Anadarko Kerr-McGee Damages Cuts Opposed by Tronox Trust

Anadarko Petroleum Corp. (APC) and its Kerr-McGee unit should pay $20.8 billion for environmental cleanup and related cancers in towns including Avoca, Pennsylvania, and not be allowed to cut the amount to $850 million, Tronox Inc. (TROX) creditor trusts and the U.S. said.

Anadarko said in January it should owe $850 million to $4 billion after losing a ruling in a lawsuit brought by Tronox and the U.S. government. The number is below the range of $5.2 billion to $14.2 billion, plus attorney’s fees, suggested by U.S. Bankruptcy Judge Allan Gropper in his December decision.

In court papers filed yesterday, two trusts that represent Tronox environmental and personal-injury claimants objected to Anadarko’s proposal, as did the U.S. government. The U.S. sought $25 billion to clean 2,772 polluted sites and compensate about 8,100 people affected by the contamination.

“This would be a windfall to the defendants at the expense of the tort claimants -- who have suffered enough in defendants’ hands,” according to the trust for people injured by Kerr-McGee’s toxins. The trust said it is already scheduled to pay 7,611 claims for cancer, cardiovascular disease and respiratory ailments, most linked to creosote used in Avoca, which had a population of 2,664 in 2012.

“The town has lost so many family members to cancers related to Kerr-McGee,” John Babkowski, a 59-year-old Avoca resident, said in an e-mail. Both of his parents were among the victims, Babkowski said.

Avoca Claims

The average claim is $179,000. Under Anadarko’s proposed limitation on damages, people would recover less than half as much as the trust has planned for them.

“Following years of litigation, months of trial and a 166-page opinion from the court, defendants have been found liable for their conduct,” the trust paying environmental cleanup costs said. The law “requires a recovery at or in excess of the high end of the court’s range,” it said.

Anadarko, based in The Woodlands, Texas, is reviewing the filing, spokesman John Christiansen said in a statement on the company’s website.

Anadarko rose 4 cents to $81.73 at 11:14 a.m. in New York trading after earlier falling as much as 1.9 percent.

The case stems from Kerr-McGee’s 2005 spinoff of its chemicals business as Tronox, which took on decades worth of environmental liabilities. About three months after the spinoff, Anadarko offered to buy Kerr-McGee’s oil and natural gas assets for $18 billion.

Tronox Suit

Burdened by the environmental debt, Tronox filed for bankruptcy in 2009 and sued Anadarko and Kerr-McGee that year.

Tronox alleged that the shift of liabilities was a “fraudulent transfer” under bankruptcy law, and that the sum of the environmental damages should be clawed back to benefit its creditors, which included the U.S. Environmental Protection Agency and thousands of injury claimants.

Tronox won permission to exit bankruptcy without paying the cleanup costs by agreeing that the EPA could get any damages from its lawsuit against Anadarko. A nonjury trial was held before Gropper in 2012.

The judge found in December that Kerr-McGee acted improperly in the spinoff by putting its environmental liabilities into the new company, and that the money could indeed be clawed back.

The U.S., represented by Manhattan U.S. Attorney Preet Bharara, said in court papers yesterday that Anadarko’s attempt to limit the damages is “inconsistent with” Tronox’s plan to exit bankruptcy and the settlement.

The trust for Tronox creditors said Anadarko also owes $62.6 million in fees for attorneys that successfully pursued the case.

The lawsuit is Tronox Inc. v. Anadarko Petroleum Corp., 09-ap-01198; the bankruptcy is Tronox Inc., 09-bk-10156, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Tiffany Kary in New York at tkary@bloomberg.net

To contact the editor responsible for this story: Andrew Dunn at adunn8@bloomberg.net

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