Kerr McGee

The Kerr-McGee Corporation, founded in 1929, was an American energy company involved in oil exploration, production of crude oil, natural gas, perchlorate and uranium mining and milling in various countries. On June 23, 2006, Anadarko Petroleum acquired Kerr-McGee in an all-cash transaction totalling $16.5 billion plus $2.6 billion in debt and all operations moved from their base in Oklahoma, United States. As a result of further acquisitions, most of the former Kerr-McGee is now part of Occidental Petroleum.

History

The company later known as Kerr-McGee was founded in 1929 as Anderson & Kerr Drilling Company by Oklahoma businessman-politician Robert S. Kerr (1896-1963) and oil driller James L. Anderson. When Dean A. McGee (1904-1989), a former chief geologist for Phillips Petroleum, joined the firm in 1946, it changed its name to Kerr-McGee Oil Industries, Incorporated. The company initially focused mostly on off-shore oil exploration and production, being one of the first companies to use drillships in the Gulf of Mexico, and later one of the first companies to use a Spar platform in the area.

With the acquisition of the Oryx Energy Company of Dallas, Texas in 1999, Kerr-McGee gained more onshore assets, as well as significant assets in several foreign areas in Algeria and western Kazakhstan. Later acquisitions of HS Resources and Westport Resources Corp. established the base of operations in Denver, Colorado and added large resource areas throughout the Rocky Mountains.

Until 2005, Kerr-McGee had two major divisions: chemical and oil-related. On November 21, 2005, its chemical division, based in Oklahoma City, was sold as an IPO, Tronox, thereby making Oklahoma City home to the administrative side of Kerr-McGee, while exploration and production management was located in Denver and Houston. Through acquisitions, for a time Kerr-McGee marketed products under the Deep Rock, Coast, Power, and Peoples brands in addition to its own. It also marketed Blue Velvet motor oil, a multiviscosity grade with a blue dyed anti-wear additive.

On June 23, 2006, Anadarko Petroleum, based in The Woodlands, Texas, purchased Kerr-McGee in an all-cash transaction totaling $16.5 billion plus the assumption of $2.6 billion in debt. Kerr-McGee shareholders approved the offer on August 10, 2006, and Kerr-McGee ceased to exist independently. All operations with the exception of Tronox which had been spun off in 2005 moved out of Oklahoma. Within a few years, the top positions at Anadarko had been filled by Kerr-McGee employees and many long-time Anadarko employees had left or been removed from the company, making the merger between Anadarko and Kerr-McGee a "wag the dog" transaction.

''Kerr-McGee Corp. v. Navajo Tribe''

''Kerr-McGee v. Navajo Tribe'', 471 U.S. 195 (1985), was a case in which the Supreme Court of the United States held that an Indian tribe is not required to obtain the approval of the Secretary of the Interior in order to impose taxes on non-tribal persons or entities doing business on a reservation.

In 1978, the Navajo Tribal Council passed two tax ordinances.Wilkinson, Charles F. (1996),
Home Dance, the Hopi, and Black Mesa Coal: Conquest and Endurance in the American Southwest
'', 1996 BYU L. R. 449, Brigham Young Univ. The first was a tax of 3% on leaseholds (such as mineral rights) and the second was a 5% tax on business activity.

Kerr-McGee held substantial mineral rights on the Navajo Nation and filed a lawsuit in the federal district court seeking an injunction to prohibit the tribe from collecting the tax. Kerr-McGee argued that any tax of non-Indians by a tribe required approval by the Secretary of the Interior and the district court agreed, granting the injunction. The tribe appealed to the Ninth Circuit Court of Appeals. The Ninth Circuit overruled the district court, finding no federal statute or regulation required such approval. Kerr-McGee then appealed to the Supreme Court, which granted certiorari and agreed to hear the case.''Kerr-McGee v. Navajo Tribe'', . The court decided unanimously that the Navajo Nation had the right to tax Kerr-McGee because tribal authority to tax had already been recognized, and because no federal law prohibited exercising tribal sovereignty in enacting a tax.

