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Anadarko Petroleum settles pollution clean-up claims for ${esc.dollar}5.15 bln

Source: Reuters - Thu, 3 Apr 2014 20:24 GMT
Author: Reuters
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(Rewrites throughout with quotes and details)

By Nick Brown

April 3 (Reuters) - Global energy company Anadarko Petroleum Corp will pay $5.15 billion to end years of litigation over cancer and other health problems across the United States caused by pollution from uranium deposits, wood creosote and rocket fuel processing.

The agreement announced on Thursday, the biggest environmental bankruptcy settlement on record, resolves environmental cleanup claims stemming from the 2009 bankruptcy of paint materials maker Tronox brought by a trust for governments, Indian tribes and individuals.

Anadarko's potential liability has weighed on its shares since December, when U.S. Bankruptcy Judge Allan Gropper of New York said Kerr-McGee, which Anadarko bought in 2006, knew that the spin off of titanium dioxide unit Tronox would harm the business.

At the time, Gropper said Anadarko should pay from $5.15 billion to more than $14 billion in cleanup costs. Anadarko later argued the liabilities should be as little as $850 million.

The settlement is subject to a 30-day public comment period, and then needs approval by both Gropper and a federal court. Anadarko shares rose 13 percent to more than $98 per share during afternoon trading as word of the settlement circulated.

"This removes huge uncertainty," said Fadel Gheit, oil analyst at Oppenhemier. "This is a premier exploration company that has this dark cloud hanging over them and now its gone."

Tronox, which makes titanium dioxide used in paints, inherited heavy environmental liabilities that forced it into bankruptcy in 2009.

John Hueston, the trustee for the plaintiffs, called the settlement "historic."

"Beyond the unprecedented magnitude of this recovery, the timing of the settlement was critical to ensure the money is promptly available to victims overdue for relief," Hueston said in a statement.

Anadarko said in a statement that it would record a net $550 million tax benefit from the agreement.

"This settlement agreement with the Litigation Trust and the U.S. Government eliminates the uncertainty this dispute has created," Anadarko Chief Executive Officer Al Walker said in the statement.

U.S. Deputy Attorney General James Cole told a news conference in Washington, D.C. that $4.4 billion will go to cleanup and environmental claims. Cole said the payment will "more than cover the damages caused."

The U.S. Attorney for Manhattan, Preet Bharara, said Anadarko's Kerr-McGee unit tried to avoid cleanup "through a corporate shell game."

DOOMED SPIN-OFF

Tronox used its Chapter 11 bankruptcy protection case to shed environmental liabilities it had inherited by assigning them to a litigation trust. It emerged from bankruptcy in 2011.

The trust in turn sued Anadarko and Kerr-McGee, arguing the spinoff was a fraudulent ploy by Kerr-McGee to shed its clean-up responsibilities and make itself a more valuable takeover target for Anadarko. The move doomed Tronox by weighing it down with too much liability, according to the lawsuit.

The trust represented the U.S. government, 11 individual states, the Navajo Nation, various environmental response trusts and trusts for individual plaintiffs. The trust represents entities that claimed health problems caused by pollution from uranium deposits, wood creosote and more.

The $5.15 billion will fund a wide array of projects, including $1.1 billion to address perchlorate contamination from operations at an industrial park near Lake Mead in Nevada, the litigation trust said. Ammonium perchlorate is a primary ingredient of rocket fuel.

The Navajo Nation will get about $1 billion to address radioactive contamination from Kerr-McGee's decades-old uranium mining operation, the litigation trust said in a statement.

Another $1.1 billion will go toward cleanup at more than two dozen contaminated sites around the country, while the U.S. Environmental Protection Agency will get $433 million to split between New Jersey Superfund sites in Gloucester and Manville, the statement said. (Additional reporting by David Ingram in Washington, D.C. and Terry Wade in Houston; Editing by Tom Hals in Wilmington, Delaware and Grant McCool)

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