Kerr-McGee

The company later known as Kerr-McGee was founded in 1929 as Anderson & Kerr Drilling Company by Oklahoma businessman-politician Robert S. Kerr and oil driller James L. Anderson. When Dean A. McGee, 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 longtime 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 Secretary of the Interior's approval to impose taxes on non-tribal persons or entities doing business on a reservation.

In 1978, the Navajo Tribal Council passed two tax ordinances. One was a tax of 3% on leaseholds (such as mineral rights) and one a 5% tax on business activity.

Kerr-McGee held substantial mineral rights on the Navajo Nation and filed suit in 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 the Secretary of the Interior's approval, 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. 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 in downtown Denver and the Greenspoint area of Houston.

Corporate headquarters were 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 its €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 growing number of protests, the company renewed the contract 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 world's biggest investment funds), saying Kerr-McGee's contract in Western Sahara had "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 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, 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, a jury found Kerr-McGee was to have failed to report earnings and thus underpaid royalties due to the U.S. government. The jury awarded $7.6 million in damages. But despite the jury's verdict, before entering judgment the court reconsidered an earlier Motion for Summary Judgment Kerr-McGee had filed and reversed its prior holding, this time determining that the court lacked subject matter jurisdiction to hear the case at all. Maxwell appealed, and on September 10, 2008, the 10th Circuit Court of Appeals reversed the lower court ruling, remanding it for further proceedings. On September 16, 2010, U.S. District Court Judge Marcia S. Krieger ordered Kerr-McGee to pay treble damages, or almost $23 million. As a whistle-blower under the FCA, Maxwell was entitled to 25% of the amount recovered for the government, or approximately $5.7 million. But he said most of the money 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 the public what it owed.

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 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."

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 Silkwood estate in this litigation.