Locations

United States

Main oil and gas operations in the US were the Mid-Continent, Rocky Mountains, onshore Louisiana, and offshore in the Gulf of Mexico. Main offices were located in downtown Denver and the Greenspoint area of Houston.

Corporate headquarters were located in Downtown Oklahoma City. In the 1970s the company had a forest products division, and mineral mining in New Mexico, Arizona, and Idaho, and coal mining in Wyoming and Illinois. Most of the U.S operations were on land owned by the U.S. government (i.e. Bureau of Land Management, National Forest) and the Navajo Indian tribe. Kerr-McGee owned a potash operation in California from 1974 to 1990.

Mainland China

Kerr-McGee had exploration, development, and production projects in Bohai Bay, China, near Beijing. Additional exploration was planned for the South China Sea. These operations were run primarily from an office in Beijing.

Other locations

Kerr-McGee and its subsidiaries formerly operated in western Kazakhstan, western Australia, Brazil, Trinidad, Benin, the United Kingdom and several other more minor locations around the world at various times.

Controversies

Exploration in disputed regions of Western Sahara

Kerr-McGee received international criticism for undertaking exploration for hydrocarbon resources offshore the Moroccan controlled area of the disputed territory of Western Sahara in 2001. In 2003, one of Norway's main private investment funds, Skagen Vekst, sold their €3.6 million stake in the oil company, referring to ethical problems surrounding Kerr-McGee's engagement in Western Sahara. In May 2005, despite the number of growing protests, the company renewed the contract signed with Moroccan authorities until October. In June 2005, the Norwegian government sold the $52.7 million it had invested in the company through the Government Petroleum Fund (one of the biggest investment funds of the world), characterizing Kerr-McGee's contract in Western Sahara as having "''particularly serious violations of fundamental ethical norms''". That same month, another two Norwegian private investment funds (Storebrand and KLP) sold their participations on Kerr-McGee, €1 million and €1.45 million respectively. On May 2, 2006, the company declared its intention to no longer drill off the coast of the Western Sahara, by not renewing the contract signed with Morocco.

Under-payment of royalties to the U.S. government

On June 14, 2004, Bobby Maxwell, a senior government auditor for the U.S. Department of the Interior's Minerals Management Service ("MMS"), filed suit in federal court on behalf of the U.S. Government against Kerr-McGee, under the whistle-blowing provisions of the False Claims Act ("FCA"). In the suit, Mr. Maxwell alleged that, based on the information uncovered during his audit, "Kerr-McGee knowingly made false and/or fraudulent statements on the monthly royalty reports submitted to the MMS and 'understated and underpaid' its federal royalties." In January 2007, after a full trial on the issues, Kerr-McGee was found by a jury to have failed to report earnings, and thus, under-paying royalties due to the U.S. government. The jury award damages in the amount of US$7.6 million. Despite the jury's verdict, however, before entering judgment, the court reconsidered an earlier Motion for Summary Judgement filed by Kerr-McGee and reversed its prior holding, this time determining that the court lacked subject matter jurisdiction to hear the case at all. The case was appealed by Mr. Maxwell, and on September 10, 2008, the 10th Circuit Court of Appeals reversed the ruling of the lower court, remanding it back for further proceedings. On September 16, 2010, U.S. District Court Judge Marcia S. Krieger of Colorado ordered Kerr-McGee to pay treble damages, or almost $23 million. As a whistle-blower under the FCA, Mr. Maxwell would be entitled to twenty-five percent of the amount recovered for the government, or approximately $5.7 million. Per Mr. Maxwell, however, most of the money awarded would go to pay the legal fees associated with his almost-10-year fight to force Kerr-McGee to change its deceptive practices and pay what it owed to the public.

Karen Silkwood

It is alleged that Karen Silkwood was negligently or purposefully contaminated with plutonium while working at Kerr-McGee's Cimarron Fuel Fabrication Site''. In a civil suit against Kerr-McGee by the Estate of Karen Silkwood, Judge Frank Theis told the jury, "If you find that the damage to the person or property of Karen Silkwood resulted from the operation of this plant, Kerr-McGee is liable."Rashke, Richard L. ''The Killing of Karen Silkwood: The Story Behind the Kerr-McGee Plutonium Case.'' 2d ed. Ithaca, N.Y.: Cornell University Press, 2000.

