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Case Summary: Tronox Incorporated Bankruptcy Settlement
Under a consent decree and settlement agreement, which was approved by the U.S. Bankruptcy Court for the Southern District of New York and became effective February 14, 2011, Tronox Incorporated ("Tronox") agreed to resolve its environmental liabilities with the U.S. Environmental Protection Agency (EPA), other federal, state, and local agencies, and the Navajo Nation (collectively, the "Governments") relating to numerous contaminated sites around the country. The Governments and certain bankruptcy-created trusts described below receive, among other consideration as part of the settlement, $270 million and 88 percent of Tronox's interest in a pending fraudulent conveyance litigation.
The settlement agreement addresses 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.
On this page:
- Overview of the Company
- Background Information on the Bankruptcy Proceedings
- The Anadarko Litigation
- Overview of the Settlement Agreement
- Overview of Trusts and Affected Sites
- Comment Period
Tronox, a Delaware corporation based in Oklahoma City, Okla., is a multinational chemical company that makes and sells titanium dioxide and electrolytic and specialty chemicals. Tronox is the world's third-largest manufacturer of titanium dioxide pigment, which is used in a wide variety of applications, including coatings, plastics, paper, and everyday consumer products. Tronox operates in North America, Europe, and Australia. The company was created through a spin-off from Kerr-McGee Corporation ("Kerr-McGee"). Several months after the spin-off was completed, Anadarko Petroleum Corporation ("Anadarko") purchased Kerr-McGee for $18 billion.
The company 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 (DOJ) filed proofs of claim on behalf of EPA to recover, among other things, 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 bankruptcy court approved Tronox's amended disclosure statement. On November 30, 2010, the bankruptcy court entered an order confirming Tronox's first amended joint plan of reorganization. The settlement agreement is consistent with the terms of the confirmed plan of reorganization. On February 14, 2011, the effective date of Tronox's plan of reorganization occurred, and the settlement agreement and the various trusts became effective on that date.
On May 12, 2009, Tronox filed a complaint in the bankruptcy proceedings against Anadarko and Kerr-McGee (collectively, the "Defendants"), seeking to avoid and recover certain allegedly fraudulent transfers associated with the spin-off (the "Anadarko Litigation"). The litigation is scheduled for trial in 2012.
At the core of the complaint is the allegation that the Defendants imposed on Tronox years' worth of legacy liabilities, including enormous environmental obligations, and as a consequence rendered Tronox insolvent and severely undercapitalized. Based on similar allegations, the U.S. intervened in the Anadarko Litigation to recover response costs for environmental cleanups at numerous sites around the country.
The settlement agreement was lodged with the bankruptcy court on November 23, 2010. The U.S. accepted public comments on the settlement agreement for a 30-day period. Under the settlement agreement, the Governments and trusts described below receive:
(1) $270 million in cash;
(2) 88 percent of Tronox's interest in the pending Anadarko Litigation;
(3) Cash value of existing letters of credit and bonds applicable to certain sites;
(4) Certain Nevada assets, including real property located in Henderson, Nev.; and
(5) $3 million for certain expenses incurred in negotiating the settlement agreement.
EPA-lead sites receive, either through the trusts described below or directly by EPA, approximately $59 million and 45 percent (of the 88 percent) of any proceeds from the Anadarko Litigation.
Tronox's payment of approximately $59 million for EPA-lead sites is divided among the following sites, several of which have been placed into the trusts described below:
- Abandoned Uranium Mine Sites in and near the Navajo Nation territory
- Federal Creosote Superfund Site in Manville, N.J.
- Flat Top Mine in Ludlow, S.D.
- Former wood treating site, 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.
The Governments' environmental claims are resolved pursuant to the settlement agreement, in part through the creation of five environmental response trusts and a litigation trust.
In this section:
The settlement agreement provides 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). On February 14, 2011, Tronox transferred these sites into the appropriate environmental response trust and simultaneously funded the trusts. The funding of the environmental response trusts (approximately $205 million in total) provides funding to the respective trustees for future cleanup work and other administrative costs associated with the sites. Funding is provided on a site-by-site basis through trust accounts with a possibility for reallocation.
On the effective date, Tronox transferred these sites into the appropriate environmental response trust and simultaneously funded the trusts. The funding of the environmental response trusts (approximately $205 million in total) provides funding to the respective trustees for future cleanup work and other administrative costs associated with the sites. Funding is provided on a site-by-site basis through trust accounts with a possibility for reallocation.
In general, the environmental response trusts 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 the Governments for each environmental response trust were appointed by the bankruptcy court to administer the trusts and to oversee site cleanups under the oversight of a lead governmental agency. The five environmental response trusts 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 environmental response trust (182pp, 1.56MB). The multistate environmental response trust 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
|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 environmental response trusts 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 trusts, including allocations for administrative costs, are set forth in the table below.
|Site(s) Description/Lead Agency(ies)||Cash Funding*||Anadarko
|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 (44pp, 281K)|
|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 (43pp, 354k)|
|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 (60pp, 384K)|
|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 (75pp, 421K)|
|* 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 the 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 settlement, is governed by a separate agreement. The litigation trust provides that the Governments and the 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 receive funding pursuant to the settlement agreement. In addition, a portion of the $270 million of up-front cash resolve the Governments' various claims for past costs, natural resource damages, and penalties relating 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
|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%|
|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.
After the settlement agreement was lodged with the bankruptcy court on November 23, 2010, it was subject to a 30-day public comment period and final court approval. Specifically, the U.S. accepted public comments on the settlement agreement through December 29, 2010.
For more information, contact:
U.S. Environmental Protection Agency (MC2272A)
1200 Pennsylvania Avenue, NW
Washington, D.C. 20460