Case Summary: Tronox Incorporated Bankruptcy Settlement
Under a bankruptcy settlement approved by the U.S. Bankruptcy Court for the Southern District of New York and effective as of February 11, 2011, Tronox Incorporated ("Tronox") resolved its environmental liabilities with the EPA, other federal, state, and local agencies, and the Navajo Nation relating to numerous contaminated sites around the country. Specifically, the settlement provided $270 million and 88% of Tronox’s interest in a fraudulent conveyance case to the governments and bankruptcy-created trusts for cleanup costs incurred or to be incurred at these sites.
On December 13, 2013, the Bankruptcy Court announced its decision in the fraudulent conveyance lawsuit and found the defendants (Kerr-McGee Corporation and certain other subsidiaries of Anadarko Petroleum Corporation) liable for damages between approximately $5.2 billion and $14.2 billion, which is the largest recovery relating to governmental environmental claims and liabilities. More information on the 12/13/13 Decision.
On April 3, 2014, EPA and the Department of Justice (DOJ) announced an agreement to resolve fraudulent conveyance claims against Kerr-McGee Corporation and related subsidiaries of Anadarko Petroleum Corporation, resulting in the largest recovery for the cleanup of environmental contamination in history. More information on the April 2014 settlement agreement.
On November 10, 2014, the U.S. District Court for the Southern District of New York (SDNY) approved the historic settlement agreement that was announced by EPA and the Department of Justice (DOJ) on April 3, 2014, resolving fraudulent conveyance claims against Kerr-McGee Corporation and related subsidiaries of Anadarko Petroleum Corporation. The deadline for any appeals from the district court's decision passed on January 20, 2015, without any appeal being filed. The settlement agreement went into effect on January 21, 2015. Pursuant to the settlement agreement, Anadarko paid $5.15 billion plus interest to the litigation trust on January 23, 2015.
- Overview of the Company
- Background Information on Tronox's Bankruptcy: 2009 - 2011
- The Anadarko Litigation (Fraudulent Conveyance Lawsuit)
- Overview of the 2011 Bankruptcy Settlement Agreement
- Overview of the Environmental Response Trusts and Affected Sites
- Contact Information
Tronox is a multinational chemical company that makes and sells titanium dioxide and electrolytic and specialty chemicals. Tronox manufactures titanium dioxide pigment, which is used in a wide variety of applications, including coatings, plastics, paper, and everyday consumer products. The company was created through a spin-off from Kerr-McGee Corporation.
Tronox commenced bankruptcy proceedings on January 12, 2009 by filing voluntary petitions for relief under Chapter 11 of the U.S. Code in the U.S. Bankruptcy Court for the Southern District of New York. On August 11, 2009, the U.S. Department of Justice filed proofs of claim on behalf of EPA to recover past and future environmental response costs relating to 18 named sites in seven Regions, including a claim in the amount of at least $335.5 million in connection with costs EPA incurred cleaning up the Federal Creosote Superfund Site in Manville, N.J.
The U.S. also filed proofs of claim in a protective manner with respect to sites owned or operated by Tronox, Tronox's injunctive and regulatory compliance obligations, and hundreds of other sites impacted by the spin-off. EPA's claims included a claim for penalties stemming from inspections and reviews of a former Tronox facility in Savannah, Ga.
On September 30, 2010, the Court approved Tronox's amended disclosure statement. On November 30, 2010, the Court entered an order confirming Tronox's first amended joint plan of reorganization. Tronox’s environmental liabilities were resolved pursuant to a bankruptcy settlement, which was approved by the Court and is consistent with the terms of the confirmed plan of reorganization. On February 14, 2011, the effective date of Tronox's plan of reorganization, the bankruptcy settlement and the various trusts established by the settlement went into effect.
On May 12, 2009, Tronox filed a complaint in the bankruptcy proceedings against Anadarko Petroleum Corporation, Kerr-McGee, and certain related entities to avoid and recover certain allegedly fraudulent transfers associated with Kerr-McGee’s spin-off of Tronox and Anadarko’s purchase of Kerr-McGee for $18 billion a few months after the spin-off (the "Anadarko Litigation"). Based on similar allegations, the U.S. intervened in the case to recover response costs for environmental cleanups at numerous sites around the country. At the core of the plaintiffs’ complaints is the allegation that the Defendants fraudulently transferred valuable assets out of Tronox and left Tronox with insufficient funds to pay the billions of dollars of liabilities that Tronox owed to involuntary creditors.
The bankruptcy settlement addressed EPA's claims in Tronox's bankruptcy case relating to liabilities under the:
- Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA, commonly known as Superfund);
- Resource Conservation and Recovery Act (RCRA);
- Clean Air Act (CAA); and
- Clean Water Act (CWA);
The bankruptcy settlement reimburses EPA for past cleanup costs and funds future cleanup costs at contaminated sites across the country.
Under the bankruptcy settlement, the governments and trusts described below received:
- $270 million in cash;
- 88 percent of the net proceeds of nay recovery in the fraudulent conveyance litigation;
- Cash value of existing letters of credit and bonds applicable to certain sites;
- Certain Nevada assets, including real property located in Henderson, Nev.; and
- $3 million for certain expenses incurred in negotiating the bankruptcy settlement.
