion paid to a trust responsible for cleaning up a former chemical manufacturing site in Nevada that contaminated Lake Mead
• Approximately $985 million paid to the U.S. Environmental Protection Agency (EPA) to fund the clean-up of approximately 50 abandoned uranium mines on land of the Navajo Nation
• Around $224 million paid to the EPA for clean-up of thorium contamination at the Welsbach Superfund Site in Gloucester, New Jersey
Tags: Anadarko, Kerr-McGee, Tronox