The jury rendered its verdict of $505,000 in damages and $10,000,000 in punitive damages. On appeal, the judgment was reduced to $5,000. In 1984, the U.S. Supreme Court restored the original verdict ('' Silkwood v. Kerr-McGee Corp.,'' 464 U.S. 283 (1984)). The suit was headed for retrial when Kerr-McGee settled out of court in 1986 for $1.38 million, admitting no liability. Gerry Spence, the noted trial lawyer from Jackson Hole, Wyoming, represented the Karen Silkwood estate in this litigation.

Environmental record

Kerr-McGee is at least partially responsible for large scale perchlorate water contamination first discovered in the Lower Colorado River in 1997; It stemmed from land used by a facility in Henderson, Nevada which was owned and operated by Kerr-McGee Chemical LLC (as of 2011 Tronox LLC), where perchlorate was produced from 1945 until 1998.

In May 2007, Kerr-McGee Corp spent $18 million on pollution controls in the first comprehensive settlement under the Clean Air Act that reduced harmful emission and conserved natural gas at production facilities across Utah and Colorado. The settlement addressed violations discovered at several of Kerr-McGee's natural gas compressor stations located on the Uintah and Ouray Indian Reservation near Vernal, Utah, and in the Denver Julesburg Basin near Weld County, Colorado. In addition to implementing pollution controls, the agreement required Kerr-McGee to pay a $200,000 penalty, and spend $250,000 on environmental projects to benefit the areas in which violations occurred. In July 2005, the United States Environmental Protection Agency (EPA) settled with Kerr McGee Chemical in Henderson, Nevada that required the company to pay $55,392 penalty to resolve air permitting violations at its facility that began in 1993. The EPA cited Kerr-McGee for failing to install carbon monoxide emissions controls required under the Clean Air Act when it installed a new open hearth furnace in 1993. The company spent $4.8 million to install proper pollution controls at the facility reducing total carbon monoxide emission by 115 tons per year, an 80% reduction from previous levels.

In a 2014 landmark legal case, Anadarko was ordered to pay between $5.1 billion and $14.1 billion for environmental liabilities resulting from Kerr-McGee's fraudulent asset transfers in 2005, which left the company’s toxic contamination cleanup responsibilities unresolved. This ruling, one of the largest in U.S. bankruptcy and environmental enforcement history, mandated the company to fund extensive environmental remediation efforts across multiple contaminated sites in the U.S.

Nuclear production

Kerr-McGee was involved in several nuclear endeavors.

In 1952 Kerr-McGee bought the Navajo Uranium Mining Company, including an interest in a number of mines. It also bought an ore buying station at Shiprock, New Mexico. In 1953 it built a processing plant (called the Shiprock Mill) near the buying station. In 1963 the mines and mill were sold to the Vanadium Corporation of America.

Later a partnership with other companies was formed called the Kermac Nuclear Fuels Corporation. In 1957-58 this partnership built a uranium mill near Grants, New Mexico and Ambrosia Lake. In 1983 the mill was taken over by a new Kerr-McGee subsidiary called the Quivira Mining Corporation. Quivira was sold to Rio Algom in 1989.

Kerr-McGee purchased the Lakeview Mining Company of Lake County, Oregon in 1961. The plant was shut down in late 1960 or 1961 and sold to Atlantic Richfield in 1968.

From about 1962-1966 Kerr-McGee processed uranium at its oil refinery site in Cushing, Oklahoma. It received licenses in 1962 for processing uranium and thorium, and in 1963 for enriched uranium. In 1966 it stopped production. An attempt was made to move all regulated nuclear material to the company's new Cimarron facility at Crescent, OK. Cleanups were attempted in 1966, 1972, 1979–82, and the 1990s

In about 1965 Kerr-McGee started producing uranium fuel at its Cimarron Fuel Fabrication Site

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