The largest pollution settlement in history was recently signed by Anadarko Petroleum and the U.S. Department of Justice (DOJ). Anadarko agreed to pay $5.15 billion to resolve fraudulent conveyance claims that will result in the cleanup of dozens of contaminated sites across the country and pay thousands of people who were exposed to toxic chemicals at these sites. That same day, the company’s stock went up by 14.5 percent.
Anadarko Petroleum is an American oil and gas exploration company and one of the world’s largest publicly traded oil and gas exploration and production companies, with approximately 2.8 billion barrels of oil equivalent (BOE) of proved reserves as of December 31, 2013, making it one of the world’s largest independent exploration and production companies. The settlement resolves claims against Kerr-McGee Corporation which Anadarko purchased in 2006.
For 85 years Kerr-McGee operated a wide range of chemical, energy and manufacturing businesses which included uranium mining, processing of radioactive thorium, creosote wood treating, and manufacture of perchlorate, a component of rocket fuel. These operations left a legacy of contamination across the country including radioactive uranium waste throughout Navajo Nation; radioactive thorium in Chicago and West Chicago; creosote waste in the Northeast, the Midwest, and the South; and perchlorate waste in Nevada.
The lawsuit filed by DOJ alleged that Kerr-McKee tried to evade its responsibility for cleaning up its pollution by transferring its environmental and tort liability to a shell company that declared bankruptcy shortly after the transfer. This left the cost of cleaning up its many toxic waste sites to US taxpayers.
Investors were happy with the settlement not only because it ends the uncertainty over the litigation, but also because it ended up costing Anadarko much less than it might have. Despite being the largest environmental cash settlement in history, those close to the matter were predicting the settlement would cost the company somewhere between $5.2 and $14.3 billion. The plaintiffs alone were seeking as much as $20 billion according to news reports.
Did the government let the company off the hook for too little money? Probably, but now it can move forward with quite a treasure chest to cleanup hundreds of sites across the country. For a complete list of the areas that will receive cleanup funds from the settlement, see the DOJ’s media release on the case.
Some see this is a major win for the public and the environment because it holds companies accountable for the pollution they generate. It also sends the message to companies and to investors that companies have to take their toxic legacy responsibilities seriously. Perhaps investors are also saying that they prefer that the companies they invest in take care of its pollution the right way, not by trying to side step its responsibility. Wishful thinking perhaps, but only time will tell. For more information about this situation, see the USEPA’s enforcement statement.