Anadarko Petroleum has agreed to pay the federal government the largest settlement ever for an environmental cleanup. But despite having to pay $5.1 billion, the news isn’t all bad for the Texas oil company. News of the settlement caused its stock to go up, as did its chances of a lucrative buyout.

The case against Anadarko started last decade after it acquired Kerr-McGee, an Oklahoma energy and chemical company whose operations polluted vast stretches of American soil and water stretching from New Jersey to Mississippi to Nevada.

Anadarko tried to get out of paying for Kerr-McGee’s mess by claiming the subsidiary, before it was purchased, set up a spinoff company (Tronox) that was legally responsible for all of the environmental liabilities. But a judge dismissed this argument after concluding that Tronox, which subsequently went bankrupt, was nothing more than a scheme to shield Kerr-McGee (or its new owner, Anadarko) from being liable.

“Kerr-McGee sought simply to walk away from it all through a corporate shell game,” Preet Bharara, U.S. Attorney for the Southern District of New York, said. The company “polluted indiscriminately and left others holding the toxic tab,” Bharara added.

The movie Silkwood told the tale of one of Kerr-McGee’s misdeeds, when labor activist Karen Silkwood accused the company of poisoning her with radioactive matter at its plutonium plant in Oklahoma. This settlement does not involve the Silkwood case, but it does cover others of a radioactive nature.

There are 50 abandoned uranium mine sites in and around the Navajo Nation in Arizona and New Mexico for which Anadarko is responsible. It will pay the Environmental Protection Agency $985 million to clean up those sites.

Another $1.1 billion will go to clean up a former Kerr-McGee chemical plant in Columbus, Mississippi. Still another $1.1 billion will help clean up a former manufacturing facility in Henderson, Nevada, which leaked hexavalent chromium and perchlorate into Lake Mead, which supplies drinking water for Las Vegas and other populations in the Southwest. More than $200 million will be used for cleanup costs at a former Kerr-McGee wood treatment facility in New Jersey.

The $5 billion deal was apparently less than what Wall Street anticipated for Anadarko, whose shares increased 14.5% in value following the announcement. The government had originally sought more than $20 billion.

Fadel Gheit, a senior oil analyst at Oppenheimer & Company, told The New York Times that the settlement “removes a huge cloud hanging over the [company’s] stock.”

With that business behind it, Anadarko is now “the most attractive takeover target because it has a premier position on the onshore U.S. and is one of the biggest leaseholders and operators in the Gulf of Mexico,” Gheit said.

-Noel Brinkerhoff

To Learn More:

United States Announces $5.15 Billion Settlement of Litigation Against Subsidiaries of Anadarko Petroleum Corp. to Remedy Fraudulent Conveyance Designed to Evade Environmental Liabilities (U.S. Department of Justice)

Anadarko Pays Billions in Settling Toxins Case (by Clifford Krauss, New York Times)

Settlement Agreement (Courthouse News Service) (pdf)

Anadarko To Pay Record Settlement To Clean Up Kerr-McGee's 85-Year Toxic Legacy (by Kate Sheppard, Huffington Post)