Oil and gas giant Hess Corp. has reached an agreement to settle asbestos injury claims related to its subsidiary HONX Inc.’s operations at an oil refinery, as outlined in a Chapter 11 reorganization plan.
Details of the Chapter 11 Reorganization Plan
The plan, filed in the U.S. Bankruptcy Court for the Southern District of Texas, stipulates that HONX and its parent company Hess will establish a trust with $106 million to address over 900 outstanding asbestos claims. In return, they seek immunity from further legal action concerning the alleged asbestos exposure, aiming to expedite compensation for claimants and avoid prolonged and costly litigation.
According to the disclosure statement accompanying the Chapter 11 plan, both HONX and Hess anticipate greater assets available for resolving asbestos claims under the plan compared to potential outcomes without confirmation.
Historical Context of Asbestos Claims
HONX has faced 911 claims regarding asbestos exposure at the Limetree Bay oil refinery in St. Croix, U.S. Virgin Islands, where operations spanned from 1965 to 1998. The collective entities, including corporate predecessors, and Hess have faced over 1500 asbestos-related lawsuits since 1987, with approximately 1,100 claims settled.
As part of the reorganization, Hess commits $106 million to the asbestos trust, allocating $90 million for existing claimants and reserving $15 million for future claims. An additional $10 million pledge is contingent upon the trust exhausting the initial $15 million within seven years, with $1 million earmarked for administrative costs.
The plan introduces a valuation process based on claimants’ disease severity and duration of asbestos exposure, encompassing conditions like mesothelioma, lung cancer, and asbestosis.
Mediation and Negotiation Background
The resolution culminates from extensive mediation efforts involving Hess, HONX, the committee of unsecured creditors, and numerous asbestos claimants. Talks, which faced a deadlock in September, eventually resulted in a comprehensive plan to address the liabilities.
HONX, formerly known as Hess Oil Virgin Islands Corp., initiated bankruptcy proceedings in April 2022, citing the inability to resolve asbestos liabilities through alternative means.
