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Kerr-McGee

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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.

Kerr-McGee
FormerlyAnderson & Kerr Drilling; Kerlyn Oil Co.; Kerr-McGee Oil Industries Inc.
IndustryEnergy
Founded1929; 95 years ago (1929) in Oklahoma, United States
FounderRobert S. Kerr
Defunct2006; 18 years ago (2006)
FateAcquired by Anadarko Petroleum
Headquarters
Oklahoma City, Oklahoma
,
United States
Logo variant.
Kerr-McGee Service Station in Pauls Valley, Oklahoma, 1982

History

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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,[1] 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.[citation needed]

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.[citation needed] 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 uranium mill near Grants, New Mexico.
 
Sulfuric acid plant at Kerr McGee uranium mill.

Kerr-McGee Corp. v. Navajo Tribe

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Main article: 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.[2] 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.[3][4] 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

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United States

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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.[citation needed] Kerr-McGee owned a potash operation in California from 1974 to 1990.

 
Kerr-McGee Tower, a prominent skyscraper in downtown Oklahoma City, served as Corporate Headquarters.

Mainland China

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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

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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

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Exploration in disputed regions of Western Sahara

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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.[5] In May 2005, despite the number of growing protests, the company renewed the contract signed with Moroccan authorities until October.[6] 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".[7] 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.[8] 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.[9]

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

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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").[10] 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."[11] 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.[12] 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.[13] 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.[14]

Karen Silkwood

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It is alleged that Karen Silkwood was negligently or purposefully contaminated with plutonium while working at Kerr-McGee's Cimarron Fuel Fabrication Site and investigating safety violations at the plant. Her activism and November 1974 death were the subject of the 1983 film Silkwood. 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."[15]

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.[16] In 1984, the U.S. Supreme Court restored the original verdict (Silkwood v. Kerr-McGee Corp.[broken anchor], 464 U.S. 283 (1984)).[17] The suit was headed for retrial when Kerr-McGee settled out of court in 1986 for $1.38 million, admitting no liability.[15][18] Gerry Spence, the noted trial lawyer from Jackson Hole, Wyoming, represented the Karen Silkwood estate in this litigation.

Environmental record

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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.[19]

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.[20] 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.[21]

Nuclear production

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Kerr-McGee was involved in several nuclear endeavors.[22]

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.[23][24]

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.[25][26][27]

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.[28][29]

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[30] [31][32]

In about 1965 Kerr-McGee started producing uranium fuel at its Cimarron Fuel Fabrication Site. This was located near the Cimarron River and Crescent, Oklahoma. From 1973 to 1975 it would also produce mixed Plutonium-Uranium Oxide (MOX) 'driver fuel pins' for use in the Fast Flux Test Facility at the Hanford Site in Washington State. The plant shut down in 1976.[33]

In 1967 Kerr-McGee bought the American Potash and Chemical Company, which owned the Rare Earths Facility in West Chicago, Illinois. This facility produced thorium, radium, and uranium by acid leaching of monazite sands and other ores. It stopped work in 1973.[34][35][36]

In 1968 the company started construction on what would become the Sequoyah Fuels Corporation plant in Gore, Oklahoma. In 1970 the plant started turning yellowcake uranium into uranium hexafluoride. In 1987 it began producing depleted uranium tetrafluoride using depleted uranium hexafluoride as input. In 1988 SFC was sold to General Atomics. In late November 1993 production ceased after a stuck valve in the processing plant stuck open and caused an uncontrolled reaction. The uncontrolled reaction resulted in a large visible cloud leaving the plant. Production ceased immediately and the plant operations were suspended to never resume.[37]

Nuclear corporations, subsidiaries, and spinoffs

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In 1956 Kerr-McGee formed the Kermac Nuclear Fuels Corporation in partnership with Anderson Development Corp, and Pacific Uranium Mines Co. It was active in New Mexico.[23][24][25]

Some time in the 1970s, the Kerr-McGee Nuclear Corporation was formed. In 1983 it split into the Quivira Mining Corporation and Sequoyah Fuels Corporation. Quivira got the Ambrosia Lake, NM mine,[25] while Sequoyah Fuels took over the Sequoyah plant in Gore, OK, as well as the Cimarron plant in Crescent, OK. Sequoyah was sold to General Atomics in 1988.[38] and Quivira was sold to Rio Algom in 1989.[39][26][40]

