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​Polluter pays: Record $5bn cleanup settlement for Kerr-McGee legacy

Published time: April 04, 2014 10:19
Edited time: April 04, 2014 10:55
U.S. Attorney for the Southern District of New York Preet Bharara stands beside a map during an announcement of a settlement with Anadarko Petroleum Corp at the Justice Department in Washington April 3, 2014.  (Reuters/Jonathan Ernst)

U.S. Attorney for the Southern District of New York Preet Bharara stands beside a map during an announcement of a settlement with Anadarko Petroleum Corp at the Justice Department in Washington April 3, 2014. (Reuters/Jonathan Ernst)

Oil and gas company Anadarko Petroleum Corp agreed to pay a record $5.15 billion to settle the eight-decade toxic legacy of subsidiary Kerr-McGee. The largest-ever compensation payout is still less than might have been ordered by a court.

The agreement announced on Thursday settles a dispute between Anadarko Petroleum Corporation, which bought Kerr-McGee in 2006, and a litigation trust representing the US government, 11 state governments, Indian tribes and individuals.

Most of the money, $4.4 billion, will go to clean up waste left since at least 1928 by Kerr-McGee's operations, including a former rocket fuel manufacturing facility in Henderson, Nevada, which contaminated Lake Mead, a water source for the Colorado River, 50 closed uranium mines in and around the Navajo Nation in Arizona and New Mexico, a former chemical production site in Columbus, Mississippi, and a wood treatment facility in Manville, New Jersey.

The rest will go to compensate to more than 8,000 people for health damage from Kerr-McGee pollution.

"If you are responsible for 85 years of poisoning the earth, you are responsible for cleaning it up," US Attorney for Manhattan Preet Bharara said at a news conference announcing the settlement.

Navajo tribal leaders welcomed the settlement, especially since some of the roads used for servicing the uranium mines are still in use.

“I have a feeling of just deep appreciation for the Navajo children, who literally are playing in uranium piles today who aren't going to have to do that in the future,” said David Taylor, an attorney with the Navajo Nation Department of Justice.

An aerial view of Lake Mead (Reuters/Mario Anzuoni)

The Anadarko share price rose 14.5 percent on the news to $99.02 per share, since the size of the settlement, while a record high, was still relatively low. In December, US Bankruptcy Judge Allan Gropper of New York said Anadarko should pay from $5.15 billion to more than $14 billion in cleanup costs.

Before Anadarko bought Kerr-McGee, the company was split, with subsidiary Tronox receiving parts of the company burdened with pollution legacy. Tronox couldn’t pay the cost of the cleanup and went into bankruptcy three years after Anadarko purchase.

The US Department of Justice, which was involved in the dispute, argued that the spin-off was a scheme to evade responsibility for the cleanup and pass its costs on local communities and the federal government. Judge Gropper was the one to rule that Anadarko should be liable for the cleanup costs.

"Kerr-McGee sought simply to walk away from it all through a corporate shell game," Bharara said on Thursday. He added that the company "polluted indiscriminately and left others holding the toxic tab."

"This settlement agreement with the Litigation Trust and the U.S. Government eliminates the uncertainty this dispute has created, and the proceeds will fund the remediation and cleanup of the legacy environmental liabilities and tort claims," said Anadarko Chairman, President and CEO Al Walker in a statement.

"I think this case stands for a principle that is really important to us, which is that the polluter pays," said Cynthia Giles of the Environment Protection Agency, who is an assistant administrator for the Office of Enforcement and Compliance Assurance. "When you make a mess, you've got to clean it up."

Anadarko, one of the largest independent US oil companies, has over 2.5 billion barrels of proved reserves worldwide. Its domestic projects are spread throughout continental US, Alaska, and the deep waters of the Gulf of Mexico. The Houston-based oil producer will get a net $550 million tax benefit from the cleanup agreement.

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