By Nick Brown
NEW YORK (Reuters) - A trial between oil and gas producer Anadarko Petroleum and a trust for paint materials company Tronox Inc resumed on Tuesday after the sides failed to settle their $25 billion dispute over environmental cleanup costs.
Anadarko, the defendant, was expected to call witnesses, starting with Joseph Flake, a former vice president at Kerr-McGee Corp, the company now owned by Anadarko that created Tronox through a 2005 spin-off.
Tronox, which went bankrupt in 2009 and emerged last year, established a trust to pay billions of dollars in environmental cleanup claims at more than 2,000 polluted locations. The trust's main asset is the lawsuit against Anadarko, and money to fund the trust will come from any proceeds of that litigation.
The trust says Anadarko, which now owns Kerr-McGee, is liable for the cleanup costs. It argues that the Tronox spin-off was fraudulent because it burdened Tronox with a heap of environmental liabilities that rendered it insolvent from the get-go.
The trust is demanding $15 billion in assets and another $10 billion in interest for cleanup costs, though some analysts say a settlement would be no higher than $2.5 billion.
The U.S. Department of Justice and the Environmental Protection Agency have joined the Tronox trust in the fight.
Earlier this month, Anadarko shares climbed on news that the sides would halt the trial for a week to try to hammer out a settlement, but came back to earth after the talks failed.
In afternoon trading on the New York Stock Exchange on Tuesday, Anadarko shares fell $2.70, or 3.8 percent, to $67.59, while Tronox shares fell $5.35, or 4.6 percent, to $111.30.
John Hueston, a lawyer for the Tronox litigation trust, declined to comment on whether future litigation talks were planned. John Christiansen, a spokesman for Anadarko, also declined to comment, but has said in the past the company would prefer to settle the dispute consensually.
Tronox makes titanium dioxide used in paints.
The trial is taking place in U.S. Bankruptcy Court in Manhattan.
(Reporting By Nick Brown; additional reporting by Caroline Humer; Editing by Maureen Bavdek)