EPA-lead sites received, either through the trusts described below or directly by EPA, approximately $59 million and 45 percent (of the 88 percent) of proceeds from the Anadarko Litigation.
Tronox's payment of approximately $59 million for EPA-lead sites was divided among the following sites, several of which have been placed into the trusts described below:
- Approximately 50 uranium mines that were operated, and subsequently abandoned, by Kerr-McGee in and near the Navajo Nation territory
- Federal Creosote Superfund Site in Manville, N.J.
- Flat Top Mine in Ludlow, S.D.
- Kerr-McGee Chemical Corporation Superfund Site in Columbus, Miss.
- Former wood treating site, Meridian, Miss.
- Kerr-McGee Chemical Corporation Superfund Site in Navassa, N.C.
- Kerr-McGee Chemical Corporation Superfund Site in Soda Springs, Idaho
- Kerr-McGee Chemical, LLC Superfund Site in Jacksonville, Fla.
- Kerr-McGee Superfund Sites in West Chicago, Ill.
- Lindsay Light Removal Sites in Chicago, Ill.
- Moss American Superfund Site in Milwaukee, Wis.
- North Cave Hills/Riley Pass Site in Harding County, S.D.
- Quivira Church Rock Mine Site, N.M.
- Toledo Tie Treatment Site in Toledo, Ohio
- Tronox Pigments (Savannah), Inc. facility in Savannah, Ga.
- Welsbach and General Gas Mantle Contamination Superfund Site in Camden and Gloucester City, N.J.
- White King/Lucky Lass Superfund Site in Lakeview, Ore.
More site-specific information is available below and on the Tronox EPA-funded sites and communities Web page.
Tronox’s environmental liabilities were resolved pursuant to the 2011 bankruptcy settlement, in part through the creation of five environmental response trusts and a litigation trust.The bankruptcy settlement provided for the creation of five separate trusts to address the many sites Tronox owned at the start of the bankruptcy proceedings that are no longer operating facilities (except for the Henderson, Nevada facility and a portion of the Savannah, Georgia facility, both described below). The five ERTs are:
- Multistate ERT;
- Cimarron, Okla. ERT;
- Henderson, Nev. ERT;
- Savannah, Ga. ERT; and
- West Chicago, Ill. ERT.
On February 14, 2011, Tronox transferred the sites into the appropriate ERT and simultaneously funded the ERTs. The funding of the ERTs, approximately $205 million in total, provided funding to the respective trustees for future cleanup work and other administrative costs associated with the sites. Funding was provided on a site-by-site basis through trust accounts with a possibility for reallocation.
As a result of the bankruptcy settlement, approximately 53.5% of the 88% environmental share of the recovery from the fraudulent conveyance litigation will be distributed to the ERTs discussed below.
In this section:
In general, the ERTs have the following purposes:
- conduct cleanup work at the sites;
- manage the sites and pay associated administrative costs; and
- ultimately try to sell or transfer the sites, subject to the approval of both EPA and the applicable state.
Trustees selected by Tronox for each ERT were appointed by the Court to administer the trusts and to oversee site cleanups under the oversight of a lead governmental agency. The five ERTs are governed by separate trust agreements.
The vast majority of Tronox's owned but non-operating sites, as well as a number of Tronox-owned service stations in several states, were placed into a multistate ERT. The multistate ERT holds both state- and federal-lead sites. The initial funding levels and the Anadarko Litigation percentage payouts for each site in the multistate environmental response trust, including allocations for administrative costs, are set forth in the table below in alphabetical order by the state in which the sites are located.
|Site and/or Location||Lead Agency||Cash Funding*||Anadarko Litigation Percentage**|
|Theodore (Mobile), Ala.||State||$21,587,129||6.000%|
|Jacksonville, Fla. (Ag Chem)||EPA||$4,220,981||2.000%|
|Jacksonville, Fla. (Petroleum Terminal)||State||$38,957||0.000%|
|Soda Springs, Idaho||EPA||$6,050,929||2.000%|
|Bossier City, La.||State||$897,624||0.500%|
|Kansas City, Mo.||State||$1,743,398||0.500%|
|Wilmington (Navassa), N.C.||EPA||$4,208,555||2.000%|
|Bristol Mine, Pioche, Nev.||To be determined||$17,952||0.003%|
|Caselton Mine, Pioche, Nev.||To be determined||$269,287||0.150%|
|Corpus Christi, Texas||State||$215,477||0.000%|
|Service Stations (Owned)||State||$2,028,696||0.150%|
|Service Stations (Non-owned)||State||$315,989||0.500%|
|Other sites***||To be determined||$0||3.000%|
|* Does not include site-specific financial assurance, insurance, or real estate assets.
