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Tronox Witnesses Look To Build Contamination Case

Two witnesses on Friday in New York bankruptcy court detailed contamination at two sites at issue in Tronox Inc. successor Anadarko Litigation Trust's case seeking to hold former Tronox parent Kerr-McGee Corp. liable for legacy environmental liabilities.

Stephen B. Etsitty, executive director of the Navajo Nation Environmental Protection Agency, and Richard Puvogel, a remedial project manager for the U.S. Environmental Protection Agency who oversees the Federal Creosote Superfund Site in Manville, N.J., testified about environmental contamination at the two sites, describing legacy liabilities the Anadarko Litigation Trust says Kerr-McGee left with it and is responsible for.

According to Etsitty, the Navajo Nation, which lies within Arizona, New Mexico and Utah over vast uranium deposits, agreed to allow companies including Kerr-McGee to mine within its borders in connection with the U.S. nuclear weapons program.

"These mining companies were supposed to return the land to us in the same condition in which they found it when they arrived" as part of leases entered into with the Navajo Nation, Etsitty said in direct testimony. "Instead, the mining companies left large piles of mining waste containing radioactive materials next to numerous abandoned mines."

He testified that as a result of the contamination Kerr-McGee allegedly left behind, there is a legacy of health and environmental impacts in the region, especially in Arizona's Lukachukai Mountains and in Church Rock, N.M.

Puvogel testified about creosote contamination in the residential area of Manville. According to his direct testimony, the EPA determined that a Kerr-McGee predecessor had conducted creosote operations in the area and that canals used to transport and store creosote waste lay directly beneath a residential development.

Though the agency gave Kerr-McGee multiple opportunities to respond to the contamination as a potentially responsible party, the company refused each time and the EPA ultimately cleaned it up through its Superfund program, Puvogel said. The U.S. government incurred $298 million in costs cleaning up the site, and the litigation trust argues Kerr-McGee is responsible for a portion of the cost.

Counsel for Kerr-McGee sought to downplay the company's responsibility for the contamination and focused on a kickback scandal that occurred during the cleanup of the site, asking Puvogel if he thought the EPA still was entitled to every dollar of the money it sought, to which he replied that he did.

The trial, which began May 15 and is expected to last months, pits the litigation trust and the U.S. Department of Justice, which stepped into the case during Tronox's bankruptcy on behalf of the EPA as the debtor's largest creditor, against Kerr-McGee, which is now wholly owned by Anadarko Petroleum Corp.

The suit focuses on the 2005 and 2006 move that saw Kerr-McGee put its valuable oil and gas exploration and production assets into an entity known as New Kerr-McGee, leaving behind its pigment business laden with decades worth of environmental liabilities from Kerr-McGee's chemical operations.

After filing for bankruptcy protection in 2009, Tronox filed the suit in an attempt to recover $15 billion it said Kerr-McGee and Anadarko owed it as a result of the fraudulent transfer. That figure has since grown to $25 billion with interest.

U.S. Bankruptcy Judge Allan L. Gropper ruled the week before the trial began that Anadarko is not a proper defendant in the suit because it maintained Kerr-McGee as an isolated business unit.

The Anadarko Litigation Trust is represented by David J. Zott, Andrew A. Kassof, David H. DeCelles and Jeffrey J. Zeiger of Kirkland & Ellis LLP.

The defendants are represented by Lydia Protopapas, Richard A. Rothman, Melanie Gray, Jason W. Billeck and Bruce S. Meyer of Weil Gotshal & Manges LLP, James J. Dragna, Thomas R. Lotterman and Duke K. McCall III of Bingham McCutchen LLP and Kenneth N. Klee and David M. Stern of Klee Tuchin Bogdanoff & Stern LLP.

The case is Tronox Inc. v. Anadarko Petroleum Corp. et al., case number 1:09-ap-01198, in the U.S. Bankruptcy Court for the Southern District of New York.