(New York, N.Y.) A historic settlement announced today with the Kerr-McGee Corporation and certain of its affiliates ("New Kerr-McGee"), and their parent Anadarko Petroleum Corporation today will greatly benefit environmental cleanups at the Welsbach Superfund location in Gloucester City, New Jersey and the GCL Tie and Treating Superfund location in Sidney, New York, and reimburse the federal government for substantial cleanup costs at the Federal Creosote Superfund location in Manville, New Jersey. The U.S. has entered into the settlement arrangement with the companies in a fraudulent conveyance case brought by the U.S. and co-plaintiff Anadarko Litigation Trust in the bankruptcy of Tronox Incorporated
The bankruptcy court had previously found, in December 2013, that the historic Kerr-McGee Corporation ("Old Kerr-McGee") fraudulently conveyed assets to New Kerr-McGee to evade its debts, including its liability for environmental clean-up at contaminated sites around the country. Pursuant to the settlement agreement, the defendants agree to pay $5.15 billion to settle the case, of which approximately $4.4 billion will be paid to fund environmental clean-up and for environmental claims. This is the biggest environmental enforcement recovery ever by the Department of Justice.
"The Superfund plan works best when the polluter pays and today the polluter is paying in a very big way," said E.P.A. Regional Administrator Judith A. Enck said. "Old Kerr-McGee is responsible for a toxic legacy that impacted communities in New Jersey and New York and threatened people's health. This settlement provides funds to address the environmental damage that poses risks to people's health and the environment at these sites and other sites across the country."
The settlement includes in excess of $440 million for several sites in New Jersey and in New York.
Approximately $224 million will be paid to E.P.A. for cleanup of thorium contamination at the Welsbach Superfund location in Gloucester City, New Jersey. Among ongoing efforts related to the site, E.P.A. has removed in excess of 200,000 cubic yards of radiologically contaminated soil and building materials from in excess of 140 properties in the Gloucester City and Camden areas and has investigated in excess of 900 properties.
Approximately $217 million will be paid to the federal Superfund in repayment of costs previously incurred by E.P.A. cleaning up the Federal Creosote Superfund location in Manville, New Jersey. Among other efforts at the site, E.P.A. removed in excess of 450,000 tons of contaminated soil and cleaned up nearly 100 residential and commercial properties in Manville before completing work in 2008.
The federal Superfund will gain a portion of approximately $43 million for past and future costs paid by E.P.A. to clean up the GCL Tie and Treating Superfund location in Sidney, New York. Among other cleanup efforts at the site, E.P.A. removed in excess of 20,000 gallons of creosote waste, and excavated and treated about 109,000 tons of contaminated soil, sediment and debris. E.P.A. continues to operate a ground water extraction and treatment system at the site.
Under today's settlement agreement, the defendants will pay $5.15 billion to the Trust to settle the fraudulent conveyance case. Pursuant to a 2011 arrangement between the United States, certain state, local, and tribal governments, and the bankruptcy estate, approximately 88% of the net proceeds of this litigation will be distributed by the Trust to the United States, certain state governments, the Navajo Nation, and environmental trusts created to clean up the contaminated sites.
According to the complaints of the government and the Litigation Trust created to pursue Tronox's fraudulent conveyance claims on behalf of its environmental and torts creditors and the Dec. 12, 2013 written opinion of U.S. Bankruptcy Judge Allan L. Gropper:
Old Kerr-McGee operated numerous businesses, which included uranium mining, the processing of radioactive thorium, creosote wood treating, and manufacture of perchlorate, a component of rocket fuel. These operations left contamination across the nation, including radioactive uranium waste across the Navajo Nation; radioactive thorium in Chicago and West Chicago, Illinois; creosote waste in the Northeast, the Midwest, and the South; and perchlorate waste in Nevada.
In the years prior to 2005, Old Kerr-McGee concluded that the liabilities associated with this environmental contamination were a drag on its business, the exploration and production of oil and gas. With the intent of evading these and other liabilities, Old Kerr-McGee created a new corporate entity - defendant New Kerr-McGee - and, through a scheme executed in 2002 and 2005, transferred its valuable oil and gas exploration assets to the new company. The legacy environmental liabilities were left behind in the old company, which was re-named Tronox, and spun off as a separate company in 2006. As a result of these transactions, Tronox was rendered insolvent and unable to pay its environmental and other liabilities. In 2009, Tronox went into bankruptcy.
The U.S. and the bankruptcy estate (now represented by the Trust) brought this lawsuit to hold the defendants accountable and require them to repay the value of the assets fraudulently conveyed from Old Kerr-McGee.
In its decision, the court found that Old Kerr-McGee transferred assets with the intent to hinder or delay creditors, in particular environmental creditors, and also transferred those assets for less than their fair value, which left Tronox insolvent, unable to pay its debts when they came due, and undercapitalized. Among other things, the Court concluded that:
"[T]here can be no dispute that Kerr-McGee acted to free substantially all its assets - certainly its most valuable assets - from 85 years of environmental and tort liabilities."
The settlement arrangement will be lodged with the U.S. Bankruptcy Court for the Southern District of New York for a period of at least 30 days before it is submitted for the court's approval, in order to provide public notice and to afford members of the public the opportunity to review on the settlement agreement.
More information can be obtained at the following web sites:
Case Summary: Settlement Arrangement in Anadarko Fraud Case Results in Billions for Environmental Cleanups Across the Country
http://www2.epa.gov/enforcement/case-summary-settlement-agreement-anadarko-fraud-case-results-billions-environmental
Welsbach Superfund Location in Gloucester, New Jersey
http://www.epa.gov/region02/superfund/npl/welsbach/
GCL Tie and Treating Superfund Location in Sidney, New York
http://www.epa.gov/region02/superfund/npl/0203408c.pdf
Federal Creosote Superfund Location in Manville, New Jersey
http://epa.gov/region02/superfund/npl/federalcreosote/
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