The Cimarron Corporation was a subdivision that took control of the Cimarron plant in 1988.[41] When Tronox was spun off in 2006, it would get ownership of Cimarron Corporation and responsibility for the plant as well.[41]

Kerr-McGee bought the American Potash and Chemical Company in 1967, including its Rare Earths Facility that processed uranium and thorium. AMPOT became Kerr-McGee Chemical Company around 1970 or 1974. In 2005 this became Tronox. Tronox became independent in 2006, a few months before Kerr-McGee was sold to Anadarko Petroleum. Tronox later went bankrupt, blaming in part the environmental liabilities inherited from KMC. In 2009 purchasers of Tronox filed a class action lawsuit against Anadarko for having allegedly misled investors.[42]

Licenses

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In the US, nuclear companies must get licenses from the Nuclear Regulatory Commission. Kerr-McGee licenses follow:

  • SNM-928 - Cimarron - uranium fuel fabrication
  • SNM-1174 - Cimarron - mixed oxide fuel (MOX) fabrication - ?-1993[41]
  • STA-583 - Rare Earths Facility
  • SMB-664 - Cushing refinery - uranium and thorium. 1962-1966[43]
  • SNM-695 - Cushing refinery - enriched uranium. 1963-1966[43]
  • SNM-1999 - Cushing refinery - cleanup. 1993-2006[31]
  • SUB-1010 - Sequoyah[44]
  • SUA-1473 - Ambrosia Lake source materials license (currently managed by BHP) [45]