** Percent of 88% share of net Anadarko Litigation proceeds.
*** These are sites for which the U.S. and certain states provided covenants not to sue under the settlement agreement.
Four separate ERTs were created for the following sites due to the unique nature of the sites. The initial funding levels and the Anadarko Litigation percentage payouts for the four, non-multistate ERTs, including allocations for administrative costs, are set forth in the table below.
|Environmental Response Trust||Site(s) Description/Lead Agency(ies)||Cash Funding*||Anadarko Litigation Percentage**||Trust Document|
|Cimarron, Okla.||A former nuclear fuel processing facility in Cimarron, Oklahoma. The Nuclear Regulatory Commission and the state of Oklahoma are the lead agencies, with distinct responsibilities, for the trust.||$8,638,384||1.839%||Cimarron ERT Agreement|
|Henderson, Nev.||Tronox's active manufacturing facility in Henderson, Nevada. Tronox will continue to operate the Henderson, Nevada facility through a lease with the Nevada trust. The state of Nevada is the lead agency for the trust.||$81,020,018||25.000%||Nevada ERT Agreement|
|Savannah, Ga.||A semi-operational manufacturing facility in Savannah, Georgia. To generate income to fund site cleanup, the Savannah Trust will operate the sulfuric acid plant at the Savannah, Georgia facility. The state of Georgia is the lead agency for the trust.||$7,107,355||1.285%||Savannah ERT Agreement|
|West Chicago, Ill.||Superfund sites associated with the Rare Earths Facility, a former thorium and other radioactive materials plant, in West Chicago, Illinois. EPA, the Illinois EPA, and Illinois Emergency Management Agency are the lead and non-lead agencies.||$10,356,820||0.000%||West Chicago ERT Agreement|
|* Does not include site-specific financial assurance, insurance, or real estate assets.
** Percent of 88% share of net Anadarko Litigation proceeds.
Tronox's rights to the Anadarko Litigation, including Tronox's rights to any relief awarded in the litigation, were contributed to a litigation trust pursuant to the settlement for the benefit of the governments and Tronox's tort claimants and certain non-governmental environmental claimants (collectively, the "tort claimants"). The litigation trust, funded with $25 million of the $270 million of up-front cash provided by Tronox under the bankruptcy settlement, is governed by a separate agreement. The litigation trust provides that the ERTs/governments and tort claimants receive 88 percent and 12 percent, respectively, of Tronox's interest in the Anadarko Litigation.
Download the Anadarko Litigation Trust Agreement.
Sites contaminated by Tronox and its predecessor companies that were not owned by Tronox during or prior to the bankruptcy also received funding pursuant to the bankruptcy settlement. In addition, a portion of the $270 million of up-front cash resolved the governments’ various claims for past costs, natural resource damages, and penalties related to Tronox-owned and non-owned sites. The initial funding levels and the Anadarko Litigation percentage payouts for each such site, combining separate recoveries by the governments for a particular site, are set forth in the table below in alphabetical order by the state in which the sites are located.
|Site and/or Location||Receiving Entity||Cash Funding**||Anadarko Litigation Percentage***|
|Mansfield Canyon, Ariz.||FS||$94,797,||0.150%|
|Juniper Mine, Calif.||FS||$191,490||0.303%|
|Jacksonville, Fla. (Ag Chem)||EPA||$1,896||0.003%|
|Savannah, Ga.||EPA and State||$6,952||0.011%|
|Chicago, Ill. sites||EPA||$5,686,628||2.700%|
|Mount Vernon, Ill.||State||$94,797||0.150%|
|West Chicago sites, Ill.||EPA and State||$111,747||0.201%|
|Bossier City, La.||State||$106||0.00017%|
|Kansas City, Mo.||State||$20,801||0.033%|
|Wilmington (Navassa), N.C.||EPA, DOI/NOAA, and State||$917,732||0.503%|
|Federal Creosote site, Manville, N.J.||EPA and State||$3,398,485||5.575%|
|Welsbach site, Camden and Gloucester City, N.J.||EPA||$3,159,890||5.000%|
|Quivira Church Rock Mine, N.M.||EPA||$1,263,956||2.000%|
|Specified uranium mine sites in or near Navajo Nation territory||EPA||$12,039,562||20.000%|
|Ship Rock Mill, N.M.||Navajo Nation||$1,231,978||1.000%|
|Caselton Mine, Pioche, Nev.||BLM||$6,320||0.010%|
|Toledo, Ohio||EPA and State||$256,856||0.215%|
|Gore, Kriner/Stigler, and Wynnewood sites, Okla.||State||$94,797||0.150%|
|Flat Top Mine, S.D.||EPA||$631,978||1.000%|
|North Cave Hills/Riley Pass, S.D.||EPA and FS||$7,368,730||4.113%|
|Texarkana, Texas||DOI and State||$484,115||0.466%|
|* Receiving entities include the following: EPA, various state environmental agencies, the Forest Service (FS), the Department of Interior (DOI), and the National Oceanic and Atmospheric Administration (NOAA), the Bureau of Land Management (BLM), and the Navajo Nation.
** Does not include site-specific financial assurance, insurance, or real estate assets.
*** Percent of 88% share of net Anadarko Litigation proceeds.
For more information, contact:
U.S. Environmental Protection Agency (MC2272A)
1200 Pennsylvania Avenue, NW
Washington, D.C. 20460