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DOJ Extracts $5.15 Billion Settlement From Anadarko Petroleum Corp.

04/09/2014 06:58 pm 18:58:23 | Updated Jun 09, 2014

On 3 April the Department of Justice announced that it had settled a lawsuit against Anadarko Petroleum Corp., with the defendant agreeing to pay $5.15 billion, the largest environmental enforcement settlement ever by the Department of Justice, surpassing its plea agreement with BP over its massive 2010 Gulf oil spill, which resulted in $4 billion in criminal fines for the British company. The settlement will be used to restore thousands of toxic sites and to settle thousands of personal injury claims.

Over the past half-decade Anadarko Petroleum Corp. has been highly successful globally, with offshore operations in Mozambique and Ghana, as well as developing immense onshore acreage holdings in the U.S., especially in the Wattenberg of Colorado, Eagle Ford and Permian basin of Texas.

In 2006 Anadarko Petroleum Corp.acquired Tronox, a former subsidiary of Kerr-McGee. In a classic shell game commonly used by Wall Street wizards, Kerr-McGee had set up Tronox as a toxic dump, offloading decades of toxic environmental liabilities and toxic tort claims there, balancing them out with a small number of assets, then spun it out as a standalone public company.

According to the Department of Justice website, "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." Anadarko Petroleum Corp.'s shares subsequently plunged 9.3 percent. U.S. Deputy Attorney General Cole observed:

Kerr-McGee's businesses all over this country left significant, lasting environmental damage in their wake. It tried to shed its responsibility for this environmental damage and stick the United States taxpayers with the huge cleanup bill. Through a lot of hard work, we uncovered this fraud and recovered over $5 billion for the American people. This settlement demonstrates the Justice Department's firm commitment to preventing and combating all forms of fraud and to securing environmental justice.


Environmental Protection Agency Office of Enforcement and Compliance Assurance Assistant Administrator Cynthia Giles remarked, "EPA's vigorous pursuit of this case will have a big return for communities across the country. Companies that pollute can't escape their responsibility to pay for the cleanup. EPA will continue to fight for those affected by pollution."

Anadarko Petroleum Corp.'s chief executive Al Walker issued a statement lauding the agreement, saying it "eliminates the uncertainty this dispute has created. Investor focus can now return to the tremendous value embedded in Anadarko's asset base, allowing our peer-leading operational and exploration results to again become the basis for valuation. We are grateful to our stakeholders who have maintained their confidence and trust in our people and our assets." The day the settlement was announced, Anadarko Petroleum Corp. shares surged 14.5 percent in the last two hours of the trading day, partly because the settlement was far lower than what the government originally sought.

The final word belongs to U.S. Attorney for the Southern District of New York Preet Bharara, who said:

If you are responsible for 85 years of poisoning the earth, then you are responsible for cleaning it up. That's why this case was brought. And that's why the defendants are paying a record $5.15 billion -- to fund that colossal cleanup and to make things right. The company tried to keep its rewards and shed its responsibilities by playing a corporate shell game, putting its profitable oil-and-gas business in a new entity and leaving behind a bankrupt shell holding the environmental liabilities of the defunct, polluting lines of business. The company tried to cleanse its valuable business from its toxic legacy liabilities. Now the defendants will pay to cleanse the land and water.

By John Daly of Oilprice.com

John C.K Daly is the chief analyst at the energy news site Oilprice.com. Dr. Daly received his Ph.D. in 1986 from the School of Slavonic and East European Studies, University of London.

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