References

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  1. ^ "Kerr-McGee Natural Gas STAR Case Study Series" (PDF). United States Environmental Protection Agency.
  2. ^ Wilkinson, Charles F. (1996), Home Dance, the Hopi, and Black Mesa Coal: Conquest and Endurance in the American Southwest Archived 2013-11-10 at the Wayback Machine, 1996 BYU L. R. 449, Brigham Young Univ.
  3. ^ Kerr-McGee v. Navajo Tribe, 471 U.S. 195 (1985).
  4. ^ Kerr-McGee v. Navajo Tribe, 731 F.2d 597 (9th Cir. 1984).
  5. ^ "Divestments from Kerr-McGee over Western Sahara engagement". Afrol News. 2004-12-21. Retrieved 2010-10-01.
  6. ^ "Kerr-McGee renueva su búsqueda de hidrocarburos en Sáhara Occidental" (in Spanish). Afrol News. 2005-05-06. Archived from the original on 2008-10-07. Retrieved 2015-01-23.
  7. ^ "Recommendation on Exclusion from the Government Petroleum Fund's Investment Universe of the Company Kerr-McGee Corporation". Ministry of Finance of Norway. 2005-04-12. Retrieved 2010-10-01.
  8. ^ "Inversoras venden acciones Kerr-McGee por conflicto Sahara" (in Spanish). Western Sahara Resources Watch (EFE). 2005-06-30. Retrieved 2010-10-01.
  9. ^ "Last oil company withdraws from Western Sahara". Afrol News. 2006-05-02. Retrieved 2010-10-01.
  10. ^ 31 U.S.C. § 3729. (See also The Royalty Treatment. NOW | PBS, May 11, 2007, retrieved April 22, 2015.)
  11. ^ Maxwell v. Kerr-McGee Oil & Gas Corp., 486 F.Supp.2d 1217, 1221 (D.Colo.2007)
  12. ^ Maxwell, 486 F.Supp.2d at 1222
  13. ^ U.S. ex rel. Maxwell v. Kerr-McGee Oil & Gas Corp., 540 F.3d 1180 (10th Cir.2008)
  14. ^ Lichtblau, Eric (2010-09-20). "Oil Company Fined in Royalty Case". The New York Times. ISSN 0362-4331. Retrieved 2023-02-22.
  15. ^ a b 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. ISBN 0-8014-8667-X
  16. ^ "Silkwood Award Is Reversed." Associated Press. December 12, 1981.
  17. ^ "High Court Clears Award in Karen Silkwood Case." New York Times. January 12, 1984.
  18. ^ "Business Digest." New York Times. August 23, 1986.
  19. ^ "Southern Nevada Perchlorate Clean Up Project". Nevada Department of Conservation and Natural Resources. 16 August 2011. Archived from the original on 23 May 2011. Retrieved 13 May 2014.
  20. ^ Kerr-McGee Reaches Major Settlement on Natural Gas Production in Colorado and Utah | Newsroom | United States Environmental Protection Agency|U.S. Environmental Protection Agency
  21. ^ U.S. EPA settles air pollution case with Kerr-McGee in Henderson, Nev. | Newsroom | United States Environmental Protection Agency|U.S. Environmental Protection Agency
  22. ^ Sources:
  23. ^ a b O'Dell, Larry. "NUCLEAR POWER". Encyclopedia of Oklahoma History and Culture. Oklahoma Historical Society / Oklahoma State University. Archived from the original on 2010-07-27. Retrieved 2009-10-02.
  24. ^ a b "Shiprock Mill Site". Energy Information Administration. 2005-10-09. Archived from the original on 2009-10-16. Retrieved 2009-10-02.
  25. ^ a b c V. McLemore (February 2007). "Uranium Mining Resources in New Mexico" (PDF). SME Annual Meeting. Retrieved 2009-10-03.
  26. ^ a b "DECISION AND ORDER OF THE DEPARTMENT OF ENERGY". US DOE. 1997-03-13. Archived from the original on 2009-09-02. Retrieved 2009-10-03.
  27. ^ "ATOMIC ENERGY: Uranium Jackpot". Time. 1957-09-30. Archived from the original on October 19, 2011. Retrieved 2009-10-07.
  28. ^ "OLM- Lakeview Oregon Disposal Site factsheet". lm.doe.gov. November 2018. Retrieved 6 July 2020.
  29. ^ Ho, Clifford K. "Lakeview Mill Site". sandia.gov. Retrieved 6 July 2020.
  30. ^ "PUBLIC HEALTH ASSESSMENT KERR-MCGEE REFINERY SITE". Centers for Disease Control. Archived from the original on August 24, 1999. Retrieved 2009-10-01.
  31. ^ a b "Kerr-McGee Corporation's Cushing Refinery Site". US NRC. Retrieved 2009-10-02.
  32. ^ Michael Hillesheim and Gail Mosey (November 2013). "Feasibility Study of Economics and Performance of Geothermal Power Generation at the Lakeview Uranium Mill Site in Lakeview, Oregon" (PDF). nrel.gov. Retrieved 6 July 2020.
  33. ^ Sources:
  34. ^ U.S. Environmental Protection Agency (July 2009). "NPL Fact Sheet, KERR-MCGEE (SEWAGE TREATMENT PLANT)". Retrieved 2009-10-02.
  35. ^ Appeals, United States Court of; Circuit, Ninth (1995-10-17). "75 F3d 536 General Atomics v. United States Nuclear Regulatory Commission". openjurist.org. p. 536. Retrieved 2009-10-02.
  36. ^ "PACIFIC ENGINEERING & PRODUCTION COMPANY OF NEVADA, Plaintiff-Appellee, v. KERR-McGEE CORPORATION". atlaw / US 10th Circuit. 1977. Retrieved 2009-10-06.
  37. ^ Sources:
  38. ^ General Atomics vs NRC, 1995
  39. ^ Design and use of plasma APC cutting equipment (PDF) (Report). Sequoyah Fuels Corp., Oklahoma City, OK (United States). 1994-05-01. doi:10.2172/10151409.
  40. ^ (technically, GA owned Sequoyah Holding Corporation, which owned Sequoyah Fuels International, which owned Sequoyah Fuels). See General Atomics vs NRC, 1995, footnote 1
  41. ^ a b c "Kerr-McGee - Cimarron". US NRC. April 2009. Retrieved 2009-10-01.
  42. ^ Sources:
  43. ^ a b Abelquist, E.W. (July 1997). "FINAL STATUS SURVEY" (PDF). US NRC / Oak Ridge Institute for Science and Education. Archived from the original (PDF) on 2009-08-14. Retrieved 2009-10-02.
  44. ^ "Environmental Impact Statement for the Reclamation of the Sequoyah Fuels Corporation Site in Gore, Oklahoma, Final Report" (PDF). US NRC. May 2008. Retrieved 2009-10-03.
  45. ^ "Rio Algom - Ambrosia Lake". United States Nuclear Regulatory Commission.
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