UPDATE: Justice Dept Files Suit Against Anadarko, Kerr-McGee

(Updates throughout with comments from Anadarko's spokesman, latest stock quote.)

The U.S. has filed a civil suit against Anadarko Petroleum Corp. (APC), alleging the independent oil and natural-gas producer fraudulently attempted to avoid hundreds of millions of dollars in environmental liabilities.

The allegations stem from the company's corporate spin-off of Kerr-McGee Corp. and its Tronox entities, according to Lev Dassin, acting U.S. Attorney for the Southern District of New York and George Pavlou, the Acting Administrator for Region 2 of the Environmental Protection Agency.

But Anadarko said in its own filings, Tronox attributed its deteriorating financial condition to the downturn in the housing and construction markets. As a result, Anadarko said Tronox's woes were unrelated to Anadarko and Kerr-McGee.

"We conduct our business with the utmost integrity, and we are not responsible for Tronox's financial condition," said Anadarko spokesman John Christiansen.

Kerr-McGee, which has been involved in oil, gas and mining industries since the 1920s, had discontinued many of its operations by 2000 but was still responsible for significant environmental liabilities. The company undertook a series of mergers starting in 2001 that converted the original parent company into a subsidiary of a new "clean" parent company, the U.S. Attorney's office said.

As part of its reorganization, Kerr-McGee took in $537.1 million of net proceeds from $550 million debt that the chemical subsidiary remained obliged to service. In 2005, it attempted to sell off its chemical business, which had been renamed to Tronox., and when a sale became unsuccessful, it elected to spin off Tronox in an initial public offering. Three months later, having been free of its environmental liabilities, Kerr-McGee was acquired by Anadarko for $18 billion.

Tronox, meanwhile, entered into bankruptcy and the U.S. moved to intervene in the proceedings as Tronox was left without valuable assets that could have satisfied environmental debts.

The complaint is seeking to reverse those transfers, or to obtain a judgment from Anadarko and Kerr-McGee for the amounts of those outstanding debts.

Christiansen, meanwhile, countered that Tronox was solvent and adequately capitalized at the time of its IPO, saying Tronox was able to issue stock at about $14 per share, and also enter into a credit facility and issue unsecured bonds.

Cleanup costs at former Kerr-McGee sites include a now $280 million cleanup due to a New Jersey site, and other similar sites throughout the U.S.

Anadarko closed down 3.9% amid a broad market decline.

-By John Kell, Dow Jones Newswires; 201-938-5285; [e-mail]