Anadarko to settle Kerr-McGee cleanup case for $5.15 billion

Bloomberg NewsApril 3, 2014 

— Anadarko Petroleum Corp. has agreed to pay $5.15 billion to settle a U.S. claim for $25 billion to clean up 85 years worth of pollution left behind by its Kerr-McGee unit across the country, including uranium mines and wood- treatment plants.

The Justice Department said it was its largest environmental recovery ever.

“For 85 years, Kerr-McGee operated numerous hazardous businesses, and those businesses caused significant damage to the environment and to communities exposed to contamination,” Deputy Attorney General James Cole said in a statement.

The U.S. government initially sought $25 billion to clean up 2,772 sites and compensate about 8,100 claimants. Most of Thursday’s settlement, $4.4 billion, would be used for cleanup of environmental contamination and to settle environmental claims, Cole said.

Anadarko, based in the Woodlands, Texas, had said in January it should pay $850 million to $4 billion. 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, the Environmental Protection Agency has said.

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 Thursday.

“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 million Anadarko shares.

Kerr-McGee spun off its chemicals business and old environmental liabilities as Tronox Inc. 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 billion. 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 billion in exchange for a complete release of all claims asserted against Kerr-McGee, the company said today in a statement. The settlement is subject to bankruptcy court approval.

U.S. 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 billion to $14.2 billion, plus attorney fees.

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 trillion cubic feet of natural gas, enough to meet annual U.S. residential demand for 14 years. The company also used acquisitions of more than $21 billion to boost its drilling prowess in North America in Colorado, Texas and Pennsylvania.

Kary reported from New York. Bradley Olson contributed from Houston.

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