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Anadarko settles Kerr-McGee Cleanup lawsuit for $5.15 bn

BY DEL QUENTIN WILBER, JIM SNYDER & TIFFANY KARY

THE WOODLANDS, Texas (Bloomberg) -- Anadarko agreed to pay $5.15 bn to settle a U.S. claim for $25 bn to clean up 85 years worth of pollution its Kerr-McGee unit left behind across the country.

The U.S. Justice department said it represents the largest recovery for environmental cleanup ever.

Anadarko shares surged more than 14 % to $99.02 in New York, its biggest one-day rise since 2008 and an all-time high.Anadarko, which drills for oil and gas from Colorado to Mozambique, has lagged behind peers since 2010 as the company was weighed down under the onus of potential liability from the 2010 deepwater horizon spill in the Gulf of Mexico and the case settled.

The government said the settlement made sure that the polluters were held responsible, instead of taxpayers.

“Kerr-McGee’s businesses all over this country left significant, lasting environmental damage,” Deputy Attorney General James Cole said at a news conference at the Justice department in Washington. “It tried to shed its responsibility for this environmental damage and stick the United States taxpayers with the huge cleanup bill.”

The U.S. initially sought $25 bn to clean up 2,772 sites and compensate about 8,100 claimants. Most of settlement, $4.4 bn, would be used for cleanup of environmental contamination and to settle environmental claims, Cole said. The rest would go to injury claims of people who have come down with cancer, respiratory problems, or other injuries from pollutants, according to court documents.

By comparison, BP agreed to pay $4.5 bn in criminal and civil penalties on top of $9.2 bn worth of private party lawsuits for the April 2010 deepwater horizon disaster, the worst offshore oil spill in U.S. history.

Anadarko, had said in court papers in January that the judgment could be as high as $4 bn. It increased that estimate to $5.15 bn in a Feb. 28 filing with financial regulators.

The settlement “eliminates the uncertainty this dispute has created, and the proceeds will fund the remediation and cleanup of the legacy environmental liabilities and tort claims,” Anadarko Chairman and CEO Al Walker said in a statement.

Founded in 1929 near Oklahoma City, Kerr-McGee left a toxic legacy that includes uranium mines in Navajo territories in the West and wood-treatment plants that used creosote in Mississippi and Pennsylvania, according to the Environmental Protection Agency.

“There are a lot of investors out there that would like to own Anadarko, but they couldn’t because of these liabilities hanging over them that were difficult to quantify,” said Tim Beranek, a money manager at Denver-based Cambiar Investors, which owns nearly 2 mn Anadarko shares.

Anadarko will record the impact of the settlement in its first-quarter financial statements, including a $550 mn net tax benefit, according to the company.

Kerr-McGee spun off its chemicals business and old environmental liabilities as Tronox, beginning in 2005. About three months after the transaction was completed, Anadarko offered to buy Kerr-McGee’s oil and natural gas assets for $18 bn. Tronox filed for bankruptcy in 2009 and sued Kerr-McGee over the environmental debt. The U.S. as Tronox’s largest creditor, intervened on behalf of the EPA.

Anadarko will pay $5.15 bn in exchange for a complete release of all claims asserted against Kerr-McGee, the company said in a statement. The settlement is subject to bankruptcy court approval.

United States Bankruptcy Judge Allan Gropper in New York ruled in December that Kerr-McGee improperly unloaded its environmental liabilities into Tronox before the Anadarko takeover. He suggested that Anadarko pay $5.2 bn to $14.2 bn, plus attorney fees.

Gropper had been scheduled to rule on the damages amount. The settlement was reached to avoid any potential appeals that could delayed payments to injury claimants for years, said John Hueston, a lawyer who acted for the U.S. and Tronox creditors in the case.

“I have witnessed first-hand the devastation caused by Kerr-McGee’s national toxic legacy,” Hueston said in a statement. “I have picked my way through uranium mine debris in the Navajo Nation, walked over Nevada desert stained with perchlorate rocket fuel, and examined evidence of oozing coal tar creosote in New Jersey and Pennsylvania.”

The case, he said in a telephone interview, “cried out for attempts to reach a result that would bring justice now.”

Kerr-McGee’s pollution legacy includes one made famous by 1983 movie “Silkwood,” starring Meryl Streep. The film dramatized the story of labor activist Karen Silkwood, who was killed in a car crash in 1974 while on her way to discuss her claims about safety violations at Kerr-McGee’s nuclear materials plant near Crescent, Oklahoma. That facility is one of the sites covered in the settlement.

Pending court approval, payments should begin sometime this year, with some of the largest sums going to a Nevada trust to clean up perchlorate contamination near Lake Mead in Nevada, which will receive $1.1 bn, and the Navajo Nation, which will also get $1.1 bn for contamination related to Kerr- McGee’s Cold War era-mining of uranium.

“If you are responsible for 85 years of poisoning the earth, then you are responsible for cleaning it up,” Preet Bharara, the United States attorney in Manhattan, said at the news conference.

Anadarko has been remade in the past decade, tripling its market value while honing an expertise in deepwater exploration projects in the Gulf of Mexico and Africa. The global explorer has announced discoveries off the coast of Mozambique that may contain 70 Tcf of natural gas, enough to meet annual U.S. residential demand for 14 years. The company also used acquisitions of more than $21 bn to boost its drilling prowess in North America in Colorado, Texas and Pennsylvania.

04/04/2014

 

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