US will likely intervene in Tronox lawsuit – professor

Al Greenwood

26-May-2009

A bag of Tronox TiO2HOUSTON (ICIS news)–The US will like receive permission to intervene in a lawsuit that Tronox filed in bankruptcy court against its former parent firm as it relates to environmental issues, a law professor said on Tuesday.

After filing for bankruptcy protection, Tronox sued its former parent, Kerr-McGee, alleging that the spin-off was a convenient way for Kerr-McGee to rid itself of massive environmental liabilities. Tronox also sued Anadarko Petroleum, which acquired Kerr-McGee in 2006 for $18bn (€13bn).

Spinning off Tronox with the liabilities was part of Kerr-McGee’s strategy to make itself an attractive takeover target, Tronox alleged. Andadarko acquired Kerr-McGee soon after the spin-off.

Tronox was burdened with more than 70 years worth of environmental liabilities, the company said. The legacy costs overwhelmed the company and it filed for bankruptcy protection earlier this year.

The US government has since filed a request to intervene in the Tronox lawsuit against Kerr-McGee and Anadarko.

The US will likely be allowed to intervene as to the environmental problems addressed in the lawsuit, said Jay Westbrook, a professor of law at the University of Texas Law School.

The US said it filed the intervention motion on the request of the Environmental Protection Agency (EPA).

In its intervention request, the US alleged that the environmental liabilities inherited by Tronox amount to debt. Basically, Kerr-McGee transferred its environmental liabilities to Tronox as a way to avoid paying debt to the US, the government alleged.

“Kerr-McGee Corp engaged in a corporate restructuring beginning in 2000 with the actual intent to hinder, delay or defraud the US by shifting liabilities from Kerr-McGee … to other Kerr-McGee subsidiaries,” the US said.

Those subsidiaries became Tronox, which went bankrupt.

Since Anadarko acquired Kerr-McGee, the US wants the firm to pay the clean-up costs owed by Tronox. Those costs could total in the millions, as they relate to dozens – if not hundreds – of former Kerr-McGee sites, according to court documents.

Anadarko has repeatedly said that it was not responsible for the financial state of Tronox.

“We conduct our business with the utmost integrity, and we are not responsible for Tronox’s financial condition,” Anadarko said in a statement. “The market demonstrates that Tronox was solvent and adequately capitalised at the time of its [initial public offering], as Tronox was able to issue stock at approximately $14/share, and it was also able to enter into a credit facility and issue unsecured bonds.”

($1 = €0.71)

To discuss issues facing the chemical industry go to ICIS connect

READ MORE

Global News + ICIS Chemical Business (ICB)

See the full picture, with unlimited access to ICIS chemicals news across all markets and regions, plus ICB, the industry-leading magazine for the chemicals industry.

Contact us

Now, more than ever, dynamic insights are key to navigating complex, volatile commodity markets. Access to expert insights on the latest industry developments and tracking market changes are vital in making sustainable business decisions.

Want to learn about how we can work together to bring you actionable insight and support your business decisions?

Need Help?

Need Help?