AVOCA - Thousands of people injured by toxic waste at a now-shuttered creosote plant are waiting to see how they will benefit from a multi-billion dollar settlement reached with Anadarko Petroleum Corp. in an environmental contamination case that spanned the country.
The U.S. Department of Justice and the Environmental Protection Agency announced Thursday that Anadarko had agreed to pay $5.15 billion to settle the case against its subsidiary Kerr-McGee Corp. and some of its affiliates accused of fraudulently transferring assets to avoid paying its bills.
The settlement calls for $4,101 to go to Avoca for cleanup of creosote, a distilled coal tar, at the former wood-treatment plant on a 35-acre site off York Avenue. According to a case summary released by the EPA, people injured or killed because of contamination will split $605 million.
Avoca resident Ed Paradis, 62, said he has lived on Main Street for 27 years and recalls how, on hot summer nights, residents would have to close their windows as the odor of creosote permeated town.
Paradis, who is one of nearly 4,000 people who lived near the plant who sued Kerr-McGee in 2005, said he has had heart trouble and other problems as a result of the exposure, and he personally knew three men who died young of cancer.
“We never thought it would be settled. I thought they would hold us off until we were gone,” Paradis said. “At least we’re vindicated. We have vindication that something was wrong here.”
Authorities said Kerr-McGee Corp.‘s operations - including uranium mines, processing radioactive thorium, treating wood with creosote and manufacturing perchlorate, a component of rocket fuel - spanned more than 2,700 sites in 47 states.
Sometime prior to 2005, the company decided the costs of dealing with contamination created by its operations were a “drag on its business,” namely exploration and production of oil and gas, according to the U.S. Attorney’s Office.
The corporation created another entity - New Kerr-McGee Corp. - and transferred its valuable oil and gas exploration assets to the new company, prosecutors said. The liabilities, however, remained with the old company, which was renamed Tronox Inc. and broke off as a separate company in 2006.
Kerr-McGee transferred its assets to the new company for less than fair value, leaving Tronox insolvent and leading it to file for bankruptcy in 2009, authorities said.
The government stepped in, alleging fraud. In February 2011, Tronox reached a settlement to pay $270 million and transfer an 88 percent share of its interest in the Anadarko litigation to the governments and environmental response trusts created under the settlement.
In December, U.S. Bankruptcy Judge Allan L. Gropper ruled that Kerr-McGee transferred its assets in a scheme to hinder or delay creditors.
“There 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,” Gropper wrote.
The federal government brought the lawsuit to “hold the defendants accountable and require them to repay the value of the assets fraudulently conveyed from Old Kerr-McGee,” according to the U.S. Attorney’s Office. The $5.15 billion settlement - which is in addition to the $270 million agreement in February 2011 - represents the largest environmental enforcement recovery ever by the Department of Justice.
“If you are responsible for 85 years of poisoning the earth, then you are responsible for cleaning it up,” U.S. Attorney Preet Bharara said in a statement. “The company tried to cleanse its valuable business from its toxic legacy liabilities. Now the defendants will pay to cleanse the land and water.”
In a statement, Anadarko said it agreed to the settlement to resolve all claims against Kerr-McGee that “stemmed from alleged actions by Kerr-McGee prior to its acquisition by Anadarko in 2006.” The company acquired Kerr-McGee’s oil and gas assets for $18 billion.
Under the settlement, the litigation trust and Kerr-McGee agreed to release claims against each other, and federal authorities and Kerr-McGee agreed not to sue, the statement said.
“This settlement agreement with the litigation trust and the U.S. Government eliminates the uncertainty this dispute has created, and the proceeds will fund the remediation and cleanup of the legacy environmental liabilities and tort claims,” Anadarko chief executive Al Walker said in a statement. “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.”
The litigation trust agreement calls for governments and environmental response trusts to collect 88 percent of the proceeds and for tort claimants to receive 12 percent. According to a case summary released by the EPA, that equates to $4.475 billion for cleanup costs and $605 million for tort claimants.
Lehighton-based attorney Jane Seigendall Sebelin, who represents the estates of about 400 Avoca claimants who died before or since the case was filed, said the money will be split among the deceased based on the type of illness they had.
“We still have not gotten word as to how much anybody will get, which is the question everybody has,” Sebelin said. “In terms of timing, we don’t have an exact date yet, but at least it’s in the process.”
Former Avoca mayor James L. Haddock said the settlement should prevent Anadarko from appealing a ruling, thereby prolonging a dispute that has already gone on for years.
“This out of court settlement will expedite the final payouts,” said Haddock, who is now the county prothonotary. “It’s certainly good news for all those involved.”
The plant closed in 1996 after more than 40 years of operation, and the state Department of Environmental Protection approved the company’s final cleanup plan in 2005.
Haddock said he believes there are still environmental issues there, and he hopes that it can now be evaluated, cleaned up if needed and certified clean.
“Avoca will win down the road because that useless land will be put back in the market and utilized, creating a tax base and maybe jobs as part of this down the road,” Haddock said.
©2014 The Citizens’ Voice (Wilkes-Barre, Pa.)
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